Italian Debt

European Equities Positive on Fed Rate Cut Hope, Italian Woes Cap Gains, ADP NFP in Focus

Italian DebtFed rate cut hopes, easing tensions surrounding Sino-U.S. trade war on lack of major market impact headlines boost risk appetite in the market. ADP NFP data in focus now.

Summary: Global market is seeing a breath of positive price action as US President Trump goes on state visit. With lack of progress in critical trade war and geo-political issues, headlines and investor sentiment based price action is seeing market bulls make a recovery action. While macro data continued to disappoint in Asia, Asian indices still managed to close on positive note. As USD weakened on increasing expectations for rate cut by US FOMC, risk appetite boomed and fund flow from emerging market boomed on cheaper exchange rates. This has helped European markets to see fully fledged positive price action. While positive macro data outcome in German and EU Services and Markit composite PMI added some strength to positive price action, Italian budget woes continue to affect investor sentiment putting a ceiling over bullish price momentum. As USD weakened, forex market is seeing major forex pairs trade positive in global market.

Precious Metals: Both gold and silver are seeing positive price action despite prevalent risk appetite in the global market today. As trade war and geo-political issues are likely to extend for some time in near future, traders are using today’s cheap USD as opportunity to stock up on precious metals, especially clients from emerging markets which has helped price cross critical levels and scale multi-week highs.

Crude Oil: US spot and futures crude oil are trading with some level of positive bias in the international market. However, gains are capped owing to API weekly crude oil stockpile which showed increase in inventory data. Further, slowing demand is also a concerns weighing down on crude oil bulls while OPEC enforced supply cut provides some level of positive support to price action.

AUD/USD: The pair is trading positive across Asian and European market hours. However, gains are capped owing to mixed outcome in GDP data. Further, strong resistance found near 0.71 handle continues to limit further upside while weak USD owing to increased expectations for fed rate hike continues to provide AUD bulls with positive support resulting in bullish price action with range bound momentum.

trump-mayOn The Lookout: While Sino-U.S. trade war proceedings take back seat, Brexit takes center stage. While uncertainties surrounding Brexit has already caused sharp losses to market, PM May’s resignation coming Friday is set to bring forth a greater power struggle which could greatly damage any and all progress made in terms of Brexit so far and could lead to hard Brexit. Such an outcome will cause loss in global market worth several hundred millions to few billions depending on impact of same on market. While US FOMC is expected to cut rate and hopes for same is high in the market weighing down USD, Fed chair Jerome Powell made cryptic comments during his speech last night commenting that Federal Reserve will respond as appropriate. US President Trump’s visit continues to UK continues to garner some level of attention but has had limited impact on market so far. On the release front, focus is now on ADP NFP data from US scheduled to release later tonight.

Trading Perspective: Dollar’s decline is likely to be capped given impact of Powell’s comments and influence from rebound in US T.Yields. Further, positive sentiment in the global market is likely to reflect on US market resulting in US Wall Street seeing positive price action today. In Pacific-Asian market hours traders await Australian trade balance data for short term directional cues while forex pairs continue to trade positive as long as USD remains near current level or bearish pressure on USD remains strong. Mexico officials are still continuing their talks with US officials in a bid to avert tariffs schedule to become active coming Friday.

US Market: US stock futures and benchmark index futures trading in the international market were positive ahead of Wall Street opening. Tech sector shares are likely to provide some level of positive support while headlines from china which commented Chinese firms are requesting tariff waiver on US imports are also likely to provide positive support to market today resulting in positive action today.

EUR/USD: The common currency traded with some level of positive strength against US greenback as rate cut expectations from US Federal reserve continued to underpin Euro bulls. Positive macro data in European market hours also added strength to EURO. Traders now await US macro data updates especially ADP NFP data for short term profit opportunities.

USD/CAD: The pair is unable to make serious headway as risk appetite boomed in the global market today. While crude oil suffered from impact of weekly US API inventory data it still managed to trade positive providing commodity linked currency with some level of positive support combined with USD’s weakness capping USD’s gains. Traders now await ADP employment data from US and labour productivity data from Canada for short term profit opportunities.