Better than expected Chinese data and gains in the European Auto sector helped improve risk sentiment in the market.
Summary: Global equities and indices are continuing to enjoy positive price action for the third consecutive session this week. As economic data hints at recovery and displays consistent better than expected readings in several key market regions, risk sentiment has improved considerably, and hopes for global economic outlook improvement has also improved. This has resulted in major risk assets across Asian and European markets trading near 3-month highs for the second consecutive session this week.
In the European market, major indices maintained positive price momentum across the day, aided by cues from better than expected Chinese services activity data and gains in Auto and Oil & Gas sector shares. Gains in auto sector shares were led by a 7% spike in Renault SA’s share value as the board finalised a 5 Billion EURO loan from the French government to cushion from the impact of recent covid-19 led economic depression and loss in demand. There was also some level of gains led by French Insurer Axa whose shares spiked nearly 5% as it announced plans for cutting back its dividends by half owing to covid-19 led crisis.
Precious Metals: As USD continues to decline steadily for the sixth consecutive session today, and global risk sentiment improves, rare metals are losing demand stemming from caution and safe-haven demand. This, along with a decrease in activity from India and Emerging markets – major players in rare metals despite low exchange rate owing to costly gold rate, price of gold has declined below $1700 handle while silver is rangebound near mid-$17 range in European trading hours today.
Crude Oil: Crude oil price continues to hover near monthly highs as the focus remains on OPEC+ teleconference meeting later this week, during which members are expected to agree of extension of production and supply cut agreement. This, along with a decline in US API weekly stockpile data released yesterday help liquid gold retain positive bias across both Brent and WTI indices and futures in the international market today.
DXY: The US Dollar index, which measures the strength of Greenback against rival global currencies, remains near monthly lows as caution has declined in the market. At the same time, risk sentiment led by hopes for economic recovery is abundant across Asian and European markets. Tensions from Sino-U.S. disagreements and US Protests also weigh down the currency alongside pressure over expectation for further stimulus packages from central banks and governments keeping the price of index range-bound in the lower half of 97 handle.
On The Lookout: There isn’t any major event or update in the US and global market, which could cause a big change to overall price momentum in the market during North American market hours today. The intra-day activity will be led by developments in US macro data updates as China-U.S. tensions and US protests don’t seem to make any progress in the immediately foreseeable future.
On the release front, the US calendar sees EIA weekly crude oil stockpile data, ISM Non-Manufacturing PMI, factory orders, Services PMI, Markit Composite PMI, and ADP Non-Farm Employment change data. In contrast, the Canadian calendar sees the release of Q1 labour productivity data and interest rate decision update from Bank of Canada.
Trading Perspective: US futures trading in the international market were positive on account of prevalent risk sentiment and hopes of economic recovery in the USA. But gains were limited owing to caution stemming from escalating tensions between US-China and increasing violent activities among US protestors. Wall Street is likely to open on a positive note, but gains are likely to be influenced by headlines led cues from the local market during North American market hours.
EUR/USD: The pair is trading positive in the global market with price scaling fresh multi-month highs as EURO scales 1.12 handle in a rally primarily influenced by USD’s weakness. While support package announcements from European governments provided some level of fundamental support, market activity today was led by USD’s decline in the global market. Traders now await US PMI’s for short term profit opportunities.
GBP/USD: The pair scaled 1.26 handle in a rally driven by USD’s weakness. But gains were capped below 1.2615 handle post which price has entered consolidative tone as Brexit talks have entered an impasse adding pressure to British Pound despite hopes for positive progress in a mutually beneficial manner. Traders now await US macro data for short term profit opportunities.
USD/CAD: The pair is continuing to slowly edge lower for 8th consecutive session with price declining below the 1.3500 handle as USD’s strength continues to wane in the global market proportional to increase in risk appetite among global investors and hopes for economic recovery.
But gains were capped as Crude oil price has entered consolidation near monthly highs instead of continuing to further extend rally in favour of Canadian Loonie, resulting in price stagnating near the mid-1.34 handle. Traders now await US PMI data, EIA weekly crude oil inventory update, and BOC statement for short term profit opportunities and directional cues.
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