Profit warnings and rebound in USD hurt investor sentiment causing equities and benchmark indices to decline. Traders now await Powell speech for directional cues.
Summary: Equities and major benchmark indices in Asian and European markets continue to decline for the third consecutive session today as bets surrounding the possibility of a Fed rate cut later this month continues to decline with each passing day. Asian market saw major indices drop to two and a half lows on cues from Wall Street as equities last night saw a sharp decline over the sharp drop in the price of Apple Inc., share price. Similar to the Asian market, European market also saw shares and benchmark indices drop sharply on geopolitical and Wall Street cues. Further, bearish pressure on the market increased further owing to profit warning from German chemicals manufacturing giant BASF which also triggered a decline in shares of rival firm BAYER. Both firms stated that slowdown in global economy influenced by Sino-U.S. trade war was the reason for profit warning and a decline in business activities. In the Forex market, global currencies are beginning to take a hit as USD regained strength proportionate to declining expectations surrounding rate cut decision.
Precious Metals: Precious metals market is seeing dovish influence creep in as USD grows stronger. While Silver has managed to retain positive bias, gold has been declining across the day and hit a one-week low in the European session as participation from emerging markets declined influenced by firm USD. But prevalent risk aversion in the global market helped keep the loss in check.
Crude Oil: Crude oil is trading positive in the global market today influenced by cues from Middle Eastern tensions as UK officials seized an Iranian Crude oil shipment on way to Syria. Further, OPEC supply cut extension influenced supply concerns also added support to crude oil bulls influencing a well supported bullish price rally in both major crude oil benchmarks WTI & Brent.
AUD/USD: The AUD/USD pair is trading with dovish bias in the global market on cues from Chinese equities decline and from disappointing NAB data in Australian macro calendar. Even a rise in Iron ore price failed to help the currency of mining nation see an upward boost. Given USD’s growing strength in the global market, the pair has entered consolidation after hitting 2-week lows earlier today.
On The Lookout: All attention in the global market is now on macro data influenced price action. While geopolitical events continue to dictate price action, lack of progress and lack of any major updates pertaining to major geopolitical events such as Sino-U.S. trade wars and Brexit has resulted in both events taking a backseat. In the global market today, price action is influenced by macro data-driven momentum. Following UK officials seizing Iranian crude oil shipment, tensions in the Middle East are very high but it remains to be seen on how Iran chooses to retaliate. On the release front, in the North American market hours, US calendar sees the release of JOLTs job openings data and speech from multiple Federal Reserve members – Powell, Bostic, and Quarles. Also, the Canadian calendar will see the release of housing starts and building permits data.
Trading Perspective: In the forex market, as USD grows stronger, gains are likely to be capped in USD denominated currencies of major economies, while emerging economy currencies are likely to suffer sharp declines. All Eyes are now on Powell’s speech for cues on upcoming Fed Reserve Monetary Policy meeting and hawkish comments which hint at the possibility of a no-rate cut in the upcoming meeting will greatly affect price action across Forex, Bonds, Equities and F&O market. US stock and index futures trading in the international market continues to decline as profit warnings from major business corporations influenced by prolonged Sino-U.S. trade wars with no positive progress hurt the global economy in turn affecting the US market.
EUR/USD: The EUR/USD pair continues to decline from bearish pressure on the US Dollar grows stronger. Further, bearish pressure from speculations of yet another QE measure from ECB added pressure to Euro bulls. The pair is currently trading near the 1.1200 handle as traders await Powell speech for directional cues and short term profit opportunities.
GBP/USD: The GBP/USD pair dropped to new six month lows amid growing concerns as uncertainties surrounding Brexit continues to increase weighing down British Pound in the global market. Further, the decline in UK macro data – BRC retail sales which dropped by 1.6% also added dovish influence to GBP which is already suffering sharp declines. Traders now await Powell speech for directional cues and short term profit opportunities.
USD/CAD: The USD/CAD pair is seeing positive price action beyond 1.31 handle on the momentum gained from USD’s rebound influenced by declining Fed rate cut bets. However, gains are capped as Crude oil traders positive in the global market adding support to commodity-linked currency Loonie. Investors now await Powell’s speech for directional cues as his stance on rate cut decision will greatly affect the momentum of USD in the global market. Traders are also on the lookout for Canadian macro data outcome for short term profit opportunities.
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