Despite caution on escalating trade war tensions between China and U.S. optimistic comments from China and US helped improve risk appetite influencing positive activity in European markets.
Summary: Major equities and indices in US Wall Street and Asian markets continue to suffer as trade war intensifies with each passing day. Chinese finance ministry has made an announcement that it plans to impose tariffs ranging from 5% to 25% on various US goods worth nearly 60 billion USD in retaliation against US tariff on Chinese goods. Given the probability that trade war could last for quite a while, analysts have began to calculate impact of import tariffs on permanent basis to see how it would factor into economic growth the year ahead. However, US President Trump has announced that trade talks would continue and there is still chance for trade negotiations succeeding between the nations. This move is viewed by many as a strategic decision from US to avoid initiating a sharp selloff in US government bonds as China holds huge quantity of US bonds and if sell off is used as negotiation tactics or as retaliatory move it could greatly affect the value of US Greenback in the broad market. However, European market is seeing risk on activity as investors hope that trade war could still see positive outcome given the optimistic comments from US & China to extend trade talks as prolonged trade war in negative for all parties involved. In the meanwhile, investors continue to pile up safe haven assets as caution remains prevalent in the global market.
Precious Metals: Gold continues to trade range bound with slight bearish bias as strong dollar influenced by sell-off of major currencies in forex market on risk averse trading activity. Strong Dollar is always a negative factor for Greenback denominated yellow metal however, Silver is seeing some demand in market today resulting in positive rice action.
Crude Oil: Crude oil continues to trade position owing to expectations for possible tightening in global supply over reports of attach on Saudi Arabian oil tankers. Further, reports hinting at both China and US’s willingness to continue trade talks in hopes of resolving the trade wars also added strength to crude oil bulls resulting in today’s positive price action.
AUD/USD: The Australian Dollar continues to remain under pressure as Sino-U.S. trade war continues to escalate with each passing day. However, positive comments from both parties in trade war have helped underpin bulls resulting in the pair trading range bound slightly above multi-month lows. But strong dollar has negated any possibility of the pair seeing upward price action today.
On The Lookout: Sino-U.S. trade war related headlines remains in focus today. So far both parties have expressed willingness to continue trade related negotiations and US President Donald Trump is expected to meet up with Chinese President Xi Jinping next month. However, there is a chance that China could go ahead with retaliatory move of implementing tariffs suggested by Chinese finance ministry. This could do a lot of damage to both US economy and trade war negotiations which is likely to be reflected in market with further sharp slide in value. Proceedings in Brexit have calmed down as upcoming EU elections and ongoing political power struggle in UK remain the main focus of investors. In the meanwhile, traders await macro data updates for short term profit and trading opportunities. US market will see release of import and export price index, API weekly crude oil stock pile data while in Pacific-Asian market hours, will see the release of Wage price index data from Australia and industrial production data from China.
Trading Perspective: US Wall Street is likely to see subdued activity on cautious investor sentiment but positive cues from European market could influence some level of positive price action in intra-day trading activity at early American trading hours.
US Market: Major benchmark index futures trading in the international market saw mixed activity with mostly positive price action ahead of US market hours as optimistic comments from Washington and China on further trade talks. Also risk appetite in investors improved in European markets which suggests US could see some level of positive bias in today’s price action despite caution limiting possibility of gains.
EUR/USD: The pair today fell sharply near 1.1200 and an attempt to scale mid-1.12 handle ended in failure. While EU macro data saw positive outcome earlier today, it failed to have visible impact on price action of the common currency. Traders now await US macro data for short term profit opportunities with strong USD dollar hinting at possibility for further downside move.
USD/CAD: As Crude oil price continues to remain positive since trading session began for the week despite slight weakness at start of the week, Crude oil linked currency Canadian Loonie gains strength to oppose strong USD in the broad market. As mixed signals from global market hurt USD’s rally in the global market, CAD bulls made best of the opportunity resulting in Loonie gaining control of price action. Traders now await US macro data for short term profit opportunities.