Global equities see a mixed reaction to dovish fed amidst an event-filled day. UK elections exit polls, speech from key global central bank figures and US inflation data in focus.
Summary: Asian market today saw most major indices close positive, albeit several key stocks closing in red as the Fed’s forward guidance had dovish tone despite FOMC members keeping interest rate steady. While European markets took cues from dovish fed and risk on trading in Asian markets to open on positive notes, most major indices and key equities still traded in red.
However, the European market clearly displayed a prevalent risk-on investor sentiment stemming from Fed forward guidance cues, gains led by Zara owner Inditex and expectations for PM Johnson’s majority in exit polls data set to release later today from the UK. However, caution ahead of speech from the ECB president Lagarde’s speech and UK election proceedings kept gains in check.
In the forex market, US Greenback remained near 4-month lows as the Fed announced that interest rate would be steady with no planned hikes across 2020, which helped major global currencies trade with positive price momentum.
Precious Metals: Gold gained on the Fed’s decision to keep interest rates low in the USA for a brief period while other metals also gained momentum on prevalent cautious tone. However, risk sentiment boosted by Fed cues and investors’ hesitation to direct funds into safe-haven metals during an event filled market hours kept gains capped and price trapped well inside a narrow price range.
Crude Oil: Crude oil price is trading positive in the global market, but it has lost most of its gains from the Pacific-Asian session. OPEC’s report stating that 2020 won’t see much of glut given slowdown in US shale production and its new production/supply cut agreement boosted gains of liquid gold. But reports from IEA which stated that Q1 of 2019 would see global crude oil glut due to current supply from US shale regardless of slowdown outweighed OPEC comments causing crude oil to lose most of the intraday gains.
AUD/USD: The pair is trading positive in the global market in a rally driven by broad-based USD selling and weakness. Fed forward guidance, which helped improve risk appetite in Asian market hours, also played a role in AUD’s gains. However, gains continue to remain capped as tensions surrounding the upcoming tariff deadline, which continues to pressure AUD widely considered as Chinese proxy.
On The Lookout: The day’s calendar is filled with numerous events across the globe, keeping investors on their toes across European and American market hours. Following US Fed’s declaration stating that interest rates aren’t going to be changed across 2020, traders are waiting for ECB Lagarde’s speech and UK exit poll results.
UK election updates had put investors across the globe and EU citizens in caution as live data during election progress showed a very little gap between PM Johnson and his competitors. The outcome ok today’s UK election will decide the fate of the Brexit outcome and hence is a crucial point in geo-political events watched by all. Aside from UK elections, traders are also on watch out for comments from US Fed on their decision relating to borrowing rates and US inflation data and speech from BOC Governor Poloz for short term trading cues during North American and Pacific-Asian market hours.
Trading Perspective: Event filled calendar is expected to keep both forex and equity markets high volatile during American market hours. Unless USD regains strength, major global currencies will retain the majority. Wall Street futures trading in the international market ahead of North American session traded positive as Fed Chair Powell stated that interest rates would remain unchanged until the end of 2020, providing US equities with bullish fundamental support. US Wall Street will open positive for the data, but inflation data will set the tone for further intra-day activity.
EUR/USD: The pair is trading with positive bias as EURO bulls found strong fundamental support from broad-based USD’s weakness and ECB’s decision to keep interest rates unchanged. However, traders await Lagarde’s speech and US inflation data for directional cues and short term profit opportunities.
GBP/USD: The pair is trading with dovish bias as live exit poll data from UK elections along with cautious tone caused GBP to come under pressure. As poll data showed a narrowing gap between Johnson and his competitors, Brexit woes spiked, causing GBP to come under pressure. However, USD’s weakness helped cap decline preventing the pair from seeing a sharp meltdown. Traders now await US inflation data for short term profit opportunities.
USD/CAD: The pair continues to trade flat as neither side continues to gain the upper hand. Following’ fed’s interest rate decision update, USD crashed to 4-week lows while CAD gains the upper hand earlier in the day on OPEC comments. But CAD has since lost strength as IEA reports caused Crude oil price to go down. Traders now await Poloz’s speech and US inflation data for short term profit opporEuropean Equities Mixed Amidst Event Filled Calendar, Exit Polls, US Inflation data in Focus.
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