Powell speech and PPI data to provide directional cues, lingering caution to keep gains under check in Wall Street.
Summary: Wall Street yesterday saw major indices plunge down sharply over concerns of a further virus outbreak on lockdown easing measures. However, declines were capped over reports of record budget deficit for April 2020 at 738 Billion as it was viewed as a sign of government’s efforts to aid COVID-19 hit economy and the enormity of efforts from the government to curb further impact on the nation from the ongoing pandemic.
However, Asian markets saw Chinese market trade on positive note aided by support from recent promises for support package and tariff easing measures while Indian markets also traded positive on stimulus package announcement worth nearly 10% of its GDP.
In the European market, declining bank sector stocks and updates hinted at the fallout in planned merger. However, the decline was capped over mixed reactions of Germany’s move to relax border crossing restriction for non-essential personnel in a bid to boost tourism activity during the summer season. France and Austria are seeing declining COVID-19 victim count but lingering fears over a further escalation in COVID-19 outbreak amid small pockets of resurgent victim count during lockdown easing measures keep cautious tone supported.
Precious Metals: Gold and Silver are seeing overall tone remaining positive supported by broad-based caution in US and European markets. But gains were capped, and gold suffered some loss in the Asian market over relatively positive tone in the market region, which led to profit booking activities.
Crude Oil: Crude oil price sees positive price action yet another day on both Brent and WTI indices and futures. The impact from additional voluntary supply cutbacks from OPEC members and decline in US API weekly stockpile data, albeit not to an expected degree, helped underpin demand to supply ratio in favour of crude oil bulls.
DXY: As there is no major development surrounding economic and covid-19 related scenarios in the USA, the US Dollar index remains steady in 99 region. Disappointing macro data outcome, concerns of COVID-19 outbreak resumption in case lockdown is fully relaxed has kept USD under pressure against its major global peers.
On The Lookout: The main focus on investors in the North American market session today is on the speech from Fed Chair Jerome Powell. While there is a high level of speculation in the market, activity suggests the possibility of a further stimulus package from the US Federal Reserve in the form of negative interest rates.
But so far, speech from various FOMC members this week has given no signs that there will be any such move in immediate or foreseeable future. This makes today’s speech from Mr. Powell a key factor to watch out for as traders wish to know whether the head of US central banks stands with his team or has a different approach and how it would affect the policy decisions.
On the release front, in the economic calendar, US Markets see PPI data and EIA weekly crude oil inventory stockpile update aside from Powell Speech while earnings calendar sees the release of financial data from Cisco and Macy’s Inc.
Trading Perspective: US futures trading in the international market saw positive activity suggesting some level of rebound action in Wall Street instruments during North American trading hours today. But the price of key risk assets and indices are likely to remain trapped within a familiar price range as overall market mood retains a high level of caution.
EUR/USD: The pair continues to trade on a positive note but remains trapped within a familiar price range in 1.08 handle. Positive industrial production data and weak USD support EURO bulls for now, but given lack of fundamental strength for Euro, the pair is likely to fall below the 1.0800 handle in case USD regains strength. Traders now await Powell Speech & PPI data for short term profit opportunities.
GBP/USD: The pair is trading on a positive note given better than expected outcome in UK GDP update. However, the price still remains trapped below 1.22 handle as GDP data was a clear sign of the UK economy’s sufferings from Brexit and COVID-19 pandemics. Weak USD also aids some level of support to rally, but it’s mostly negligible. Traders now await Powell Speech & PPI data for short term profit opportunities.
USD/CAD: The pair is trading with a clear dovish note as CAD retains strong fundamental support over positive crude oil price action and demand outlook. However, lingering caution in the global market and resultant safe-haven demand underpins USD keeping price above 1.40 handle for now. Traders are currently waiting for EIA weekly stockpile data, Powell Speech & PPI data for directional cues.
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