Powell & Mnuchin’s testimony in the Senate and developments of Sino-U.S. tensions cues remain in focus.
Summary: Asian market hours today saw major global indices and equities trade and close on positive note riding on momentum from the previous session. However, the European market saw major indices and key equities pull back from previous session gains weigh down by a decline in healthcare sector shares. Auto sector shares also posted some level of loss adding momentum to decline. But cues from Germany and France led 500 Million Euro relief funds helped contain decline and recover some of the intra-day loss in late session. The overall activity continues to retain a dovish tone in the European market today.
Precious Metals: Rare metals are continuing to trade positive in the global market underpinned by escalating Sino-U.S. tensions. Gold remains well near multi-year highs scaled in the previous sessions but slightly lower due to profit booking activities. Sharp gains are unlikely in immediate future given resistance from covid-19 vaccine cues prevalent in US market hours.
Crude Oil: Having scaled fresh monthly highs during Pacific-Asian market hours with WTI above $11 and Brent above $33 per barrel, the price action of major crude oil benchmarks in the international market has turned range-bound awaiting fresh cues in form of weekly inventory data.
DXY: US Dollar Index has moved below 100 but remains well within familiar price range limits seen so far this month. As focus turns to Powell and Mnuchin’s testimony in front of Senate over efforts relating to COVID-19 aid, the broad-based risk-on tone in market and dovish factors in the USA keeps Greenback under pressure while prevalent safe-haven demand helped contain its decline.
On The Lookout: The major focus of traders today would be on Fed Chair Powell and US Treasury Secretary Steven Mnuchin whom are set to testify in front of Senate over the handling of emergency lending programs (covid-19 aid) worth US$ 500 Billion. The comments from this testimony will help gain some sort of idea on how the funds were spent and how the aid will help the market recover and to what extent the impact will be visible in the immediate and near future on various fronts.
As lockdown has been relaxed global economy is set to rebalance and the idea of how governmental aid has been allocated will greatly help gain a picture of the economic outlook in the short to medium term. Escalating China-U.S. tensions continue to hinder global economic growth outlook and may very well be to bane to President Trump’s campaign and election in the year ahead.
The UK has announced its first post-Brexit global tariff regime which is set to come into effect from January 2021 and the tariff measures seem much simpler compared to the overly complex EU system as the UK aims at achieving a free trade deal by end of this year. Bonds recovered in the European market with spreads narrowing over the announcement of Paris and Berlin backed 500 Billion Euro recovery funds but data hinting at increased jobless rate and decline in car sales gave a major blow.
On the release front, the US calendar sees the release of Building Permits and Housing Starts data aside from testimony by key US figures in front of the senate. There is also the release of API weekly crude oil stockpile data.
Trading Perspective: Wall Street is set to open flat today given the mixed reaction of US futures in the international market over earnings reports from Home Depot and Wallmart. Sino-U.S. tensions are also expected to weigh down sentiment while traders await cues from Senate testimony for directional cues.
EUR/USD: The common currency strengthened considerably with full fundamental support as Paris and Berlin backed emergency fund update helped improve bond market activity and tightened spread between sovereign bonds. Broad-based USD’s weakness also provided EURO bulls with some level of support but data hinting at declining auto sales and increasing jobless claims capped EURO’s rally. The pair seems steady slightly below mid-1.09 handle as traders await US data and senate testimony for short term trading cues and profit opportunity.
GBP/USD: The pair is trading with clear positive directional bias and remains firmly rooted above 1.22 handle as its post-Brexit global tariff regime update was welcomed by many in the global market with a positive tone. USD weakness and Vaccine cues also helped GBP bulls gain positive fundamental support. Traders now await US data and senate testimony for short term trading cues and profit opportunity.
USD/CAD: The pair is trading with clear dovish bias as positive crude oil price in the broad market and vaccine cues helped CAD gain strength. Escalating Sino-U.S. tensions and economic development in the USA add pressure on USD which for now remains supported by prevalent cautious market tone albeit slowly losing strength. The pair is now trading in the upper half of 1.38 handle while traders await US data and senate testimony for short term trading cues and profit opportunity.
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