While Wall Street cues continued to influence bullish cues and spur risk appetite in broad market, profit booking post three consecutive sessions of Bull Run painted equity market in red while USD’s weakness helped limit downside action in Forex market.
Summary: Global market is seeing mixed performance today in equity and forex markets following cues from Wall Street last night. While positive investor sentiment remains high in broad market, profit booking activity post three consecutive sessions of trading in green has caused major indices and forex pairs to trade in red. US Greenback turned dovish in broad market last night over dovish comments from FOMC members. Dollar was further weakened post release of Fed meeting minutes which hinted that some Fed members wanted to keep rate hike stable at month of December 2018 while majority wanted to take a patient approach on policy tightening plans for 2019 which was in line with market expectations and changed short and medium term outlook of US Greenback. Investors now wait for more details to be released on Sino-U.S. trade talks before placing major bets which combined with profit booking activity prevalent today has most major risk assets trading in range bound pattern with bearish bias in European market hours.
EM Asian Currencies: Broad based weakness surrounding US Greenback and prevalent risk on trading environment favored market bulls resulting emerging market currencies gaining against US Greenback during Asian market hours. Indonesian Rupiah, Malaysian Ringgit, Korean Won and Thai Bhat all gained over 0.40% in Asian hours but by European market hours only Indonesian Rupiah, Malaysian Ringgit & Thai Baht were able to retain gains from early trading hours.
Gold: Despite prevalent risk appetite in broad market, demand for gold in physical market amid low USD in broad market helped the pair gain positive price action. Further traders also stocked up small volumes of gold in spot and futures market post profit booking activity in risky assets which helped gold move back near monthly highs. Demand is especially high in major markets – India & China owing to low exchange rates on weak US dollar.
AUD/USD: The Australian dollar which is greatly linked to Chinese markets suffered bearish price action in early market today weighed down by worse than expected Chinese inflation data. Influence from Sino-U.S trade talks also seems to be losing grip in market. However broad based USD weakness helped the pair recover from intra-day lows erasing most of loss made in Asian session post which the pair is trading range bound amid lack of breakout trigger and high impact market news.
On the Lookout: While Sino-U.S trade talks ended on positive note yesterday and headlines indicate that there has been significant progress in talks laying ground work for possible trade deal between two no details regarding what was discussed and what was agreed upon or resolved between two parties have been released in yet and hence updates on events continue to remain main focus of investors. Traders are also focusing on Fed Chair Jerome Powell’s speech scheduled later today for clues on Fed’s forward guidance plans as latest meeting minutes pointed at majority of members favoring slowdown in future rate hike plans despite official announcement last month hinting at 2 more rate hikes this year. Cues from Powell’s speech will set course for end of week trading activity as investors are hesitant to place major bets until more details on Sino U.S trade talks are released.
Trading Perspective: News filled American trading session is expected to provide some volatility and increase trading activity breaking range bound spell on market price action post profit booking activities.
EUR/USD: Euro gained positive price action post overnight USD sell off moving well above mid 1.15 handle supported by yesterday’s better than expected EU & German macro data. However profit booking activity in late Asian hours saw the pair lose most of early gains and trade steady near 1.152/53 price range. Investors now await ECB’s meeting minutes & Fed Chair Powell’s speech for cues on end of week trading activity. Dovish comments from Powell will help EURO move back above mid 1.15 handle, however if ECB meeting minutes highlight’s impact of recent economic slowdown in European markets the pair could fall back into wider price band limit that capped upside move for last 3 months.
GBP/USD: Amid lack of Brexit related headlines, broad based USD price dynamics dictated the pair’s price action in market today. USD Sell-off caused the pair to breach past 1.28 handle overnight but lack of solid fundamental support for Bull Run and profit booking activity which saw USD gain some level of strength since late Asian market hours caused the pair to erase most of gains made in Pacific-Asia market hours and the pair is now trading below mid-1.27 price level. Moving forward investors are looking at Fed Chair Powell’s speech whose comments regarding rate hike plans which will provide cues for short term trading activity ahead of tomorrow’s UK inflation data update.
USD/CAD: While Crude oil price action and broad based USD’s weakness post FOMC members comments and latest Fed meeting minutes continues to provide fundamental support for CAD, the pair saw USD gain slightly owing to BOC keeping interest rates steady and hinting that rate hike could be data dependent which is currently dovish owing to ongoing economic slowdown. CAD bulls continue to hold fort against Greenback as Oil price remains stable above $50 despite today’s slight decline. Moving forward comments from Fed Chair Powell during his speech tonight will help set course of rest of the week’s trading hours.