economic slowdown Archives - The Industry Spread

Both Equities and Forex markets trade in red following IMF growth forecast update which inspired fresh wave of caution as update hinted at global economic slowdown resulting in increased demand for safe haven assets but USD failed to make solid gains owing to bearish pressure from U.S. market.

Summary: Global market is painted in red today as investor sentiment has turned dovish on global growth worries following weak Chinese GDP data which hinted at slow economic growth and International monetary fund growth forecast update which released yesterday. This is second revision of IMF global growth forecast in recent times as escalating trade war and political issues continue to worsen economic outlook for 2019. This combined with ongoing Brexit proceedings which see increasing uncertainties with each passing day added to safe haven demand in broad market resulting in both Forex and equity markets seeing steady downtrend price action. While US Dollar gained positive price action in broad market owing to safe haven demand, upside move was limited near 2-week highs as Greenback still suffers from influence of dovish fed rate hike stance and partial government shutdown which has extended into fifth week following Democrats rejection of latest proposal from President Trump resulting in subdued price action in major forex assets.

Precious Metals: Both gold and silver are trading in green today as broad market sentiment is inclined towards safe haven asset investment. While price action has been relatively steady across the day, sharp gains were prevented as safe haven demand also boosted US Greenback to 2-week highs in broad market. Both precious metals are expected to continue positive price action across the day on safe haven demand as USD bulls lack strength to go higher.

USD/JPY: The pair saw steady downtrend action across today’s market hours as increased safe haven demand supports Japanese Yen. While US Dollar gained positive price action yesterday on risk asset sell off, Dollar bulls lacked strength to maintain positive price action owing to dovish pressure from US market. Further, demand for JPY is steady as better part of global investors now believe that Sino-U.S trade deal is unlikely to go through which supports long term outlook for JPY.

AUD/USD: Australian dollar hit 2-week lows as broad based risk averse trading activity saw US dollar gain strength following IMF’s growth forecast which hints at slowdown in global economic activity. Concerns of global growth and cues from Chinese market greatly affect price action in Australian dollar. Further US dollar has strong hold on its position owing to risk averse trading activity in broad market despite bulls lacking strength to make bearish breakout which is expected to keep the pair trading near session lows for rest of today’s trading session.

On The Lookout: Major economic calendar release for the day from UK & EU markets saw mixed outcome but failed to have any visible impact on price action of key assets and indices. As risk averse investor sentiment remains high in market, macro calendar release failed to have any impact given that most risk assets are already trading in red. That said US existing home sales data scheduled to release during North American market hours is expected to provide short term profit opportunities later today. US equity markets is expected to trade in red on cues from Asian and European markets while major forex pairs are expected to continue subdued price action as dollar bulls lack support to make breakout but has enough strength to remain near 2-week highs. Main focus now lies of ECB meeting set to occur later this week for comments on rate hike plans and how ECB members are going to react given high level of political tensions and slowdown in economic activity and growth forecasts which is expected to provide directional cues from near time price action.

Trading Perspective: As safe haven sentiment remains high, most major assets in equity market will trade in red while forex market will see subdued price action given Dollar’s strength during today’s market hours.

EUR/USD: The pair is experiencing two way price action during today’s market hours as both sides wage war for control of momentum. Despite prevalent bearish investor sentiment in broad market, US dollar failed to create a breakout as dollar bulls lack strength for decisive price action. Mixed macro data seems to have had little impact on EURO in broad market resulting in the pair recovering from early loss but still trading range bound near critical support level. The pair could resume further declines overnight if it fails to recover above 1.1363 handle and sustain positive price rally by end of today’s trading session.

GBP/USD: Brexit remains the main driving force behind this pair resulting in price action which is highly in contrast to other major risk assets in global markets. While uncertainties surrounding Brexit proceedings are highs, news that PM May has submitted a “Plan B” for Brexit proceedings despite numerous similarities to “Plan A” and UK employment data hitting 7-month highs helped GBP reclaim foothold over 1.29 handle. While broad based US Dollar’s recovery price action could influence some level of downtrend action later in the day, Brexit will continue to remain main driving force capping any chance for downside move at mid-1.28 price level.

USD/CAD: Broad based risk asset sell-off boosted US Greenback and declining crude oil price in broad market following IMF global growth forecast helped the pair hit 2-week high. Slowdown economic activity would mean less demand for crude oil which caused oil price to decline but recent data which hinted at reduced production from OPEC members and temporary shutdown of 21 rigs looking for crude oil in US helped limit sharp declines. The pair has moved down from intra-day highs but maintains strong foothold above 1.33 handle on broad based demand for US dollar. Investors await Manufacturing sales and Wholesale sales data from Canadian markets for short term profit opportunities and better than expected reading will help Loonie pull the action back to 1.32 handle.

Summary: Global equity market which started the week on positive note over headlines from weekend on trade truce between China & U.S.A for next 90 days have taken a bearish tone as trading session progressed into the week. Positive influence from news that had major impact on market fizzled out shortly owing to multiple factors such as lack of clarity of trade truce and flattening Treasury yield curve which sparked recession warning. Aside from geo-political issues major markets faced their own issues which had impact on price action of equities as well.

Central banks across the globe have acknowledged signs of economic slowdown in major markets and this comes in the heel of one of the most fast pace growth in equity market history as visible from highly bullish equity performance during 2017 post which markets across the globe began to suffer as US President Donald Trump began waging trade war on multiple front. As US Greenback’s value increased in broad market supported by safe haven demand from ongoing trade wars boosted by multiple rate hike from US Fed emerging markets also suffered slowdown in economy due to major goods and commodities being priced in USD and higher exchange rate hurt business progress.

The US Dollar index (USD/DXY) has managed to retain upper hand despite slide in T.Yield as FOMC member Williams reassured that rate hike would go as planned regardless of change to forward guidance despite gloomy comments from Fed Chair Powell during his speech last week.
Slide in T.Yield resulted in fear of slowdown in US Economy which combined with dovish cues from Asian and European markets pushed US Equities on sharp fall overnight. Dow Jones Industrial Average Index lost over 700 points during slide in yesterday’s trading session.
Hopes of positive outcome post 90-day Sino-U.S. trade truce continues to dwindle as no positive signs of progress or additional details were released post the weekend headlines.
Fear of slowdown in global economy and cues from Wall Street’s overnight decline has influenced bearish price action across Asian and European equity markets.

On the Lookout:

Brexit – Brexit legal advice from the Attorney General is scheduled to release today as PM May suffered another road block in her attempt to gain support to her Brexit deal as her government is now held in contempt of Parliament over its refusal to release legal advice and attempts to hide the same. This move also resulted in a new amendment being passed to give UK parliament more power over Brexit if PM May’s deal fails to gain vote of approval.
Protest in France – In a televised address, PM Edouard Philippe announced that Fuel tax raise which led to weeks of violent protests in France has now been postponed for six months. He also said that the next planned raise in the so-called carbon tax on vehicle fuel which had been due to come in on 1 January and planned increases in gas and electricity prices this winter would be halted, and that a toughening of the rules for vehicle emissions tests would also be postponed to allow consultations across the country to see what accompanying measures might be introduced to ease the burden for the worst-off.
Crude Oil – Oil prices declined 1% today, weighed down by raising US inventories and a plunge in global stock markets amid concerns over an economic slowdown ahead of OPEC summit scheduled to occur this weekend. Oil prices were pressured by a weekly report from the American Petroleum Institute (API) that said U.S. crude inventories raised by 5.4 million barrels in the week to Nov. 30, to 448 million barrels, in a sign that U.S. oil markets are in a growing glut.
Economic Data Release & Events – U.S. stock markets will be closed today in observance of a national day of mourning for President George H. W. Bush. UK market sees the release of BOE FPC Minutes & Services PMI while Canadian market sees release of BOC interest rate decision and rate statement.

Trading Perspective:

AUD/USD – The AUD/USD pair held on the dismal Aussie macro data-led weakness and remained heavily offered near weekly lows which were further aggravated by strong demand for US Greenback in broad market supported by hawkish comment from FOMC member Williams and bearish rout in equity market. It would now be interesting to see if the pair is able to find any buying interest at lower levels or the ongoing slide marks the end of the recent up-move amid fading optimism over the US-China trade truce.
USD/JPY – The USD/JPY pair caught some bids on early Asian market hours and managed to recover a part of the previous session’s sharp fall to two-week lows that saw the pair slip over 100 pips owing to bearish influence from T.Yield curve inversion, positive comments from Fed Williams helped limit downside move. However bearish rout in Wall Street & other major global equity markets continue to underpin demand for Japanese Yen.
EUR/USD – The EUR/USD pair erases entire losses and looks to regain the 1.1350 barrier in early European market hours despite the risk-off action seen on the European equity markets and broad based USD demand as liquidity is expected to be thin in US market hours owing to market holiday while EURO bulls are also supported by upbeat Eurozone macro data giving the pair a temporary upward boost in price action.

Global Markets Trade In Red Following IMF Growth Forecast

Major Equities on Bearish Rout over Worries of Global Economic Slowdown

More than just a news source

Links

Social Media

Subscribe