European Equities Post Solid Gains on Improved Risk Appetite

Brexit remains the main focus of investors. Rebound in US T.Yields, and positive cues from Asian market helped European equities open and traded on a positive note.

Summary: Asian market saw mixed action with positive bias across major markets as improved risk appetite underpinned market bulls while cues from Wall Street capped gains. Meanwhile, European equities saw positive price action on all major European stock exchanges following four consecutive sessions of closing in red. However, investor sentiment remains cautious owing to concerns of slowdown in global economy, U.S recession and uncertainties surrounding Brexit progress. Also, German 10-year government bond yield remaining in negative zone added to dovish pressure in European market capping gains. However, updates hinting at change in Brexit power dynamics in UK parliament, rebound in US T-Yields and bullish cues from Asian market helped improve risk appetite providing positive support to market bulls in European market hours. Gains in healthcare sector shares played a major role in today’s positive price action across European equities. An improved risk appetite boosted selling activity surrounding the US and helped most major Forex currency pairs trade positive in global market across Asian and majority of European market hours.

Precious Metals: Precious metals declined in the global market as risk appetite returned to the market. Profit booking activities post hitting overnight highs added strength to downside momentum. However, declines were limited as investors maintained cautious tone over worries relating to U.S recession and uncertainties surrounding Brexit progress.

Crude Oil: Crude oil price gained positive momentum today as a rebound in US T-Yields helped ease concerns of recession in the US and improved risk appetite added strength to crude oil bulls. Further, prospect of tightening global supply owing to US sanction on Iranian and Venezuelan crude oil export and Russian export on path to meet OPEC production/supply cut target adds fundamental support to crude oil bulls supporting positive price action in immediate and near future trading sessions.

AUD/USD: The pair traded with strong positive bias across today’s Asian and European market hours. While uncertainties surrounding Sino-U.S. trade talks and dovish Chinese equities cap gains, the pair built on overnight gains initiated by US T.Yields hitting new lows and managed to retain upside momentum on healthy risk appetite. While US T.Yields rebound later in the day, the USD was unable to drag the pair from intra-day highs.

Theresa May

On The Lookout: There are no major events scheduled to occur during today’s American market hours. All focus is now on UK’s Brexit related vote and discussions in House of Commons session tomorrow. Headlines suggested that UK lawmakers and members in PM May’s party voted in favor of an amendment that took control of Brexit away from government and gave it to lawmakers. As thirty conservative party members voted against PM May, she continues to lose more power and support over her own government. During tomorrow’s meeting, lawmakers are expected to meet and vote on amendments which include but are not limited to possibilities of second referendum, crashing out with no deal, and a Norway-style deal with the EU. The outcome of tomorrow’s vote will provide short term directional bias as EU’s deadline extension permit comes with conditions attached to same. Ahead of the UK parliament meeting tomorrow, immediate focus is on the US macro data updates for short term profit opportunities during American market hours.

Trading Perspective: Both Asian and European markets saw Equities and Forex instruments trade with a high level of risk on investor sentiment. A rebound in US T.Yields is also in support of market bulls. This suggests that Wall Street will open on positive note and trade with bullish bias across American market hours.

EUR/USD: The pair is seeing rangebound price action with limited volatility today. While risk appetite returned in the global market and most Equity and Forex assets traded in green, disappointing German macro data update and rebound in US T.Yields pressured EURO capping upside move. The pair now awaits the US macro data update for short term directional cues and profit booking activity.

GBP/USD: The GBPUSD pair got a bullish boost and moved back above the 1.3200 handle during the European market hours. News hit market on comments of Tory lawmaker Jacob Rees-Mogg’s stating that he may be forced to support PM May’s deal to prevent the UK from being struck in the EU. This raised hopes on the possibility of PM May’s deal seeing third vote in the UK parliament which is reason for intra-day gains.

USD/CAD: The pair lacked directional bias despite positive crude oil price in global market. This resulted in range bound price action near 1.34 handle for majority of the Asian and European market hours. The US Dollar received some support from rebound in US.T-Yields but failed to see any sharp upside move. Investors now await the US macro data update for directional bias.