President Trump’s response to China to decide directional cues as the trading session comes to an end for the month. Prevalent caution ahead of Trump’s briefing keeps risk assets under pressure.
Summary: The European market today saw major indices and key equities trade lower as investors took on cautious tone awaiting President Trump’s response to the Chinese Parliament’s approval of national security law for Hong Kong. While there was some level of profit booking activity on month-end activity, the overall approach of major indices hints at a positive close for the month. Another reason for the slide in European markets today stems from a major move made by popular automakers who slashed their capacity in response to the global covid-19 pandemic causing an economic slump.
Rare Metals: Both gold and silver are continuing to enjoy positive price action courtesy of their status as safe-haven assets. While traders booked profits on risk assets as the month came to close, escalating caution on account of Sino-U.S. tensions helped underpin demand for rare metals such as gold and silver, enabling them to maintain positive activity across spot and futures markets.
Crude Oil: Crude oil price of both major international benchmarks WTI and Brent are currently seeing dovish activity. As tensions between China and the US continue to escalate, and US weekly inventory stockpile saw build in inventory demand to supply ratio took a hit. But cues from OPEC supply cut measures helped keep ratios in check, preventing price from declining below key support levels. WTI remains above $11 per barrel while Brent remains above $34 per barrel.
DXY: US Dollar index, which measures the strength of US Greenback against major rivals, continues to retain dovish bias. While the index tested fresh monthly lows at 97.940 in Pacific-Asian market hours, caution in the market ahead of President Trump brief in response to China’s new security law helped the price of index recover some of the loss and consolidate around the lower half of the 98 handle.
On The Lookout: The major focus on investors from across the globe today is on President Trump’s brief as US president is expected to retaliate against China over its new security law allowing it to interfere with Hong Kong and treatment of Muslims in the Xinjiang region. As China’s new security law effectively negates Hong Kong’s status as an autonomous body, President Trump’s retaliation is expected to come out most likely in the form of revoking special trade rights with Hong Kong.
But given the bad blood which is escalating between two nations, a harsh remonstration of President Trump could blow open another major geopolitical war similar to the trade war between the two nations in the recent past. To this end, investors have resorted to profit booking activity in the global market since the late hours of Wall Street trading activity yesterday.
Traders also eye Fed Chair Powell’s speech following recent data updates from the USA, and his cues are likely to provide short term directional cues for bonds and currency markets. On the release front, the U.S calendar sees Goods Trade Balance (April), PCE Price Index, Personal Income/Spending, Retail Inventories EX Auto, and Chicago PMI data aside from Powell Speech while Canadian calendar sees the release of budget balance, corporate profits, GDP (Q1) and RMPI data.
Trading Perspective: US futures, which are trading in the international market, saw price edge lower following profit booking activity in Wall Street in the latter half of yesterday’s session and dovish cues from across major global markets. Caution ahead of President Trump’s brief has created an air of risk aversion and hesitation in traders from across the globe, which suggests Wall Street is set to see dovish opening today.
EUR/USD: The pair is trading positive given solid fundamental surrounding EURO bulls stemming from European commission’s corona aid relief package. The pair has consolidated its hold above 1.11 handle and trades Rangebound in 1.1120/30 range aided by strength from prevalent USD’s weakness. But, broad market caution ahead of President Trump’s response to China prevented the pair from posting further gains. Traders now await Powell Speech and President Trump’s response for short term directional cues and macro data updates for profit opportunities.
GBP/USD: The pair is trading with clear positive bias hovering well above the 1.235 handle but the price momentum today primarily stems from broad market USD weakness rather than GBP’s strength. Dovish factors surrounding GBP have lost their impact in immediate sessions due to overwhelming support from USD’s decline, but a rebound in USD could crush the British Pound yet again. Traders now await Powell Speech and President Trump’s response for short term directional cues and macro data updates for profit opportunities.
USD/CAD: The pair is trading flat with intra-day price oscillation ranging to both ends of 1.37 handle as price activity dances to intra-day trading activity from scalpers and hedgers. But lack of solid update that could help strengthen either currency has resulted in a clear lack of directional bias resulting in a neutral activity. Weak Crude oil price weighs down CAD while lack of enough safe-haven demand and pressure from Fed/US government aids pressure USD. Traders now await Powell Speech and President Trump’s response for short term directional cues and macro data updates from the U.S and Canada for profit opportunities.
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