Geo-political woes affect risk asset demand in European markets, cautious investor sentiment dictates and drives price action of key assets in the global market.
Summary: Amid lack of fresh geo-political cues, Asian market saw relatively positive activity on most major Asian benchmark indices, while a few popular stocks and risk assets still traded in red. Prolonged Sino-U.S. trade war cues, internal political scenario woes and increasing odds of no-deal Brexit outcome continued to affect investor sentiment and risk appetite in the European market causing major benchmark indices, key stocks and risk assets to see sharp declines today. Further, caution influenced by bidding war for German lighting group Osram also affected activity in European equity markets. In Forex market, risk aversion has caused major global currencies to trade in red despite the dovish influence surrounding USD which has helped limit decline to some extent.
Precious Metals: Amid Holiday thin trading session in Asian market and cautious trading activity in European markets, Gold held steady above $1500 per ounce while silver also traded positive in the global market. Safe haven demand influenced by geo-political cues are expected to keep precious metal bulls underpinned in immediate and near future trading sessions.
Crude Oil: Crude oil price is seeing flat activity amid woes surrounding prolonged trade war and holiday thinned market participation today. Geo-political cues from trade dependent European economy is also a dovish sign as all these events hint at slowdown in global economic activity which is bad for crude oil price owing to decreased demand for crude oil consumption.
USD/JPY: The pair saw dovish activity today as well given weakness surrounding US Dollar and increased demand surrounding Japanese Yen. Being a safe haven currency, amid increased risk aversion and holiday thin trading activity, the demand for Japanese yen surged considerably causing the price to go as high as 1½ year highs and the momentum is likely to continue in immediate and near future sessions.
On The Lookout: Growing concerns surrounding escalating trade war tensions between China and U.S.A. and its impact on global economy given the scenario which hints at a drawn out economic warfare and political uncertainties in Europe, increased odds surrounding no-deal Brexit are beacons of risk aversion sentiment. This has caused investors to skip risk assets and invest in safe haven currencies, bonds and precious metals. Prospects for fresh elections in Italy given Matteo Salvini’s decision to pull back his support to ruling coalition party is talk of the town but there is prospect for move back firing if his coalition partner and opposition party team up but that could cause dire impact on Italian economy. Economic calendar is silent today aside from release of US Federal budget balance later today. Later in Pacific-Asian market hours traders await RBA asst gov Kent’s speech along with Japan PPI and Singapore preliminary GDP data for short term trading cues.
Trading Perspective: Caution in European market hours from local and international cues and holiday thin trading activity in Asian market caused US index and stock futures trading in the international market to see dovish activity today. On Earnings calendar, US market is set to see release of report from Sysco but the same is unlikely to cause visible impact on market. Given investor sentiment in the global market which is deep in bear’s territory, US Wall Street is likely to open in red and see subdued price action today.
EUR/USD: Euro is trading positive influenced by USD’s weakness. But China’s further devaluation of Yuan and internal political woes affect Euro capping gains. For now the pair is stable above 1.1200 handle. US Dollar is weighed down by escalating trade war woes between China and U.S.A. Traders now await fresh cues from US market for short term profit opportunities.
GBP/USD: The pair went as low as 1.2015 today but is mostly trading above mid 1.20 handle as news hinted that MPs are looking for ways to avoid no-deal scenario and on news of PM Boris Johnson’s visit to Paris and Berlin. Meanwhile, traders await fresh cues from US market for short term profit opportunities.
USD/CAD: The pair is trading positive in the global market today despite USD’s broad based weakness. The gains are led by weakness surrounding crude oil’s price action in the global market as escalating geo-political woes weighed demand for crude oil consumption hurting demand for crude oil usage. CAD being commodity linked currency was weighed down by weak Crude oil price. Traders now await fresh cues from US market for short term profit opportunities.
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