Equities Recover of Fresh Positive Cues, Investor Caution Eases

cuesLocal events from major global economies provide positive cues which outweigh dovish signal from prolonged geopolitical issues. 

Summary: While US markets closed on dovish note yesterday well in line with expectations, the Asian market saw all key risk assets and major benchmark indices trade and close on a positive note. The positive price action in Asian markets was influenced by better than expected outcome in Chinese macro data which helped ease investor caution albeit lack of fresh developments in China-U.S. trade war. Further, news that Hong Kong will announce the withdrawal of the extradition bill, which was the cause of the recent protest also helped calm down investor’s nerves.

European market opened positive on cues from the Asian market and received further positive support from gains in Italian shares and political developments in Italy. While Brexit uncertainties continue to hang around a fresh breath of positive cues outweighed dovish influence from geopolitics influenced cues. In the Forex market, currencies of major global economies gained headway on improvement in investor mood and decline in USD influenced by disappointing US macro data. 

Precious Metals: Rare metals market is seeing mixed activities with Silver retaining positive price momentum while Gold fell slightly on improved risk appetite among global investors. However, the decline in USD helped cap decline in gold as investors from Emerging Markets made small bets on lower exchange rate owing to prolonged geopolitical issues. 

Crude Oil: Crude oil price gained considerable today with both major international benchmarks WTI & Brent seeing more than 2% increase in value as better than expected outcome in Chinese macro data helped improve investor sentiment. Further, an expectation of a draw in US weekly stockpile data also adds support to crude oil bulls. 

AUD/USD: The pair is trading positive for second consecutive session capitalising on cues from RBA’s decision to hold steady on account of Australian GDP data outcome. Lingering positive influence from previous sessions and cues from better than expected Chinese macro data outcome along with a decline in USD also added strength to AUD bulls. 

On The Lookout: While both Asian and European markets today saw positive price action influenced by bullish cues on account of local events, key geo-political issues which have hurt global economy continues to remain a major hurdle. Neither Sino-U.S. trade war nor Brexit seems to be close to positive resolution any time soon. On Sino-U.S. trade war front, failure to schedule date for a face to face meeting and trade talks combined with President Donald Trump’s comments earlier this week hinting that he would come up on Beijing tougher than before if trade talks dragged on are clear indications that the issue is likely to remain unresolved in the foreseeable future.

On Brexit front, opposing party MP’s put a pin to UK PM Boris Johnson’s move to head towards no-deal outcome leading to Boris pushing for a snap election in order to shutdown UK parliament and prevent MP’s from acting as a hurdle during the upcoming deadline. Boris’s unreluctant approach is a clear sign that the UK is heading to no-deal exit unless his powers are crippled and he is ousted before the deadline. But there is still a ray of positive hope on a different matter as Christine Lagarde – who is set to succeed as ECB’s president seemed pessimistic in her speech stating need to be cautious and analyse negative impact of policy easing while warning from Deutsche Bank and Commerzbank CEO’s on side effects of rate cut by ECB also seemed to hurt the possible outcome of ECB rate decision in upcoming meeting helping the common currency reverse loss from the previous session and see some gains. 

Trading Perspective: On the release front, traders await US Trade balance data and Canadian Trade balance and Labour Productivity data updates in early North American market hours while Pacific Asian market hours will see the release of US API weekly crude oil inventory data and Australian Trade balance data. Also, there is a release of Bank of Canada’s rate decision and Press conference in early American market hours which are set to provide some level of short term profit opportunity for the forex market. On earnings calendar front, US market will see financial data from Copart. US Stock and Index futures trading in the international market ahead of Wall Street opening saw positive activity influenced by positive Chinese macro data and improved risk appetite of investors in the global market. 

EUR/USD: The pair is trading positive today supported by improved investor risk appetite and better than expected EU area macro data. Also, pessimistic developments surrounding ECB interest rate policy easing decision helped EURO bulls gain positive influence which combined with USD weakness is likely to keep the pair trading positive in US market hours. Traders now await US macro data for short term profit opportunity. 

GBP/USD: The pair is trading positive as British Pound gained positive momentum post outcome in UK parliament which saw lawmakers shutdown UK PM Boris Johnson’s move towards no-deal Brexit. However, gains were capped owing to mixed outcome in UK macro data while USD’s weakness helped GBP bulls stay afloat. Traders now await US macro data for short term profit opportunity. 

USD/CAD: The pair erased gains made in the previous session and declined below mid-1.33 handle as USD fell on account of disappointing macro data in the previous session. Canadian Loonie the commodity-linked currency gained positive momentum as Crude oil price saw a sharp upward move in the global market today. Traders now await BOC rate decision outcome, cues from BOC press conference, and macro data outcome from US and Canada for short term profit opportunities. 

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