Theresa May

European Market Recovers amid Muted Trade War Cues

Theresa MayGlobal market trades with mixed momentum on last trading session for the week. Muted trade war cues do little provides some level of positive support but caution prevails.

Summary: Asian market today saw major benchmark indices and equities close on mixed note owing to cautious investor sentiment and dovish cues from US Wall Street. While President Trump stated that trade talk between US and China will come to a conclusion soon, he also reiterated his stance that Huawei Technologies Ltd., was a dangerous firm. But he commented that the issues relating to said firm can be resolved in framework of broader trade deal. Any positive influence stemming from this update soon lost all its impact on the market as U.S. commerce department announced proposition of new rule to impose anti-subsidy duties on products from countries that undervalue US Dollar. This move is viewed as a veiled threat to make China bend the knee to US demand hinting that nothing has changed between two nations and power struggle is likely to extend for prolonged duration. However, lack of any solid form of retaliation by both parties combined with Trump’s comments that trade deal will be concluded shortly provided European market with some level of positive influence. However, news of UK PM May’s resignation has capped gains as it increased Brexit woes in the market. Forex market is also seeing relatively positive price action today amid muted trade war progress.

Precious Metals: Precious metals are trading range bound with slight bearish bias as global market is seeing some level of risk on trading activity today. However, yellow metal has managed to hold firm above $1280 per ounce owing to cautious investor sentiment in the market and broad based hopes for possible rate cut by US Fed’s on account of recent weak US macro data.

Crude Oil: Crude Oil price today trades positive on both major benchmark indices with more than 1% increase in value. Amid muted trade war cues, crude oil price has regained positive momentum as OPEC continues to enforce supply cut agreement while tensions in Middle East remains high increasing supply concerns. While US inventory data may affect price action once in awhile, given current geo-political scenario price is likely remain well above $55 per barrel for US crude oil (WTI).

AUD/USD: The pair slumped sharply during Pacific-Asian market hours today but has since managed to erase all loss made in today’s and previous trading session. The pair is now trading with slight positive bias as risk appetite remains prevalent in the global market in European market hours. However, gains are capped over cautious investor sentiment in global market and geo-political cues resulting in the pair remaining range bound above 0.69 handle.

On The Lookout: The main focus of investors is now on political climate in Europe given UK Prime Minister Theresa May’s decision to resign from her role as leader of Tory Party on June 7, 2019. PM Theresa May’s resignation is a clear sign that Brexit mess could extend further with high possibility for hard Brexit scenario. PM May has been under considerable pressure from both her own party and opposition party over the progress of Brexit deal making her fight hard and alone for quite a while now. PM May losing power is a great deal for Brexit unless second Brexit referendum comes into play and public vote against leaving EU this time. Meanwhile, Sino-U.S. trade talks have come to a temporary halt where it is likely to remain in immediate and near foreseeable future unless US stops its threatening tactics or China bends the knee both of which seem highly unlikely at the moment. Traders now await macro data updates for short term profit opportunities.

Trading Perspective: US Wall Street is likely to see positive price action on improved risk appetite in the market but upside move is likely to be limited as traders continue to exercise some level of caution on account of geo-political cues.

US Market: US benchmark index futures trading in the international market saw range bound action in Asian market hours over dovish cues from US market and cautious investor sentiment surrounding progress in trade talks between China and U.S.A but has since managed to gain positive momentum as risk appetite improved in European market hours. This could be viewed as a sign that US Wall Street will open positive for the day but traders will retain caution as trading activities come to close for the week.

EUR/USD: The common currency held on to strong rebound from previous session and managed to establish a range bound price action near intra-day highs. Positive UK macro data, influence from ECB meeting minutes updates could be viewed as factor supporting Euro’s gains and positive price action. The pair still remains below 1.12 handle which is cause for concern as positive US macro data could drag the pair back to bear’s territory. Traders now await US macro data update for short term profit opportunities as trading session approaches week’s closing.

USD/CAD: The pair began to lose ground on increased risk appetite despite U.S. Treasury bond yields spiking in American session last night. Further, Crude Oil price’s positive momentum amid muted trade war progress also helped CAD bulls gain strength giving the commodity linked currency an edge against US Greenback. As trading session comes to close for the week, Canadian calendar lacks major impact macro data while US calendar will see release of Core durable goods order which will provide short term profit opportunities. The pair is likely to close in red for the day as long as crude oil price holds steady.