Equities Recover Ahead of Fed Policy Update, Draghi Rekindles Rate Cut Bets - The Industry Spread

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

M. Draghi

Equities Recover Ahead of Fed Policy Update, Draghi Rekindles Rate Cut Bets

June 19, 2019

M. DraghiDraghi’s comments provide positive strength for equities but Euro declines. Fed rate decision in focus as two day session to decide on interest rate begins today.

Summary: Equities rose in Asian market today as investors and traders display some level of risk appetite in trading activity ahead of FOMC interest rate decision update. However, caution ahead of tomorrow’s Fed update has limited gains albeit bulls retaining upper hand in control of price action. European equities which traded in red yesterday recovered its loss and is trading positive today over cues from ECB President Mario Draghi’s speech. Draghi commented that ECB will provide more monetary stimulus if the economy does not improve rising hopes for rate cuts in near future during his speech in ECB’s annual conference in Sintra, Portugal. Contrary to equities, Forex market is painted in red as USD remains strong ahead of upcoming Fed update resulting in all major forex pairs trading in bearish territory.

Precious Metals: Precious metals are trading positive despite prevalent risk appetite in the global market. As geo-political issues continues to extend for prolonged time frame, demand for safe haven assets remain steady and investors have opted to invest in precious metals  to protect their wealth from volatile price inflations. Ahead of upcoming fed update, caution in the market is greatly boosting demand for gold in market today.

Crude Oil: Crude oil is trading positive today as geo-political headlines takes backseat and risk appetite boomed in the global market. Given rising tensions between US and Iran and tensions in the Middle East, crude oil has strong fundamental support. Further, efforts from OPEC to continue stemming global supply also underpins crude oil bulls facilitating positive price action today.

AUD/USD: The pair is continuing to struggle near multi month lows below mid-0.68 handle. RBA minutes update released earlier displayed a highly dovish tone further weighing down the Australian dollar causing the pair to remain under bear’s influence. However, the pair saw limited loss as USD lost some momentum today.

building permitsOn The Lookout: ECB Draghi’s comment caused rate cut hopes to flare up again and this caused German bond yields to hit new record lows. Euro also took a beating owing to said comments. Focus is now on updates from two day FOMC interest rate decision meeting which beings today. The US central bank is expected to provide dovish outlook. While there is chance for rate cut given increased bets on same in the market, it is unlikely to happen. Fed Chair Jerome Powell’s comments from recent speeches suggest that interest rate may remain unchanged. But a dovish forward guidance update tomorrow could still cause serious damage for US T. Yields and USD in the global market. Traders now await speech from BOE governor Mark Carney, US housing starts and building permits data and Canada’s manufacturing sales for short term profit opportunities.

Trading Perspective: US stock and index futures trading in international market ahead of Wall Street opening saw positive activity on healthy risk appetite. Further, dovish cues from ECB’s Draghi have influenced expectations for accommodative policy from US FOMC meeting which begins today. This factor is likely to underpin market bulls and influence positive price action in the market today.

EUR/USD: The pair saw dovish price action as ECB’s Draghi hinted at possibility for more stimulus for EU economy. Dovish Draghi’s comments caused German bond yields to hit record lows which combined with disappointing German macro data caused Euro to lose strength and decline strongly today. Traders now await US housing starts and building permits data for short term profit opportunities.

GBP/USD: The pair is continuing to trade in red for fifth consecutive session today. British Pound continues to remain under pressure owing to increasing odds of no-Brexit deal. Focus also remains on race for power in UK among PM succession candidates. Traders now await US housing starts and building permits data for short term profit opportunities.

USD/CAD: The pair trades positive as USD retains some level of strength ahead of Fed interest rate decision update. However, a goodish pick up in crude oil price underpins CAD bulls exerting pressure on USD and capping gains in the process. Traders now await Canada’s manufacturing sales , US housing starts and building permits data for short term profit opportunities.

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