European Equities Positive despite Caution in Market, Brexit Summit & ECB Update in Focus

EU- UKCautious tone on geo-political issues continues to cap gains in market but European equities are trading positive. Investors now focus on key events in Europe and macro data updates for short term directional cues.

Summary: Asian market hours saw mixed price action in major benchmark indices and equities today on dovish cues from US Wall Street. Yet another reduction of International Monetary Fund’s global growth forecast and continued escalation of trade related tensions between EU & U.S.A. on comments from US President Donald Trump over imposing tariffs on European auto market greatly affected investor risk appetite. While cautious investor sentiment from global market continues to hurt risk appetite in global market, European equity market opened on positive note and major equities and benchmark indices across key Europe stock exchanges. Hopes for positive outcome during today’s critical E.U.-U.K. summit that could lead to longer Brexit deadline extension and expectations for further details on European central bank’s TLTRO plans which are set to begin this September during today’s interest rate decision press conference  influenced some level of support for market bulls. In contrast to equity markets, major forex currencies pairs are trading positive across both Asian and European market hours.

Precious Metals: Both Gold and Silver are seeing range bound price action with bullish bias today. Reduction of 2019’s growth forecast for third time in last seven months by International Monetary Fund is viewed by many as a major sign of recession in global economy. This has helped underpin precious metal bulls in immediate and near future trading session. But prevalent risk on investor sentiment and expectations for positive outcome in today’s key Brexit summit serve as factors limiting gains in global market.

Crude Oil: Crude oil price is seeing positive price action today having hit new 2019 highs in last two consecutive trading sessions. The build in US weekly API crude oil stockpile data caused price in both WTI & BRENT benchmark indices to decline from yearly highs. However, prevalent risk on investor sentiment, supply disruption from Middle East on OPEC supply cut enforcement and Libyan crisis underpin crude oil bulls to great extent preventing sharp slide in price action.

USD/JPY: The pair saw sharp downward slide during American market hours as IMF reduced 2019 growth forecast which was viewed as sign of recession in the global economy. Further, President Donald Trump’s comments on enforcing tariffs worth $11 Billion on European market added to risk averse investor sentiment and dragged the pair to one week lows. But the pair rebound from overnight lows and trades range bound with neutral bias over mixed cues from Asian and European markets as investors eye key geo-political events for short to medium term directional cues.

ECBOn The Lookout: The main focus of investors today is on EU-UK Brexit summit which is considered as highly critical geopolitical event in the global market. With less than two days for Brexit deadline, the outcome of this event will greatly affect economic activity of European and global markets as messy Brexit will lead to economic loss worth Billions in both EU & UK. Aside from Brexit summit, investors also wait for ECB interest rate decision and post MPC meet press conference as they await further details on the central bank’s plans for Quantitative easing program which is set to begin later this year. Investors also hope for comments on ECB’s standpoint over Brexit progress as messy Brexit would mean loss for both sides. Escalating trade tensions between US & EU on US President Donald Trump’s comments over imposing tariffs on European auto market continues to exert bearish influence on market. But the impact of same on market is relatively low as current scenario is still at oral arguments and no clear signs of documented procedural move towards imposing tariffs have been mentioned so far. Aside from the key events, investors’ eye macro data updates for short term profit opportunities given the eventful schedule in today’s economic calendar. UK calendar will see release of GDP data, trade balance and manufacturing data updates while EU calendar will see release of interest rate decision and speech from key MPC members. Meanwhile, US calendar will see the release of Core CPI update, FOMC meeting minutes and EIA weekly crude oil inventory data updates.

Trading Perspective: European and American markets will see range bound action with positive bias as expectations for positive resolution of geo-political events underpin market bulls. But caution ahead of key geo-political and economic events are likely to keep gains in check.

US Pre-Open: Major benchmark index futures trading in the international market were positive ahead of US Wall Street opening.  While Wall Street saw major indices and equities closed in red yesterday, investor sentiment and risk appetite has improved comparatively in today’s Asian and European market hours. Positive proceedings in geo-political events in European market hours and upbeat US CPI data will help Wall Street see positive price action today.

EUR/USD: Tensions between E.U. and U.S. continue to escalate on trade tariff comments from US President Donald Trump putting pressure on the common currency. But expectations for positive outcome in critical Brexit summit today and prevalent risk on investor sentiment are keeping Euro bulls supported from fundamental perspective helping the pair maintain positive price action ahead of ECB update today.

USD/CAD: The USDCAD pair is trading with slight bearish bias as Crude oil price remains positive in the broad market. While the pair got a solid upward boost, in previous session as crude oil price fell slightly over API weekly crude oil data, the pair lost significant chunk of previous session’s loss and is trading with bearish bias today as Crude oil price has managed to hold fort near 2019 highs and is trading with positive bias in international market today. Investors now await macro data updates for directional bias.