IMF Forecast, Moody’s rating downgrade, and China virus outbreak weigh down risk sentiment. Trump impeachment proceedings in focus.
Summary: Global equities decline on fresh headlines driven momentum. Investor sentiment stands divided on the latest developments in geopolitical and financial concerns. News of a new strain of coronavirus spreading in China is the latest factor that has put a block in the path of market bulls. However, Moody’s downgrade of Hong Kong’s credit rating over escalating geopolitical and socio-economic issues in the city and IMF’s decision to reduce growth forecast for the year ahead, despite successful proceedings on Phase 1 of the trade deal, added fuel to market bears. IMF’s decision has been attributed to slow economic activity in major emerging markets.
Broad-based risk aversion stemming from headlines of a virus outbreak in China and cues from the international market resulted in European markets seeing dovish price action today. However, recent news of US President Donald Trump and French President Macron agreeing to a truce to hold off a trade war and tariff implementations until the end of 2020 and work towards digital tax proposal helped keep declines in check. In the Forex market, major global currencies see mixed activity backed by local headlines and macro data updates.
Precious Metals: Gold, Silver, and other major rare metals are trading positive in the global market aided by a sharp spike in safe-haven asset demand. While IMF forecast had already come as a major blow, headlines from China on the virus outbreak and Moody’s credit rate downgrade also added demand to safe-haven metals.
Crude Oil: Crude oil prices fell considerably in the global market today. As news of Libya’s oil production set to resume shortly boosted supply and IMF decreased global economic growth forecast, demand to supply ratio skewed in favor of the glut scenario forming as expected despite OPEC’s latest supply cuts. This caused the price of crude futures in the international market for both major benchmarks to fall sharply.
AUD/USD: The pair saw sharp loss today on headlines driven momentum. While the Aussie economy already took a hit from recent wildfire issues, news of a virus outbreak in China further added a major blow as this causes more impact on income from the tourism industry. Also, USD’s demand on broad-based risk aversion weighed down the pair resulting in sharp decline today.
On The Lookout: The main event in today’s calendar schedule is the start of President Donald Trump’s impeachment proceedings in the US Senate. There is also a speech from President Trump which is expected to provide short term profit cues. There is also an earnings report from US streaming content provider Netflix and tech giant IBM.
On Brexit developments, PM Johnson suffered his first post-election defeat as House of Lords voted to protect EU citizens’ rights after Brexit. The focus is now on the vote for an amendment that would ensure protection for child refugees. a promise made by Johnson’s predecessor Theresa May.
Trading Perspective: Broad-based mixed sentiment and woes stemming from the virus outbreak in China caused US futures in the international market to decline ahead of the Wall Street opening. This along with news of IMF growth forecast reduction is expected to pressure Wall Street into subdued opening later today post which headlines on development surrounding President Donald Trump’s impeachment proceedings will provide the directional bias for Wall Street.
EUR/USD: While the pair took a hit on cues from China over the virus outbreak, it managed to contain loss and region upper hand following strong German ZEW data update. However, broad-based cautious investor tone and USD’s strength from the demand for safe-haven assets kept EURO’s gains in check. Traders now await President Trump’s speech for short term profit opportunities.
GBP/USD: The pair saw steady upward price action with strong fundamental support for GBP bulls on strong UK jobs data and unemployment data outcome.
USD/CAD: The pair saw a sharp upward spike in price action as a decline in crude oil price and reduction of global growth forecast by IMF weighed down commodity-linked currency Loonie. Firm USD on broad-based risk aversion and safe-haven demand along with CAD’s weakness helped push the price on the steep upside move. Traders now await President Trump’s speech for short term profit opportunities.
Please feel free to share your thoughts with us in the comments below.