Huawei, U.S.-China trade dispute rattle markets, China blames US for trade war extension, investor retain cautious stance.
Summary: Global market today is seeing equities decline as tensions surrounding Sino-U.S. trade talks continue to escalate. With U.S. government’s threatening tactics only serving to infuriate further against the aim of US to force China to submit to their terms, Chinese retaliation seems imminent. Google has terminated all closed license business with Chinese firm Huawei because of the blacklist alert adding fuel to fire. China has accused US of having extravagant expectations for trade deal which is preventing both nations from coming to an agreement. The dovish cues flowed over from Asian market into European markets. As trade dependent economy is the major driving force behind most European nations, escalating trade tensions is causing European indices to decline sharply today. Risk averse investor sentiment on trade war cues has resulted in forex market also seeing dovish price action.
Precious Metals: Despite trade war woes and cues from geo-political tensions escalating in the market boosting safe haven demand, neither gold nor silver could gain much headway today. As forex market saw sharp sell-off, USD gained strength capping prospect for precious metals. A costly dollar means higher exchange rate for users of other currencies limiting demand for precious metals.
Crude Oil: As tensions between two major global super powers escalate into new politico-economic war, it is greatly affecting performance of global economic growth limiting demand for crude oil. This has in return caused crude oil price to fall. But news reports hinting that OPEC is likely to keep supply cut enforcement agreement active across the year helped limit loss.
AUD/USD: The Australian dollar gained positive momentum today as return of incumbent government in the country was seen as a positive trigger. However, costly US Dollar, escalating sino-u.s. trade tensions and potential rate cut by RBA kept gains in check resulting in range bound momentum with positive bias.
On The Lookout: Neither Brexit, nor Sino-U.S. trade war has made positive progress despite nearly half year passing. With both issues expected to have been resolved long ago but neither seeing any solid progress or conclusion, economic growth across the globe has been affected. This along with escalating political tensions between major economies involved has hurt activity in stock and forex markets as business activities have slowed down in the mean time. The week ahead is filled with multiple high impact macro data updates, but escalating trade tensions and headlines pertaining to progress in geo-political issues will continue to hold sway over long term price trend. For the day ahead, macro data calendar schedule is silent aside from speech by Fed Chair Jerome Powell and key FOMC MPC members.
Trading Perspective: Wall Street is likely to see dovish activity on trade war woes. As Canadian market is closed for the day on account of Victoria day liquidity in North American market hours is likely to be low.
US Market: US index futures trading in international market dropped sharply ahead of Wall Street opening. While Singapore market is closed for the day, all other major markets gave dovish cues as blacklisting of Huawei and resulting consequence has whipped up dovish frenzy in the global market. This suggests Wall Street is likely to bleed red today.
EUR/USD: The pair gained positive momentum in European market hours owing to positive German PPI update. However, escalating trade war woes continue to weigh down EURO. Strong USD ahead of Wall Street opening on safe haven demand also caps Euro’s potential upward move while traders await Powell speech for profit opportunity.
USD/CAD: The pair fell from Friday’s highs post which it has entered consolidation. Forex market is seeing mixed activity despite dovish investor sentiment in the market. OPEC’s decision to extend supply cut enforcement supports CAD. Traders now await Fed chair powell’s speech for short term profit opportunities.