Equities decline as Sino-U.S. trade optimism declined and US-North Korean trade talks failed without making any progress. Investors now await US macro data updates for short term profit opportunities.
Summary: Global equities continued to see dovish price action for third consecutive trading session today. While the downside move initially started as profit booking activity, headlines inspired cautious investor sentiment resulting in consecutive sessions of dovish price action. Key geo-political events that investors were watching out for this week saw unexpected results and this was a major cause for concern. UK parliament decided to wait till next session on March 12th before voting on further brexit progress in this side of Atlantic while in USA dovish comments from Fed Chair Jerome Powell and headlines that caused optimism surrounding Sino-U.S. trade talks to take a hit added bearish influence to broad market. Meanwhile, reports that talks between USA and North Korea fell apart owing to Kim’s demands to completely remove all sanctions imposed on N.Korea added to bearish influence in market but didn’t have any major impact as there is no threat of war between the two of them as of yet. Meanwhile, Dollar’s rebound resulted in mixed price action in forex markets.
Precious Metals: Gold and silver saw positive price action today as talks between USA & North Korea fell apart and optimism surrounding trade talks between China & U.S.A took a hit. Brexit uncertainties following UK parliament session boosted safe haven demand in market but positive dollar influenced by spike in US treasury yields capped gains keeping price action of precious metals near weekly lows.
AUD/USD: The pair traded range bound ahead of US GDP update as US Greenback lacks strength to trigger a downside move while Australian dollar also lacks strength to establish rally in its favor owing to recent developments in market surrounding Sino-U.S. trade talk optimism, neutral stance from the RBA and disappointing macro data outcome in recent past. However a positive US GDP update is likely influence a rally in favor of USD later in the day.
USD/JPY: The global tensions fueled by India-Pakistan military conflict in Kashmir, talks falling apart between USA & North Korea on denuclearization plans of Korean Peninsula boosted demand for safe haven assets in broad market. This helped Japanese yen one of the most preferred safe haven currencies gain positive price action. However, a better than expected US GDP data will lead to reversal of Yen’s gains made early in the day.
On The Lookout: As the month comes to an end all major events in investors focus are done for the day. However, no major geo-political events found any resolution resulting in cautious price action moving on to month of March. Sino-U.S. trade talks remain as main focus of investors as optimism surrounding same took a hit recently on headlines which hinted at lack of progress despite US President Donald Trump’s positive tweets. And given the fact that no-official announcement has been made over delaying tariffs on Chinese products and the current deadline is set as March 1st 2019, investors have taken a cautious stance. Aside from Sino-U.S. trade talks immediate focus of investor sentiment is on US GDP data scheduled to release in late European-early American market hours and Euro area inflation data scheduled to release later tomorrow for short term profit opportunities as trading session approaches week’s closing.
Trading Perspective: The day ahead is likely to see both forex and equity markets take range bound price action with bullish bias as investor sentiment in global market displays high level of caution.
EUR/USD: The pair hit 3-week high as Dollar declines in market ahead of US GDP update. This helped common currency stage solid positive price rally despite recent economic update releases hinting at slowdown in Euro area economic activity. The pair is likely to erase gains in case of positive outcome in GDP update while continue with positive price action in case GDP update disappoints. However, major change in price action is unlikely ahead of tomorrow’s Euro area inflation update.
GBP/USD: Following yesterday’s sharp gains, profit booking and unexpected outcome in UK parliament session led to slight declines but the pair has managed to find strong support above mid-1.32 region where the pair has maintained range bound price action across the day as hopes for brexit delay still underpins GBP bulls keeping price action well near five month highs. However, GDP update is unlikely to have any impact as brexit headlines controls price action and given strength of GBP the pair is likely to remain range bound for rest of the day.
USD/CAD: The USDCAD pair today saw sharp upside price move as Crude oil price declined in broad market. Further US Dollar’s rebound influenced by spike in U.S. T yields and declining optimism surrounding Sino-U.S. trade talks also added to US Dollar’s momentum in broad market while investors wait for US GDP and Canadian current account / RMPI updates for short term profit opportunities.