Investors remain divided on the market outlook of the near future as Sino-U.S trade talks and Brexit deal deliberation begins in UK Parliament today.
Summary: Global market today is experiencing difficult shades of investor sentiment and market performance in the equity and forex market scape. The trading session began for the day with increased risk appetite in the market on cues from Wall Street which saw bullish price action in equities following positive US NFP data, and Fed Chair Jermoe Powell’s comments which hinted at the possibility of a pause in the Fed’s 2019 rate hike plans significantly boosting investors risk appetite. Asian markets also saw lingering cues from the Chinese central bank’s policy modification to accommodate small business. Both these factors improved investor sentiment across Asian markets greatly in both equity and forex space as investors looked forward to key events – Sino-U.S representatives meeting face to face for trade negotiations and UK parliament meeting for a 5-day session to vote on PM May’s Brexit deal.
However European market hours saw mixed performance in the forex market and bearish performance in equity markets as investors exercise caution owing to mixed macro data outcome and French protests which escalated to new heights this weekend which inspired some level of safe-haven demand in the market.
Precious Metals: Gold and Silver traded positive since the trading session began for the day as Greenback weakened in broad market over Powell’s comments on a possible pause in Fed rate hike. Also, investors are divided over their opinion on geopolitical events with few investors fearing that Sino-U.S. talks and Brexit could have a dovish outcome and wish to avoid volatility keeping demand for safe-haven assets aloft. The European market is also seeing dovish sentiment over escalating French Yellow vest protest which on last weekend saw participants attack government property which also adds to demand for safe-haven assets.
EM FX Asia: While risk appetite was high in the market ahead of Sino-U.S. trade talks, investor’s expectations for positive outcome in Sino-U.S trade negotiations and Powell’s comments during his speech on Friday weakened demand for the greenback in the broad market, boosting Asian currencies. Indonesian Rupiah was leading the gains with a 1.9% increase in value followed by Korean Won and Indian Rupee with 0.8% & 0.7% increase in value respectively.
USD/JPY: USD/JPY pair traded positive in Asian market hours despite broad-based USD weakness as the overall market saw improved risk appetite as investors looked forward to the start of Sino-US trade negotiations with representatives set to meet face to face for a two–day session. However, a decline in US futures in European market hours combined with prevalent demand for safe-haven assets and USD’s weakness which slowly crept back into the pair helped Japanese Yen gain the upper hand as trading session moved well into European market hours.
On the Lookout: Moving ahead with the trading session for the week, the immediate focus of investors lies on Sino-U.S. trade negotiations which will conclude tomorrow followed by Brexit proceedings in UK parliament. But investors will also be on the lookout for Bank of Canada’s Monetary Policy update, US home sales data & CPI data for short-term profit opportunities. The outcome of Sino-U.S. talks could be positive or negative depending on how key issues – intellectual property theft and U.S. ban on Chinese products are addressed with negative outcome expected to influence a bearish rally in equity and forex space while positive outcome will likely give bulls some momentum, but upside is expected to remain limited as traders await Brexit update.
Trading Perspective: As global investors stand divided on the opinion of the near future outlook for risk assets, safe-haven demand will remain relatively high in the market, but news and macro data-driven price action is expected to keep major risk assets highly volatile in the week ahead.
EUR/USD: The pair traded positive in Asian hours on cues from Wall Street and broad-based USD’s weakness over Powell’s comments. But increased risk-averse trading in European market hours has caused the pair to decline from intra-day highs erasing gains made in the early trading session. EU area macro data saw a mixed outcome but failed to have any meaningful impact on the Euro’s price action. Investors will now look to ISM Manufacturing PMI for short-term profit opportunity in American market hours, but the pair lacks major breakout trigger which will depend on tomorrow’s headlines post completion of Sino-U.S. trade talks.
GBP/USD: The British pound is trading well near last week’s high’s in range-bound price action as price action is dominated by broad-based USD’s weakness over Powell’s comments and a risk-on environment over two-day Sino-U.S. trade talk which began today. While investor sentiment surrounding pair is positive, it is mostly due to USD’s price dynamics, and investors continue to look at Brexit headlines for a solid breakout trigger. The pair, for now, remains stable above 1.27 handle, however, given negative outlook surrounding PM May’s deal in UK parliament, a bearish breakout looks likely which will see the pair back below mid 1.26 handle.
USD/CAD: Canadian Loonie gained significant ground against US Greenback today owing to multiple factors like the rebound in crude oil price which saw both spot and futures market gain by 1%, and broad-based USD’s weakness following Fed Chair Jerome Powell’s comments last Friday. The pair could continue to see increased gains if ongoing Sino-U.S trade talks in China has a positive outcome when the talks conclude tomorrow which as it is will greatly improve risk appetite in the market while also improving mood in the oil market as China is one of the biggest crude oil importers in the world.