As risk appetite took a hit over easing Sino-U.S. trade talks and disappointing macro data, European equities bled red. Investors have taken cautious stance with focus on geo-political headlines.
Summary: Equity and Forex assets are seeing mixed price action in Asian and European market as investors take a breather following three consecutive sessions of positive price action. While the overall investor sentiment remains positive in global market, lack of further headlines on Sino-U.S. front with details on talks between two parties resulted in strength from Sino-U.S. trade deal optimism easing away. However, progress in Brexit front continues to underpin market to some extent. While Asian markets managed to see positive price action, Forex market and European equities have seen relatively subdued price action. News that Italy cut its growth forecast for the year ahead greatly weighed down investor sentiment in European markets resulting in bearish price action in European stock market and Euro losing ground in global market. Meanwhile, the slowdown influenced by investor fatigue in Asian and European markets has strengthened US Dollar in the broad market further capping gains in major Forex pairs.
Precious Metals: Gold and Silver are seeing sharp downward price action since trading session began for the day. While the yellow metal has managed to contain its loss within 0.50% as slip in European equities and decline in Forex market refreshed demand for gold in the market, Silver fell by more than 1% declining below $15 handle. It’s unlikely for precious metals to regain positive price action today as overall investor sentiment remains risk on despite decline in European equities and as US Dollar has also gained some level of strength.
Crude Oil: Crude Oil gained positive momentum in the broad market over increase in volume of speculative bet and fundamental support stemming from expectations for increase in demand. Optimism surrounding Sino-U.S. trade talks influenced expectations for increased demand for Crude oil while tightening supply from Middle East continues also underpins crude oil bulls. But increased weekly crude oil inventory stockpile data from US continues to limit further gains keeping WTIUSD price capped below $63 handle.
AUD/USD: The pair saw slight upward movement from previous session highs helped by AU-US 10-year yield spread rising in Australian Dollar positive manner. However, easing optimism surrounding Sino-U.S. trade talks capped further upside move resulting in the pair trading rangebound near intra-day highs. Later, slight pick up in US dollar during European market hours dragged the pair down from intra-day highs. Investors now await US macro data update for short term profit cues ahead of tomorrow’s US NFP data.
On The Lookout: While the global market saw optimism surrounding Sino-U.S. trade talks ease in the global market, hopes for positive trade deal still remains high in the global market. During American market hours, headlines hit market that stated that China & U.S. are aiming to address and bridge any difference between both nations during ongoing trade talks between two parties according to comments made by White House economic adviser Larry Kudlow. This has caused investors across the globe to expect possible meeting between Presidents of both nations at the earliest to sign a trade deal. Aside from Sino-U.S. trade talks, Brexit is also making progress. UK house of commons yesterday approved Cooper amendment which enables PM May to request another Brexit deadline extension which most traders, analysts and general populace alike expect to be of longer durations. Investors focus is on UK house of lords which is expected to convene and vote on this amendment today which if approved, it is highly likely that PM May could request a deadline extension for a period of 9-months. Immediate focus continues to remain on headlines over progress in geo-political events. Aside from that investors await macro data updates from US & CANADA which could set course for price action in American market hours. Chinese markets are closed tomorrow on account of Ching Ming festival which suggests that trading activity could see a decrease during Pacific-Asian market hours.
Trading Perspective: While Wall Street is likely to see cautious opening on cues from European markets, headlines with more details on Sino-U.S. trade talks and Brexit could influence increased activity in equity and Forex markets. However, owing to lack of high impact macro data updates, lack of high impact headlines would mean range bound price action of major risk assets in American market hours.
US Indices: Major US benchmark index futures trading in international market saw subdued price action in international market today ahead of US market open as optimism surrounding Sino-U.S. trade talks eased and European market saw dovish price action. As investors take cautious stance ahead of tomorrow’s US NFP update, lack of high impact macro data and headlines hinting at progress in geo-political events could influence range bound price action in major US indices in Wall Street.
EUR/USD: The EURUSD pair which saw recovery price action capped near mid-1.12 handle in Asian market hours as investor risk appetite took a hit over easing Sino-U.S. trade talk optimism. Further, dovish German macro data and update on Italy reducing its growth forecast for the year ahead put the pair back on path towards 1.1200 handle ahead of US macro data update. A rebound in US dollar during European market hours also weighed down the pair. The pair could see further downside price action if ECB meeting minutes released today shows high level of bearish sentiment.
USD/CAD: Post yesterday’s sharp upside move on recovery rally fuelled by US crude oil stockpile data that hurt investor sentiment, the pair saw slight upward price action on easing Sino-U.S. trade optimism. However, positive crude oil price capped gains resulting in range bound price action across the day. Investors now await Canadian IVEY PMI data and US initial jobless claims data for short term profit opportunities as US Dollar started gaining strength in European market hours owing to dovish equity market price action.