Equities Positive on Stimulus Expectations from Major Central Banks

Stimulus updates provide the market with a fresh breath of positive influence, trade war remains at impasse and USD remains flat on stimulus cues. 

Summary: Global stock market is seeing positive price action today as investors expect fresh stimulus from major global central banks to boost economic activity. Following Chinese central bank’s announcement last Friday on decreasing minimum cash reserve requirement for banks to boost loan and liquidity offerings as a measure to boost slowing economic growth, traders now expect other major central banks – ECB & US Federal Reserve to mirror similar sentiments. Comments made by Fed Chair Jerome Powell during the weekend stating that central bank would act as appropriate to sustain economic expansion also helped shore up investor expectations of fresh stimulus from US central bank.

In the European market, equities saw positive price action influenced by the rise in German exports as visible from economic data released today and expectations for fresh stimulus from ECB interest rate decision meeting scheduled to occur later this week. On the forex market, major global currencies traded positive as USD remained flat while central bank cues boosted market bulls in support of risk currency gains. 

Precious Metals: Rare metals market is mixed today with Silver trading in red while gold continues to trade positive. While gold traded positive on cheap USD and expectations for a rate cut from key central banks later this week, gains in the equity market put a pin to yellow metals positive price momentum. 

Saudi Arabia remains compliant with OPEC’s terms

Crude Oil: Crude oil is trading positive in the global market today with both major international crude oil benchmarks seeing nearly 1.5% increase in value. Crude oil bulls gained support from an update that Saudi will remain compliant to OPEC’s production cut agreement even under new energy minister. 

USD/JPY: The pair is trading flat/range-bound in the global market today as Japanese Yen the safe-haven currency lost momentum over easing investor caution while USD failed to capitalise on gains in US 10 Yr Government bond yield owing to news of possible stimulus updates from major central banks. 

On The Lookout: In the European market, following last week’s developments in the political scenario, the fresh development is data hinting at positive export activity and trade balance in Germany despite the impact of trade war woes on the economy.

Further, economic data which painted a picture of positive GDP, construction output and industrial/manufacturing production in the UK albeit UK economy suffering from Brexit uncertainties came as a refreshing change for traders. These updates combined with expectations of stimulus from the major global central bank as a means to support global economic growth also greatly helped underpin market bulls on the first trading session of the week. Moving forward, investors await the release of US JOLTS job openings data, PPI data and retail sales data and interest rate decision update from ECB monetary policy meeting scheduled to occur on Thursday for fresh directional cues and short term trading opportunities.

On the Sino-U.S. trade war front, there are no fresh developments aside from expectations for talks between two parties early next month. On Brexit front, PM Boris Johnson is doing all he can to ensure he gets his way in negotiating with EU or goes ahead of with no-deal Brexit outcome while opposing MPs continue to hinder his efforts. 

Trading Perspective: Forex market is likely to see positive activity on USD’s weakness and improved investor risk appetite. US equity and index futures trading in the international market saw positive price action in the global market on expectations of fresh stimulus from the US Federal Reserve. On the release front, neither US nor Canadian calendar have any major released scheduled for North American market hours while Pacific Asian market hours will see the release of Australia’s NAB business confidence data and China’s CPI & PPI data updates. 

EUR/USD: The pair is trading positive in the global market today but its gains are limited as the common currency is still under pressure ahead of the upcoming ECB meeting. Meanwhile, weak USD and positive macro data provide EURO bulls with support for positive price action in the short term. Traders now await fresh cues from US market for short term profit opportunities in the US trading session. 

GBP/USD: The pair is trading positive in the global market supported by upbeat economic data updates. Further, renewed Brexit optimism on comments from PM Boris Johnson hinting at alternatives for Irish Backstop along with weak USD helped the pair see positive price action. Traders now await fresh cues from US market for short term profit opportunities in the US trading session.

USD/CAD: The pair is trading red-well near 5-week lows as USD remained flat on updates hinting at fresh stimulus from US Federal Reserve. Further, Canadian Loonie gained support in the form of a boost in the crude oil price which greatly helped influence the momentum of the pair. As bias is unlikely to change given strong crude oil price, commodity-linked currency Loonie is likely to continue trading positive for the rest of the day. 

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