Positive US retail sales data and hopes for economic recovery led by the Fed bond-buying program pushed wall street higher at the start of the US trading session today.
Summary: Global equities are trading on a positive note today led by cues from major central bank support package related decisions. In Pacific-Asian market hours earlier today, the Japanese central bank announced a spike in its covid-19 economic support package from the original plan for 700 Billion to 1 Trillion USD. While this did little to improve yen’s status in the global forex market, the move was greatly welcomed by investors across the globe following a recent slew of dovish market activity.
Risk sentiment also started to grow sharper as hopes for economic recovery spiked once again, given the fact that the US Fed is set to start its corporate bond-buying program later today. These factors allowed key risk assets and indices across major Asian and European exchanges to trade on a positive note today.
Precious Metals: Market activity surrounding rare metals continued to remain bleak amid mixed developments in the geopolitical and economic outlook. While the fundamentals took a hit recently, expectations for recovery to spike over the scheduled fed bond-buying program set to begin today weighed down demand surrounding rare metals—this caused the price of gold to plummet slightly while silver maintained positive price action.
Crude Oil: The price of crude oil in the international market improved across both Brent and WTI futures, given the latest update from IEA. While developments in OPEC and US & China relations and fears of a renewed COVID-19 outbreak caused a sharp plunge in the price of oil across both major international benchmarks over the last couple of trading sessions, the report from IEA forecasted a rebound in oil demand the year ahead with revised data hinting at an average demand of 500,000 BPD. This helped crude oil bulls gain some fundamental support effectively put a halt to recent declines.
DXY: US Dollar index, which measures the strength of US Greenback against six major global currencies, continued to grow strong today with readings in late European market hours putting index above the 97.100 mark. While risk sentiment improved in the global market today over cues from the Japanese central bank and hopes for the Fed bond-buying program to improve economic outlook, the actual reality predicted so far hasn’t had any visible change, allowing USD to continue reaping benefits from safe-haven demand driven by caution in the global and local market.
On The Lookout: There are three key factors for traders to look out for in North American market hours today. The first major event would be the start of 2-day Fed Chair Powell testimony before the senate banking committee to provide a semi-annual report on the status of interest rate decision and policy to congress. The second would be start of US Federal Reserve’s corporate bond-buying program set to start via central bank’s newly created entity – Secondary Market Corporate Credit Facility (SMCCF) one of the many emergency facilities created by the central bank to help US economy recover from damages sustained during ongoing covid-19 driven economic crisis.
Investors across the globe are hoping that economic activity and outlook may improve in days to come once US Fed’s begin the multi-trillion-dollar stimulus measures, which in turn are likely to help improve the share value of key stocks driving the US and international economy. The last factor is the release of macro data.
The US economic calendar sees the release of retail sales data ahead of the market opening. At the same time, later in the day, there is the release of industrial and manufacturing production readings, API weekly crude oil inventories, business inventories and retail ex-auto inventory readings update while Canadian calendar is set to see the release of foreign securities purchase and speech from BOC governing council member Wilkins.
Trading Perspective: US futures trading in the international market saw positive activity over cues from changes made to BOJ stimulus package and hopes for economic recovery in the US as the Fed bond-buying program is set to start later today. Given positive US retail sales readings in late European market hours, Wall Street is set to open on a positive note while macro data and cues from Powell speech will help provide directional bias for intra-day and short term market activity.
EUR/USD: The pair tested 1.13 handle earlier in the day over-improved risk sentiment in the market, but failed to hold firm above the 1.1300 mark as USD continues to grow stronger in the international market. Traders now await US macro data and cues from Fed Chair Powell’s speech for short term profit opportunities while price action remains looped within a familiar price range between 1.13-1.1210 mark.
GBP/USD: The pair declined below 1.26 handle as mixed macro data from the UK weighed down GBP bulls. Further, firm USD supported by better than expected US retail sales data also added pressure on British Pound, causing pair to struggle hard as it holds fort around mid-1.25 mark. Traders now await US macro data and cues from Fed Chair Powell’s speech for short term profit opportunities.
USD/CAD: The pair continues to trade in favour of US Greenback, but its ongoing positive price rally has come to a temporary halt as traders await fresh cues for further directional bias. Better than expected US retail sales data and firm USD strength in the broad market kept pair from reversing recent gains today while CAD grew strong on improved crude oil price led by IEA revision to demand forecast. Traders now await US weekly crude oil inventory data, Fed and BOC members speech for short term profit opportunities, and directional cues.
Please feel free to share your thoughts with us in the comments below.