Progress in key geo-political events underpin market bulls influencing positive price action, lack of macro data results in broad based investor sentiment controlling price action in the global market.
Summary: Global equity market saw a shaky start for the day but bulls have gained control over the momentum. Major equities and benchmark indices in Chinese markets traded positive as headlines from US boosted optimism surrounding Sino-U.S. trade talks. U.S. Treasury Secretary Steven Mnuchin’s comments stating that trade talks between the two nations are entering final leg was a fresh breath of positive influence on market. However, Singapore and Chinese equity market still saw mixed price action amid lack of high impact market headlines. However, equities and major benchmark indices saw steady positive price action across all major European stock exchanges. Healthy risk appetite in the global market also underpinned positive price action in USD denominated major global currency pairs. Sino-U.S. trade talk related headlines remain the main focus of investors as the month progresses given the fact that both countries are likely to sign a trade deal in near future.
Precious Metals: Precious metals see decline in the global market as risk appetite hurt demand for safe haven assets. As trade talk related optimism boosted risk appetite in broad market and underpinned market bulls, fund flow to precious metals market took a hit. Gold hit 1-week lows but declines were capped owing to relatively weak USD in the global market.
Crude Oil: Crude oil price is seeing dovish price action in the global market today despite prevalent risk appetite. Dovish cues from last week’s close still retain some level of influence on price action in the crude oil market. But positive progress in trade talks hint at possibility for increased demand keeping decline in check resulting in range bound price action.
USD/JPY: The pair hit new 2019 highs and is trading range bound near said level owing to strong resistance which is preventing further upside price action. The price action of USD took a sharp upswing as risk appetite boomed in the market on Sino-U.S. trade optimism. Further, safe haven assets saw profit booking and decreased demand which also supported positive price action of USD in Asian and European market hours.
On The Lookout: Given the fact that Brexit has been delayed till October and headlines hinting at trade talks between USA and China entering final leg, all focus is on trade talk related headlines and EU-U.S. trade negotiations. The headlines last week saw tensions in European markets escalating on two fronts – Brexit and trade tensions on US over tariff on Airbus-Boeing conflicts. Given that both US & EU have been blaming each other over providing Boeing and Airbus with illegal benefits, both countries are on each other’s throat in world court arguing over imposition of tariff worth several billion dollars. Further, US has been trying to coerce EU into opening access to its agriculture market via threat of tariff on Auto market. Headlines hit market that EU council has given the EU trade commission to start negation for eliminating tariff on industrial products. As trade related events which have been causing serious price swings in the market are seeing progress, optimism surrounding same is influencing positive price action in high risk assets across the global market. Amid lack of high impact macro data updates, headlines on geo-political events will continue to dictate price momentum in the day ahead.
Trading Perspective: The price action of major forex pairs and Wall Street equities are expected to see positive momentum during American market hours today. The next major release is RBA meeting minutes during Pacific-Asian market hours which is likely to influence some level of volatility during late American market hours.
US Indices: Major US benchmark index futures trading in the international market are seeing mixed price action in the global market ahead of US market opening today. Optimism surrounding Sino-U.S. trade talks continue to underpin market bulls in the global market. US Wall Street is likely to see subdued opening and range bound price action today as traders wait for further updates on Sino-U.S. trade talks before placing major bets to ensure that the latest update is not yet another dead-beat attempt at stating the obvious.
EUR/USD: The pair is trading range bound with slight positive bias in favor of Euro in the global market. US T.Yields saw a spike in Asian market hours but German T.Yields also saw upward action preventing USD from gaining upper hand. Further, optimism surrounding trade talks underpinned EURO helping the pair see positive price action today. Investors now await further updates and cues from US market hours for short term trading opportunities amid silent macro calendar schedule.
GBP/USD: The pair is seeing positive price action today as delay in Brexit deadline continues to underpin Sterling bulls. But gains are capped as lack of further progress in UK cross party talks and lack of initiative from law makers to focus on resolving Brexit related issues affect sentiment surrounding British Pound in the broad market. Broad based investor sentiment surrounding both currency pairs will dictate price action ahead of tomorrow’s earning and employment update from UK.