USD gains on risk aversion in the market. Trade war influence takes back bench despite Trump’s comments as investors focus on EU election results which hint at great struggle for upper hand in political power play in Europe in near future. This has caused all positive influence from international markets to evaporate resulting in European indices declining sharply.
Summary: US Wall Street yesterday saw major benchmark indices and equities close in green over fresh wave of trade-talk optimism influenced by US President Donald Trump’s comments. However, investors held back from placing any major bets as the update seemed to be repetitive statement coming from US officials recently. Trump Administration continues to maintain its blacklist stance on Chinese telecom giant Huawei Technologies Ltd., which makes it difficult for trade deal to go-through between two nations given China’s stance on US treatment. This suggests that trade deal is unlikely to happen any time in near future no matter, how the officials gloss it over in their statements. Asian markets rode on Wall Street momentum and closed positive but European equities bleed red on Italian budget woes and caution amid EU election results announcements. Muted showings in EU parliamentary elections, talks surrounding Italy’s budget ahead of Fiat-Chrysler- Renault Merger and decline in bank stocks are major factors contributing to bearish activity in European equity market today. Forex market is seeing subdued price action in European market house owing to cautious investor sentiment.
Precious Metals: Precious metals are trading flat in global market owing to mixed cues from major markets across the globe. Risk appetite on Wall Street cues earlier in the day pressured precious metals while cautious investor sentiment in European market is providing precious metal bulls with some level of support resulting in the pair trading range bound/near flat with slight bearish bias.
Crude Oil: Crude Oil is trading with slight positive influence on both major international benchmarks Brent and WTI today. The positive influence is result of support bulls gain from OPEC enforced production and supply cut agreement which combined with escalating tensions in Middle East has managed to provide liquid gold with strong fundamental support regardless of influence from US inventory data.
AUD/USD: The Australian Dollar managed to gain positive momentum today as yet another news driven wave of Sino-U.S. trade optimism. Further, rallying iron ore prices also helped the currency of mining nation gain some strength against its counterpart. While the pair managed to stay above 0.69 handle modest pick-up in USD prevented the Australian Dollar from seeing sharp upside move while they await macro data updates for further trading cues and short term profit opportunities.
On The Lookout: As EU parliamentary election results are announced today, geo-political issues which lack any major progress aside from the usual updates has resulted in trade war headlines taking back bench. Increased political tensions and struggle for upper hand in political power play in Europe and Italian budget woes have taken centre stage today. In UK, while Brexit struggles fume in the background Brexit party has won 9 out of 12 regions which can be taken as an indirect sign that even in case of second referendum people are likely to vote in favor Brexit in which case, a lack of solid agreement between two economies will result in both parties suffering huge loss. Further, Matteo Salvini’s right wing league party won by claiming 34.3% votes and given his position on EU budget limitations committee he is likely to hit back at EU hard over their plans to fine Italy with 3 Billion Euro’s on account of overspending. Given events from recent past, Italy isn’t likely to sit back quietly to EU’s decisions which make it yet another concern for European citizens and Euro traders to watch out for aside from Brexit, Sino-U.S. trade talks and US threat of sanctions on EU’s auto market.
Trading Perspective: While geo-political events and trade war updates may move to back bench they still garner some level of attention and priority from traders across the globe. Despite all the hype in European market today, EU parliament election results are unlikely to have major impact on Wall Street indices performance tonight. Investors now await US CB consumer confidence data and Bank of Japan Governor Kuroda’s speech for short term trading cues and profit opportunities.
US Market: US benchmark index futures trading in the international market saw positive activity in Asian market hours. However, cautious investor tone in European market hours has resulted in futures trading in international market ahead of Wall Street opening take on flat movement with slight bearish bias. Given fresh wave of trade optimism and positive cues from Asian markets, Wall Street is likely to open positive but geo-political event related updates and US traders take on EU Election results will dictate price action for rest of the day.
GBP/USD: The pair is trading with high level of bearish bias as British Pound is facing strong dovish pressure from political uncertainty in the country. Increased likelihood of a hard Brexit outcome is yet another factor pressuring GBP which combined with EU parliamentary elections results and moderate pick-up in favor of US Dollar has resulted in the pair seeing sharp downward price action. Traders now await US CB consumer confidence data for short term profit opportunities and trading cues.
USD/CAD: The pair has been trading with positive bias since trading session began for the day. While lack of trigger favouring USD Bulls and positive crude oil price supported CAD bulls in Asian market hours capping gains, modest pick-up in USD in European market hours on risk averse investor sentiment helped USD gain upper hand. The pair managed to move past mid-1.34 handle ahead of North American market hours supported by USD’s safe haven demand but traders await US macro data update to confirm possibility of prolonged USD’s positive bias and for short term profit opportunities.