Healthy risk appetite over positive progress in key geo-political issues inspire positive price action ahead of Fed meeting minutes which is expected to provide short term directional cues.
Summary: Global equity markets continue to trade positive today in hopes of positive progress in trade talks between China & U.S.A. Further major central banks have recently expressed dovish sentiment over impact of Sino-U.S. trade war on their economy and a few have even started taking measures to improve their economy via various refinancing plans. This move greatly underpins market bulls helping major indices and equities see positive price action. Forex market also saw positive price action as weaker dollar in broad market owing to decline in US Treasury Yields and political issues in U.S.A. Brexit optimism also underpins risk appetite as headlines indicate that no-deal exit scenario is unlikely. Given positive progress on key global events, risk appetite remains high in market and major assets are likely to continue positive price action in near future.
Precious Metals: Precious metals continue to trade positively in the broad market on weak US Dollar as Weak USD makes it easier for participants across the globe to purchase precious metals owing to lower exchange rates. Aside from weaker Greenback, investors caution over possibility of Sino-U.S. trade deal falling apart and desire to shield investment from geo-political woes associated risk also influence positive price action.
AUD/USD: The Australian dollar eased following repeated failed attempts at breaching resistance near 0.717 handle. However weaker dollar in broad market and optimism surrounding Sino-U.S. trade talks helped keep price action range bound near 0.715 handle despite intra-day session seeing sharp decline. Investors now await Fed meeting minutes for directional cues before placing major bets.
USD/JPY: The pair recovered its hold above $110.80 handle during Asian session on increased risk appetite in broad market. But gains were limited as Dollar still faces pressure in broad market owing to political woes stemming from USA. Traders now await directional cues from Fed meeting minutes and if dovish tone is found in the report the pair is likely to see downside move else continue its range bound action in favor of US Greenback.
On The Lookout: Investors focus continues to remain on Sino-U.S. trade talks as high level discussions are expected to occur in white house later this week which could confirm whether there is an extension on deadline for trade deal. Investors also await reports on possible amendments in withdrawal agreement following meeting between EU Juncker and PM May but PM May’s hold over power decreases further as three more lawmakers quit the party over issue with ongoing Brexit proceedings. In Immediate future, the main focus is on Fed meeting minutes for confirmation of Fed’s stance on rate hike plans for 2019 and USA’s political woes as 16 states file lawsuit against US President Trump’s declaration of national emergency.
Trading Perspective: Increased risk appetite amid escalating political tensions in US and Europe are likely to result in range bound activity with bullish bias.
US Indices: While political climate in USA continues to pressure dollar in broad market, performance of US index futures in global market suggests that major indices are likely to hold onto previous session gains and continue positive price action as Sino-U.S. trade talk optimism and expectations of dovish tone in Fed meeting minutes scheduled to release later today underpin market bulls and inspire risk appetite.
GBP/USD: The pair suffered some loss in late London market hours on reports that three more lawmakers’ quite Tory party owing to issues with direction in which Brexit is heading towards. However, expectation of headlines hinting at amendments in UK’s withdrawal agreement with EU and weak USD in broad market helped limit decline well above 1.3000 handle
EUR/USD: The pair scaled to mid 1.13 handle on upbeat German macro data. But concerns of economic slowdown in EURO area dovish cues from ECB weighed down EURO resulting in range bound action. Investors now await Fed meeting minutes and a dovish report will give EURO much needed influence and support to break past mid-1.13 handle and establish a stable price rally.