Fed Budget Balance

Equities Up On Trade Deal Optimism, Fed Budget Balance Update in Focus

Fed Budget Balance Update
Trade deal meeting

Trade deal optimism ahead of Phase 1 trade deal signing meeting mid-week underpins market bulls. 

Summary: Global equities are off to a positive start for the week as trade deal optimism underpins market bulls. While the Asian market saw major indices and stocks trade and close on a positive note, the European market saw relatively flat activity in major markets.

Forecast from China stating that auto sales for the year ahead were low came as a major blow to the auto trade-dependent economy. Further, arguments surrounding the possibility of a rate cut by UK central bank citing nearly zero growth in Q4 of 2019 weighed down the UK market, also adding pressure to market bulls in the European session today. However, the broad-based tone remained in favor of risk on trading activity helping prevent major indices and stocks from seeing a sharp meltdown.

In the Forex market, major global currencies traded positive but firm USD kept gains in check. 

Precious Metals: Rare metals market continued to see dovish price action in the global market today as risk sentiment soared on trade deal optimism. With Phase 1 of trade deal scheduled to get signed coming Wednesday and headlines hinting at positive progress towards same, demand for safe-haven has shrunk considerably while firm USD also weighed down rare metal bulls keeping gains in check. 

Crude Oil: Crude oil saw a sharp drop in price today and recorded the biggest weekly loss since July as Middle Eastern tensions have completely eased up following notice for a ceasefire from both Iran and the USA. The futures price is currently near mid-December levels but further declines were prevented as Saudi announced that OPEC cuts will hold steady regardless of strife in the Middle East. 

AUD/USD: The pair is trading positive as geopolitical tensions eased up while trade deal optimism rose ahead of the mid-week Sino-U.S. meeting. However, USD also gained momentum on trade deal optimism which kept gains in check. 

On The Lookout: From an economic calendar perspective, the week ahead is filled with several high impact market updates making it a relatively busy week. Starting with the Sino-U.S. trade deal meeting, there are also speeches from several US Fed officials, earnings reports from major US multinational banks and GDP data from UK & Germany.

In US market hours today, traders await the release of further headlines pertaining to the trade deal between China and USA as global investors gear up for Phase 1 of trade deal set to be signed coming Wednesday. UK GDP which came in today was a slight drop while other data from the UK were mixed prompting higher hopes for a rate cut from UK central bank in upcoming meetings. Comments from BOE officials Gertjan & Carney which took on dovish note also underpins the possibility of a rate cut in the near future.

On release front in North American market hours, traders will see US Fed budget balance, speech from Fed Rosengren, Canadian central bank business outlook survey while Pacific-Asian market hours will see the release of building consents from New Zealand and Chinese trade balance data. 

Trading Perspective: The positive market outlook and risk appetite influenced by trade deal optimism are expected to underpin market bulls in US market hours. Bullish cues from the international market and positive activity of US futures in the international market are expected to induce positive price action in Wall Street as the trading session opens in Wall Street later today. 

EUR/USD: The pair opened flat near Friday’s close and traded with slight consolidative bias in early trading session but broad-based risk appetite underpinned by trade deal optimism helped EURO bulls gain a steady foothold above the 1.1110 handle. Traders now await US macro calendar updates for short term profit opportunities. 

GBP/USD: While the pair opened on a relatively positive note, it lost most of its gains and fell below 1.30 handle pushing towards mid-1.29 handle as GDP saw slight drop which combined with the dovish tone from BOE officials sparked hopes for a rate cut from the central bank. Traders now await US macro calendar updates for short term profit opportunities. 

USD/CAD: The pair is trading positive in the global market as USD held firm while Canadian Loonie saw a clear lack of fundamental support. A sharp drop in the price of crude oil futures in the global market to fresh multi-month lows weakened CAD bulls while trade deal optimism helped cap decline. Traders now await data from the US & Canadian calendar for short term profit opportunities. 

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