Renewed trade deal optimism fuels risk on trading activity, Trump’s decision on tariff review over EU auto import into US market in focus.
Summary: Wall Street indices last night closed on positive note following comments from White House economic advisor Larry Kudlow who stated that US & China are close to signing a trade deal citing what he believes to be highly constructive talks with Beijing paving way for ending 16-month trade war. While investors across the globe cheered on the headlines, Chinese equities and indices still closed on dovish note in Asian market hours today over lingering unrest from escalating tensions over Hong Kong unrest. Aside from Chinese market, all other major Asian markets saw major risk assets trade and close on positive note today. European market opened positive and is on path for sixth consecutive weekly gains on cues from Wall Street and Asian market as optimism surrounding trade talks fuelled risk appetite. Further, gains led by French telecom giant Orange’s announcement on splitting its mobile towers unit into a separate company. In forex market, renewed optimism surrounding trade deal helped major global currencies gain momentum while USD declined over risk on trading activity.
Precious Metals: Rare metals declined sharply as demand for safe haven assets declined on renewed risk appetite led by improved trade deal optimism. High volume of profit booking activity from India – one of major players in precious market also weighed precious metal bulls, but weaker USD helped cap decline.
Crude Oil: Crude oil price managed to lose sharp bearish pressure from previous session but failed to see any sharp gains despite renewed trade deal optimism. While this is a sign that crude oil demand may rise, fears of rise in stockpile from OPEC should they fail to extend or deepen supply cut agreement in upcoming meeting on Dec 5-6, 2019 kept gains in check.
AUD/USD: The pair gained positive momentum on renewed trade deal optimism and slowly reversed declines from earlier this week. By mid-European session the pair managed to reclaim hold above 0.68 handle. The pair has since entered consolidation ahead of US data release and positive lose today will end the pair’s streak of five consecutive session of decline so far.
On The Lookout: As trading session comes to end, most of traders focus remains on macro data updates for short term profit opportunities. While renewed trade deal optimism following comments from White House officials spiked risk appetite in global market ,it is set to die down over the weekend should headlines lack further evidence on solid progress bringing scenario back to square 1. However, traders’ attention also remains on US President Trump as his self imposed 180-day review period comes to an end this week. Traders & automakers across the globe wait to hear decision of President Trump on whether he will impose additional 25% tariffs on US car and auto part imports which will greatly spike vehicle prices and result in jobless. However, given his ongoing trade war with China, traders are hopeful that President Trump will not go ahead with the move and is likely to extend review period for imposing tariffs on vehicles and auto parts from EU & Japanese markets. A move to go ahead with tariffs will have severe effects on employment and economy while delaying tariff will push the review period to mid-2020 when presidential campaign will be in full swing making it a bad move to impose hefty tariff on high demand consumer products just ahead of election keeping auto market scenario in USA unchanged. On earnings calendar, traders are on lookout for financial data from JD.com Inc while economic calendar sees release of US retail sales, retail inventories Ex auto, Business Inventories, Industrial production data and Canadian Foreign Securities purchase update.
Trading Perspective: Forex market is likely to see positive price action as trading session comes to close for the week given prevalent risk on investor sentiment in global market. US index and stock futures trading in the international market saw positive activity ahead of Wall Street opening on yesterday’s Kudlow’s comment. This along with positive cues from major global markets suggest Wall Street is set to see sharp bullish opening on this week’s last trading session.
EUR/USD: The pair saw positive price action in global market and scaled above 1.10 handle on prevalent risk appetite over renewed trade deal optimism. But disappointing EU area macro data updates capped gains. Traders now await US data for short term profit opportunities.
GBP/USD: The pair gained strong positive momentum and breached past 1.29 handle as Farage’s Brexit party gave conservatives addition 43 seats paving concrete way for PM Johnson’s victory. Weaker USD on broad based risk on trading activity also helped boost GBP’s momentum. Traders now await US data for short term profit opportunities.
USD/CAD: The pair declined below mid-1.32 handle on broad based USD sell-off over renewed risk appetite. But the decline was capped above 1.3200 handle as Crude oil price failed to gain strong momentum over increased supply concerns, capping CAD’s strength. Traders now await US and Canadian data for short term profit opportunities.
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