Trump’s comment on a possible trade deal with China soon helped improve risk appetite, and the speech from key global central bank figures are in focus.
Summary: US Wall Street yesterday closed on a positive note as USD rose in the international market while investors grew immune to news of Trump impeachment proceedings. As nothing solid on related matters of impeachment hit the headlines it became clear to traders the impact on headlines was nothing more than short term speculation and baseless investor concerns. Further, comments from US President Donald Trump stating that trade deal with China will happen soon helped improve investor risk appetite resulting in the Asian market seeing all major benchmarks and key risk assets trade and close on a positive note earlier in the day.
European markets opened dovish as WTO ruled in favor of US tariff imposition of EU goods for a max of US$ 8 Billion stating illegal state aid provided to aircraft maker Airbus AR as a reason. However, positive cues from US Wall Street and Asian markets and improved risk appetite on trade talk related headlines helped risk assets recover early loss and trade with positive momentum. In the forex market, firm USD in the global market put pressure on Greenback denominated major global currencies resulting in top forex pairs trading in red across Asian and European market hours.
Precious Metals: While a bit delayed than expected, precious metals gained momentum as investors increased their holdings in rare metals as demand for safe-haven rose on mixed signals surrounding geopolitical events. However, firm USD continues to keep rare metal gains in check.
Crude Oil: The price of crude oil in both major international benchmarks still remains in red but price action is mostly flat today. Easing concerns surrounding Sino-US trade talks following Trump’s comments and better than expected draw in US EIA weekly inventory data support crude oil bulls today.
AUD/USD: The pair recovered most of its loss from the previous session in the Pacific-Asian market hours following easing concerns surrounding Sino-US trade talks. However, firm USD in the broad market continues to keep gains in check with price action range-bound near the mid 0.67 handle.
On The Lookout: Updates on geo-political events whose proceedings are dictating short to medium term price action in the global financial market is seeing mixed signals today. On one hand, following mixed comments from White House officials on trade talk progress recently, and threatening banter employed by the US and China during the UN General Assembly meeting, recently escalated tension surrounding trade talks. US President Trump commented that a trade deal with China will happen soon, putting investors in a confused and cautious state. However, his comments helped ease bearish pressure in speculative intra-day bets resulting in positive price action in the European stock market.
Further, a new trade war seems to be erupting as WTO granted USA the permission to impose sanctions on European goods worth US$ 8 Billion which targets more than just Airbus as the USA is expected to target planes, auto market, and luxury products which make up most of the goods exported by the European market such as Wine, Spirits, leather goods, and perfumes.
On the Brexit front, a new election seems likely sooner rather than later with ruling and opposing party leaders making a jab at each other. Meanwhile, the opposing party MPs who cheered the Supreme Court ruling are now facing a huge hurdle as recent comments from UK Attorney General Geoffrey COX came as a serious blow despite Supreme Court justices ruling the parliament suspension as illegal.
COX comments hinted that the suspension of parliament was legal and also revealed that he is inclined to release more details on his advice given to ruling party in favor of the parliament shutdown as he believes it’s in the best interest of general public, in which if it helps convince UK citizens and the queen, this will be a huge blow to opposing party MPs and give Boris a huge boost in upcoming elections.
PM Boris Johnson also stated that he is planning to initiate another parliament suspension but it remains to be seen whether if he could pull it off in short duration which is available to him for making key decision. There are no major events scheduled to occur in the US market hours, leaving macro data and local headlines based cues to dictate price action in US market hours.
Trading Perspective: On the release front, late European and early North American market hours will see the release of the US GDP data, Initial jobless claims data, Goods trade balance data and Pending home sales data and speech by several key central bank figures such as ECB’s Draghi, BOE’s Carney and US FOMC members – Kaplan, Clarida, Daly and Kashkari. Firm USD in the global market is likely to keep global currencies under pressure but a disappointing outcome in US GDP data could cause the US Greenback to weaken which will help global currencies gain some breathing space.
Easing trade war concerns and improved investor risk appetite in the global financial market helped the US stock and index futures trading in the international market ahead of Wall Street opening see positive price action. This suggests US Wall Street is likely to see positive opening and price action later today.
EUR/USD: The pair is seeing dovish price action with the price hitting multi-year lows as the common currency came under pressure on the news of WTO allowing the US to impose sanctions on EU goods. Further, solid USD in the international market put pressure on EURO bulls. Traders now await a speech from central bank figures and US GDP data for short term profit opportunities.
GBP/USD: The pair is continuing to trade in red today as comments from UK Attorney General Cox stated that his advice to the ruling party was in favor of the parliament shutdown and will release more details on same shortly. Further, firm USD in the global market also pressures GBP. Traders now await a speech from central bank figures and US GDP data for short term profit opportunities.
USD/CAD: The pair is trading in red today despite firmer USD in the global market as improved trade optimism helped ease pressure on Crude oil price action. This helped commodity-linked currency Canadian Loonie gain some momentum against USD. Traders now await a speech from central bank figures and US GDP data for short term profit opportunities.
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