Dovish cues from US Protests and China-U.S. tensions to weigh down US indices at the start of the day but US Jobless data readings to provide directional cues.
Summary: Asian market hours today saw major indices, and key stocks hit fresh 2-month highs as general mood continued to paint a picture of economic recovery hinting at prevalent optimism among investors. While Chinese and Hong Kong markets remain affected over ongoing tiff between the US and China, move by Australian Prime Minister to unveil fourth stimulus package to aid the economy on its path to recovery was highly welcomed by traders.
In the European market, major indices and key equities opened flat, post which they posted a slight loss on account of profit booking and loss stemming from Auto and banking sector shares. But prevalent risk on market mood and caution ahead of ECB meeting resulted in pair consolidating its hold near intra-day lows well near recent highs.
The ECB is expected to increase at least the size of one of its bond-buying programs in a bid to provide more stimuli for a recovering economy as estimates hint at an 8% decline in the EU area economy this year. Germany’s move to approve 130 Billion Euro support packages was also welcomed by investors helping prevent sharp loss post recent positive price rally.
Precious Metals: Both Gold and Silver are trading positive in the international market today, albeit a limited margin in its intra-day gains. Both the rare metals reversed most of the loss from previous sessions and gold is back above $1700 handle as broad market caution remains firm over US-China disagreements and President Trump’s proposal to use combat troops to patrol American cities as means preserve peace when various states are preparing to reopen their economy.
Crude Oil: Crude oil price continues to trade range-bound near monthly highs but has experienced some level of discomfort today as Saudi Arabia and Russia have issued a statement asking laggards Iraq and Nigeria to comply with OPEC+ supply cut agreements before focusing on talks for further extension. A lack of measure to comply with agreement from these two parties threaten the possibility of supply cut extension from other major players the decision of which is expected to be decided in the teleconference meeting to be held by members later this week.
DXY: As risk sentiment continues to grow in the international market, the US Dollar index, which measures the strength of US Greenback against major global rival currencies are experiencing a proportional decline. Despite lingering caution providing some level of support to USD, a clear decline in safe-haven demand has resulted in index testing new lows at 96. 573 post which the index remains range-bound in the upper half of 96 awaiting fresh cues.
On The Lookout: The main focus is back to US President Trump’s antics as his current secretary of defense Mr. Mark Esper, and his predecessor Mr. Mattis criticize foolish proposals and threats made to address national unrest. Following President Trump’s threat to invoke 1807 insurrection act and deploy combat troops inside US soil as means of preventing property damage and brining about peace from ongoing US protests, secretary of defense replies back stating that National Guard remains better placed to restore order on the streets and that Trump administration should focus on holding officials involved in the issue accountable for making a mockery of our constitution.
Given that Protesters are seeking equal justice for all under law as mention in the US Constitution, secretary of defense states that US officials responsible for the events that led to nationwide protests must be punished to quell protests and bring about peace to the USA as various states plan to reopen their economy. On the release front, the US calendar is set to see the release of US Trade Balance for April, Q1 Unit Labor Costs, and weekly initial jobless claims data. While the Canadian calendar also sees the release of Trade Balance for April and speech from BOC deputy governor Gravelle.
Trading Perspective: US Wall Street is set to open lower in the day led by dovish cues from the local market on account of US Protests and Sino-U.S. tensions. While there was some level of gains on a rally led by hopes for economic recovery, delay in US states reopening their economies has caused the gains to evaporate. US futures trading in the international market was also slightly lower, hinting at the possibility of dovish start for the day. Traders are focusing on US weekly jobless data set to release in pre-market hours, which is expected to see a decline in jobless count compared to the previous week. A lower jobless count data will help US indices limit the loss and attempt to rebound later in the day.
EURUSD: The pair continues to trade with positive bias as the rally created from USD’s strong decline in the international market pushed price above 1.13 handle. ECB’s decision to keep interest rates unchanged and the German government’s 130 Billion Euro support package provide great fundamental support to common currency resulting in pair maintaining solid upward price momentum while traders await fresh cues from US data for short term profit opportunities.
GBP/USD: The pair continues its steady approach to recovering its steep loss in the exchange rate as a rally driven by US Greenback’s weakness finally helped British Pound breach 1.26 handle. But, a clear lack of fundamental support for GBP resulted in price mostly consolidating in the upper range of the 1.25 handle near the 1.259 mark. Traders are beginning to grow used to the idea of the Brexit scenario, creating a no-trade deal environment, and this is also helping prevent sharp loss. Traders now await US data for short term profit opportunities.
USD/CAD: The pair is trading positive in the international market, despite USD’s prevalent weakness as Crude oil price has entered a consolidative phase with demand outlook taking a turn for the worse as Saudi Arabia & Russia ask laggards in OPEC cartel to comply with existing supply cut agreement before they can begin talks about extending the agreement further. This has greatly affected the mood surrounding commodity-linked currency Canadian Loonie resulting in the price of pair moving back above 1.35 handle. Traders now await the US and Canadian macro data and speech from BOC deputy governor for short term profit opportunities and directional cues.
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