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European Equities Move Two Ways on Italian Debt Woes, US Retail Sales Awaited

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Italian DebtRisk appetite recovered in the market today on easing tensions between China and U.S. but Italian debt woes capped gains in European market influencing dovish price action.

Summary: Global market today started off on a positive note following comments from US President Donald Trump who downplayed escalating tensions as nothing more than a little squabble. With both parties re-affirming their stance on continuing trade talks with aim to close a trade deal, investor’s fears that China would impose retaliatory tariffs on US goods eased paving way to positive price action in Asian markets. However, some level of caution remained in the market, as Singapore equity market one of the major hubs for global trade saw benchmark indices and major equities close in red. European equities continued with their rebound activity from previous session as hopes for positive resolution in ongoing Sino-U.S. trade wars improved risk appetite in the market. However, fresh Italian debt woes brought in a wave of caution in European market resulting in recovery rally losing steam. This has resulted in European benchmark indices paring early gains and trading in red as European session approaches the day’s close. Forex market continues to see sell-off of major global currencies resulting top forex pairs seeing dovish price action.

Precious Metals: Both gold and silver see positive price action in the global market today. While tensions surrounding Sino-U.S. trade talks have eased a bit, investors chose to retain caution. Further, fresh Italian debt woes from Europe amid renewed risk appetite also boosted safe haven demand resulting in both gold and silver trading with slight positive bias.

Crude Oil: Crude oil is trading with slight bearish bias in the global market today owing to dovish influence stemming from high build in US API weekly crude oil inventory data. However, positive influence stemming from OPEC enforced supply reduction and US decision to stop waivers for Iranian crude oil import provides support to bulls keeping crude oil mostly range bound in today’s trading session.

AUD/USD: While Australian Dollar initially gained some positive influence on easing tensions surrounding Sino-U.S. trade war, it lose all bullish strength owing to disappointing Australian Wage price index data and Chinese industrial production data. Further, strong USD in the broad market put pressure on AUD resulting in the pair seeing steady bearish price action today.

Sino-U.S. trade warsOn The Lookout: Geo-political issues remain the main driving force behind price rally in global equity market. Tension surrounding Sino-U.S. trade war woes have eased off a bit but caution remains as traders await further headlines on schedule for trade talks between two nations. Traders also remain wary to safe guard their investment against possible move from China on imposing retaliatory tariffs on US Goods or selling off US bonds in large quantity as negotiation tactics to force U.S.A. which could trigger another wave of sharp sell-off. On Brexit front, UK parliament is preparing to have another vote on PM May’s withdrawal agreement. In the meantime, traders focus on macro data updates for short term profit opportunities.

Trading Perspective: Strong USD is likely to pressure major global currencies using prevalent cautious investor tone in the market. But positive cues in US market hours may help ease dovish pressure from USD resulting in range bound price action with slight positive bias in Forex markets. US Wall Street is likely to see subdued price action with slight positive bias amid ongoing trade war related caution.

US Market: Traders await US retail sales data for short term directional cues. Ahead of Wall Street opening US index futures trading in international market saw dovish activity on disappointing macro data outcome from China and dovish cues from European markets suggesting US market is likely to see subdued opening today.

EUR/USD: The pair fell below 1.12 handle and continues to decline steadily. Macro data outcome was in line with expectations and hence there was no impact on Euro bulls. Pressure from USD bulls on cautions investor tone which underpins US Greenback adds to Euro’s decline. Traders now wait for US retail sales data for short term directional cues.

USD/CAD: US Greenback today regained control over price action of the pair as Crude oil price fell in the broad market. Further, strong USD in global forex market on cautious trading activity also adds pressure to CAD. Traders now await US retail sales data, Canadian core CPI data for short term directional trading cues.

European Equities Open Positive As Brexit Woes Disappeared, Sino-U.S. Headlines Capped Gains

by Leave a Comment Filed Under: Market News - US Open Tagged: , , , , ,

brexit voteAsian markets saw positive price action while European indices and equities opened positive on healthy risk appetite and easing Brexit woes but headlines on Sino-U.S. trade deal hinting at delay of final meeting resulted in limited gains and increased caution among global investors.

Summary: Global market today saw positive price action in all major stocks and equity indices across key stock exchanges in Asian and European markets. As concerns surrounding Sino-U.S. trade talk which was major driving force behind price action in global market till early March has calmed down in recent past and Brexit woes which had been gripping market since start of the week is also seeing investor concerns slowly easing away, risk appetite has boomed in global market. While most major stock exchanges in Asian markets saw positive price action, Shanghai stock exchange saw dovish close for the day owing to concerns of slowdown in industrial activity following release of worse than expected industrial production data. Despite EU stating that they are not ready to negotiate a new trade deal with UK and expect credible justification in case of any request for delaying article 50 deadline from UK, analysts believe that the request will be granted to avoid impact of messy Brexit on both economies. This has helped ease most of concerns and worries stemming from Brexit resulting in positive price action in European equity market. Major Forex pairs aside from EUR/USD & GBP/USD are trading positive on increased risk appetite today but Brexit woes and rebound in USD has led to range bound price action with bearish bias in both currency pairs mentioned above.

Precious Metals: Both Gold and Silver saw decline in spot and futures markets as demand for safe haven eased once Brexit woes evaporated from the market. With neither Sino-U.S. trade talk updates nor Brexit woes to left demand for safe haven assets and rebound in US dollar in broad market, precious metals saw increased bearish pressure in today’s Asian and European trading session. Further, increased risk appetite saw fund flow change direction towards equity and forex market while participation from emerging markets decreased resulting in dovish price action in precious metals market today.

USDJPY: The USDJPY pair saw sharp upside move during American market hours as news that UK parliament has voted against no-deal Brexit scenario hit market. Further, rebound of US Greenback in broad market supported by increased risk appetite during Asian market helped the pair stage a sharp upside move above mid-111 handle. However, news that China & U.S. are likely to delay their scheduled meet for finalising trade deal to month of April renewed concerns for trade war escalation between both parties resulting in Japanese yen gaining some momentum resulting in pair seeing decline from intra-day highs during European market hours but downside was limited well above mid-111 handle.

AUD/USD: The AUDUSD pair closed positive over last three consecutive trading sessions despite disappointing macro data from Australia as AUD bulls were able to capitalise on increased risk appetite and weak USD influenced by disappointing US macro data and declining US Treasury Yields but saw sharp decline today as dovish cues from Chinese equities finally managed to have visible impact on price action of AUD. Further, USD’s rebound in broad market put increased pressure on major global currencies adding to bearish pressure on Australian Dollar resulting in sharp dovish nose dive earlier today but loss from early declines could be reversed if US macro data scheduled to release later today sees disappointing outcome.

On The Lookout: Investors focus is on UK parliament meeting for updates on how lawmakers wish to proceed further as best possible outcome in current scenario would be to initiate second Brexit referendum. However, it is now clear that lawmakers would vote to extend article 50 deadline in parliament meeting today and EU would likely grant the request to extend deadline for Brexit as messy exit will have dire consequence on both EU & UK economies. Traders have already priced in extension of deadline into their trades today resulting Brexit woes easing in market and major equities and indices in Europe and UK trading positive ahead of parliament meeting. While risk appetite remained high in Asian and European market hours, investor sentiment turned cautious in mid-European market hours on news that meeting between China & U.S.A. for finalizing trade deal between two nations has been pushed from late March to early April with comments from US Trade Representative Robert Lighthizer stating that some of key issues remain unresolved. Further, Trump’s comment which expressed his opinions that there is no rush to close trade deal between two parties which is well in contrast with his statement earlier this month also weigh down risk appetite. Investors now await US macro data for short term profit opportunities. US macro calendar today will see the release of Import & Export price indices and New home sales data. Investors are also on lookout for tomorrow’s Bank of Japan’s interest rate decision as it could greatly affect price action in Pacific-Asian market hours.

Trading Perspective: Given increased caution during late European session owing to headlines on China-U.S. trade talks, risk appetite has taken a blow but there is still decent level of risk appetite in market. This suggests that depending on outcome of US macro data today, US Wall Street is likely to see major indices and equities see range bound price action with bearish bias.

EUR/USD: The pair saw sharp fall since Pacific-Asian market hours as US dollar rebound in broad market but high risk appetite capped decline in Asian market hours. However, risk appetite took a hit following news of Sino-U.S. trade talks resulting in pair seeing sharp decline in European market hours. Investors now await update from UK parliament meeting and US macro data for directional cues.

GBP/USD: The pair traded well above 1.33 handle despite seeing decline early in the day as Brexit woes eased and risk appetite remained high in market. Sino-U.S. trade deal update had no impact on price action as all eyes are focused on today’s UK parliament meeting with hopes for possibility of second Brexit referendum and extension of article 50 deadline, while US macro data is eyed for short term profit opportunities.

USDCADDaily 14319

USD/CAD: The USDCAD pair saw sharp upside move today as USD regained strength in broad market and Crude oil price which backed CAD bulls declined in broad market following hitting new 2019 highs. Further, news of Sino-U.S. trade deal hurt risk appetite in the broad market, boosting USD’s momentum even higher resulting in steady upside move across the day. Investors now await US macro data for short term directional cues and profit opportunities.

Statement by Philip Lowe, Governor: Monetary Policy Decision

by Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: , , , , ,

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

The global economy grew above trend in 2018, although it slowed in the second half of the year. The slower pace of growth has continued into 2019. The outlook for the global economy remains reasonable, although downside risks have increased. The trade tensions remain a source of uncertainty. In China, the authorities have taken further steps to ease financing conditions, partly in response to slower growth in the economy. Globally, headline inflation rates have moved lower following the earlier decline in oil prices, although core inflation has picked up in a number of economies. In most advanced economies, unemployment rates are low and wages growth has picked up.

Philip Lowe

Overall, global financial conditions remain accommodative. They have eased recently after tightening around the turn of year. Long-term bond yields have declined, consistent with the subdued outlook for inflation and lower expectations for future policy rates in a number of advanced economies. Also, equity markets have risen, supported by growth in corporate earnings. In Australia, short-term bank funding costs have moderated, although they remain a little higher than a few years ago. The Australian dollar has remained within the narrow range of recent times. While the terms of trade have increased over the past couple of years, they are expected to decline over time.

The Australian labour market remains strong. There has been a significant increase in employment and the unemployment rate is at 5 per cent. A further decline in the unemployment rate to 4¾ per cent is expected over the next couple of years. The vacancy rate is high and there are reports of skills shortages in some areas. The stronger labour market has led to some pick-up in wages growth, which is a welcome development. The improvement in the labour market should see some further lift in wages growth over time, although this is still expected to be a gradual process.

Other indicators suggest growth in the Australian economy slowed over the second half of 2018. The central scenario is still for the Australian economy to grow by around 3 per cent this year. The growth outlook is being supported by rising business investment, higher levels of spending on public infrastructure and increased employment. The main domestic uncertainty continues to be the strength of household consumption in the context of weak growth in household income and falling housing prices in some cities. A pick-up in growth in household income is nonetheless expected to support household spending over the next year.

The adjustment in the Sydney and Melbourne housing markets is continuing, after the earlier large run-up in prices. Conditions remain soft in both markets and rent inflation remains low. Credit conditions for some borrowers have tightened a little further over the past year or so. At the same time, the demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed. Growth in credit extended to owner-occupiers has eased further. Mortgage rates remain low and there is strong competition for borrowers of high credit quality.

Inflation remains low and stable. Underlying inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual and to take a little longer than earlier expected. The central scenario is for underlying inflation to be 2 per cent this year and 2¼ per cent in 2020. Headline inflation is expected to decline in the near term because of lower petrol prices.

The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Equities Bleed Across Asia & Europe, Mixed Macro Data Had Little Impact On Market

by Leave a Comment Filed Under: Market News - US Open Tagged: , , , , , , , , , , , ,

Mark Carney, Governor of the Bank of England

Mark Carney, Governor of the Bank of England

Dovish cues from US Wall Street and disappointing Chinese macro data caused equities to bleed, macro data from EU was positive but does little to change price action as investor sentiment shows bearish inclination.

Summary: Global market is seeing mixed price activity today influenced by macro data and cues from yesterday’s trading session. US Wall Street last night saw major indices and equities slide as construction spending data was way worse than expected. Further, the cheer with other major markets enjoyed on optimism surrounding Sino-U.S. trade talks failed to have any impact on Wall Street price rally as US investors have grown way of conflicting headlines hitting the streets time and again with no headlines containing any solid data on content trade talks between two nations. Further, disappointing macro data outcome from China and downgrading of growth target for the year ahead in China combined with dovish cues from Wall Street resulted in major Asian and European equities seeing sharp declines today. Meanwhile, forex market saw relatively positive performance as USD lost some ground in market following Wall Street performance last night. Positive investor sentiment and increased risk appetite influenced by optimism surrounding Sino-U.S. trade talks helped major global currencies capitalize on USD’s weakness and trade positive in global market today.

Precious Metals: Increased risk appetite over last two trading sessions has reduced demand for safe have assets in broad market significantly. Further profit booking activities also dragged the price to multi weeks low in recent past. However, Wall Street decline last night and dovish equity performance in Asian and European markets combined with weaker dollar helped precious metals find some peace. This led to both gold and silver trading flat near previous session lows across today’s trading session.

USD/JPY: The pair saw sharp fall during American session last night owing to disappointing US construction spending data and Wall Street decline. Disappointing Chinese macro data and declining Asian equities also added to Yen strength and kept it near overnight lows in early Asian market hours but better than expected EU macro data and healthy risk appetite in broad market helped the pair move back near previous session high where the pair has consolidated in European market hours.

RBAAUD/USD: The pair is seeing two way price action today as bulls on both sides of currency pair have some level of fundamental support. While macro data in Australia was mixed the PMI’s were positive and RBA maintained neutral stance and comments mirrored last month’s sentiment. However, Dollar’s strength supported by US T.Yields and disappointing Chinese macro data added dovish influence to AUD resulting in pair falling from intra-day highs to lows and both sides waging war for control resulting in range bound price action.

On The Lookout:  In American market hours today, macro data outcome and speech by Bank of England governor Mark Carney are the main events. But investors are also focused on price activity in US Treasury market as long term government bond yields dropped following Wall Street’s decline last night. This in turn weighed down US dollar in broad market helping forex market seeing positive price action today despite equities seeing sharp declines. In US market, the key release of the day as ISM Non-Manufacturing  PMI, US Federal budget balance & New Home Sales data. Also in Pacific-Asian market hours speech from Bank of Japan’s board member Harada, Japanese house hold spending and Australian GDP data are expected to provide directional cues in Forex markets.

Trading Perspective: Given the fact that US Wall Street has proved itself resilient to headlines pertaining to Sino-U.S. trade talks, macro data outcome is likely to be key driving force behind price action in Wall Street tonight. Forex markets are likely to continue range bound action with positive bias ahead of US macro data updates while equities are likely to open positive as fundamentals remain in favor of market bulls.

US Indices: Ahead of US market opening, major index futures trading in international markets such as S&P500 and NASDAQ 100 futures were up nearly 0.15% and Dollar index which measures its strength against six major global currencies is trading positive. This suggests that markets bulls have strong fundamental support and US Wall Street is likely to see positive opening. Positive price action in major stocks will lead to US indices trading positive during today’s market hours.

EUR/USD: Bears seem to have a solid grip on common currency in global market as the pair failed to capitalize on better than expected macro data outcome and build a recovery rally. The pair continues to trade range bound ahead of US macro data update as USD remains strong in broad market despite suffering slight dovish influence earlier today on cues from Wall Street and US T.Yields going down from recent highs. A positive US macro data outcome will lead to pair taking a bearish nosedive.

USD/CAD: While US dollar suffered in global market, the pair continues to trade positive as CAD seems to lack fundamental support to establish positive rally despite crude oil trading with significant gains in spot and futures market as Friday’s disappointing GDP data from Canada seems to be still weighing on the loonie. Political tensions in Canada is also continuing to weigh down CAD meanwhile strong fundamentals for USD bulls adds strength to Greenback suggesting that regardless of macro data outcome the pair is expected to remain trading in green for rest of the day.

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