China hinted at trade talks with the US in early October improving investor sentiment while UK PM Boris Johnson suffers blow after blow of unfavourable outcome.
Summary: Global stock and forex market are seeing major benchmark indices and key risk assets trade positive as bulls remain supported on temporary relief in investor sentiment. While geopolitical issues remain unresolved keeping long term outlook dovish, recent developments and repetitive familiar updates have led investors into a false sense of hope which is likely to fade away once it became clear that trade war between the US and China is unlikely to be resolved in immediate and near future as was the pattern seen in market so far the last couple of months.
Update from China stating that there is a confirmed trade talk between the US and China in early October gave market bulls a fresh breath of fundamental support. While this provided investors with a sense of relief temporarily, the next instant when things heat up because of China or US official comments or delay in announcing the exact date of the meeting is highly likely to push the market back into bearish decline once the short term relief fades away.
European equities opened and traders positive on cues from the Asian market and increased risk appetite on account of temporary trade talk update influence. In the Forex market, major currencies continue to trade positive while USD remains weak as risk appetite remains high in the global market.
Precious Metals: Rare metals are seeing a decline in price action as risk sentiment improved in the global market over the latest update from China. But lingering caution in global markets and weak USD has helped limit decline and keep price above key psychological support levels.
Crude Oil: Crude oil is trading positive today with both major international benchmarks seeing considerable gains on easing trade war woes. A resolution in the trade war would boost crude consumption and import in China the biggest global importer affecting demand to supply ratio in crude oil bulls’ favor.
USD/JPY: Despite USD remaining weak in the global market, the pair is trading positive in the global market today as demand for Japanese Yen which is considered safe-haven currency decline and resulting in JPY sell-off. But gains were capped on USD weakness and demand for other major global currencies.
On The Lookout: U.S. Yield curve became steeper on update from China over trade talks with the US. As trade war woes eased the mood in global market lightened as traders saw the scenario as favourable for growth in global economic activity. However, neither China nor the USA has yet announced the exact date for trade talks aside from vague time frame update hinting at talks in early October. On Brexit front, post putting a dent in UK PM Boris Johnson’s plans for no-deal exit scenario, MP’s failed to approve Boris’s decision for snap elections leaving a frustrated PM stranded and all alone despite Boris strengthening his side soon after taking on the role of Prime Minister.
There is also the latest blow of Boris Johnson’s brother Jo Johnson resigning from his role which weakened Boris’s side considerably. This helped improve mood in the European market as Boris is stuck between a rock and a hard place which has now given lawmakers the decision to approve snap election in the UK only if the UK parliament passes a bill preventing no-deal Brexit outcome. In Asian markets, Hong Kong withdrew the extradition agreement as agreed earlier this week which also added great support to improving investor sentiment.
Trading Perspective: In macro calendar schedule, US economic calendar will see the release of ADP Non-Farm Employment Change, Non-Farm Productivity for Q2, Initial Jobless Claims, Unit Labour Costs for Q2, Markit Composite and Services PMI and EIA weekly crude oil stockpile data. US stock and index futures trading in the international market saw positive activity ahead of Wall Street opening on latest developments surrounding Sino-U.S. trade talks which combined with positive cues from Asian and European markets suggest US market is likely to see positive price action today.
EUR/USD: The pair is trading positive as EURO bulls are supported by improved investor risk appetite and cues on easing trade war woes. Further weaker USD in the global market also added strength to Euro bulls. Traders now await US macro data updates for short term trading cues.
GBP/USD: The pair is trading positive as the latest political developments in the UK has greatly improved fundamental support for GBP Bulls. Hurdles in PM Boris Johnson’s path is acting as a bullish boost for GBP while weak USD adds support to positive momentum. Traders now await US macro data updates for short term trading cues.
USD/CAD: The pair is seeing price action in favor of the Canadian Dollar today. Canadian Dollar is supported by easing trade war woes and a spike in the crude oil price, which underpins CAD bulls. Further, the commodity-linked currency also gains support in the form of USD’s weakness. Traders now await US macro data updates for short term trading cues.
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