Better than expected PMIs in EU & UK, trade relief provides positive fundamentals for risk sentiment. US preliminary PMI’s in focus.
Summary: Global equities are trading with clear positive bias over influence from US President Donald Trump’s tweets, reassuring that a trade deal with China is still in full effect.
Risk sentiment, which was already low at the start of the week, took a significant blow over comments from US Trade Advisor Peter Navarro, who mentioned that deal with China was over in a televised interview with Fox News yesterday. But President Trump’s tweets reassuring trade deal was in full effect helped alleviate investor worry bringing about a short burst in risk sentiment, leading to positive price action across key exchanges in Asian and European markets.
Aside from cues led by Trump’s tweet, better than expected euro area macro data also came as a major relief as this helped reinforce market expectations of recovery in economic activity post the COVID-19 led lockdown’s impact on global economic activity.
Precious Metals: Rare metals market is experiencing positive price action led by broad market caution despite today’s risk-on market mood across key global market regions. While Trump’s tweets helped provide relief in the short term over trade deal-related worries, concerns surrounding escalating COVID-19 cues and other geopolitical issues, which influence caution, remained strong in the medium to long term outlook, pushing the price of spot gold to fresh 10-week highs at $1769.38 today.
Crude Oil: The price of crude oil futures and indices in the international market across both WTI and Brent are positive as demand outlook improved greatly. Following Trump’s tweets, which provided trade relief, positive data from the Euro area hinting at improving economic activity helped ease concerns of declining demand outlook. This, along with restrictions currently enforced on the production and supply market, helped push the price of oil to multi-month highs.
DXY: The US Dollar index continues to see value decline steadily with readings in the late European session today, standing at the mid-96 mark. Ever since the latest Fed readings update, which showed a decline in international USD swap activity among key central banks, USD has been losing some level of fundamental support. This, along with prevalent risk sentiment in the market, resulted in USD continuing to lose its strength against six major global peers despite a considerable level of safe-haven demand backing it up in the global market.
On The Lookout: As trading hours head to North American market hours, there isn’t much in terms of key events to look out for today. Given the fact that President Trump’s tweets have already alleviated trade deal-related worries, the only major thing to look out for at the moment is the release of macro data, which will provide some level of directional cues in the intra-day market activity.
The US market sees the release of Preliminary Manufacturing, Services, and Markit Composite PMIs and New Home Sales data. There is also the release of API weekly crude oil stockpile data while the Canadian calendar remains silent. Later in Pacific-Asian market hours, traders await Interest rate decision and press conference from the Reserve Bank of New Zealand.
Trading Perspective: Wall Street is set to open positive, given improved risk sentiment in the market led by trade relief cues. US Futures trading in the international market were also positive, led by the risk-on market mood in the respective local markets. Tesla and T-mobile stocks in focus over developments surrounding the former’s autopilot software issue and latter’s discussion with investor Softbank which is considering selling its stake in the company after a merger with Sprint.
EUR/USD: The pair is seeing a bullish price rally with the price back above 1.13 handle as better than expected EU area macro data provided a solid boost to EURO bulls which along with declining USD’s strength in the international market helped trigger a breakout rally. Traders now await US data for short term profit opportunities and directional cues for further upside movement.
GBP/USD: The pair is trading positive as UK PM Johnson’s move to push forward with economic reopening activity and better than expected macro data provided GBP bulls with positive fundamental support. Declining USD strength also aided with rally allowing pair to edge its way towards the mid-1.25 handle. Traders now await US data for short term profit opportunities.
USD/CAD: The pair is trading with dovish bias in the global market but the price has held above 1.35 handle for the most part. While price did move below 1.3500 marks and test intra-day low of 1.3485, lack of sharp gains in the crude oil market and caution ahead of weekly US crude oil inventory data updates helped keep further decline in check.
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