Market to see mixed activity with a dovish bias on international cues, recovery in energy sector shares, US Jobless claims data and cOVID-19 related proceedings in the US.
Summary: Global equities are seeing positive price action today over favorable developments on multiple fronts. US President Trump hinted at Saudi-Russia oil price war coming to an end in a matter of days and the possibility of a new deal, which will likely see Crude Oil production reduced by nearly 10 million barrels per day. This helped improve the crude oil price and related energy stocks, which in turn helped improve broad market risk sentiment.
In Asian markets, news that China is boosting its stimulus measures for the auto market by easing restrictions on new cars purchased to improve auto market sales, which have dropped by 80% so far this year, also helped in improving market mood. Cues from the Asian market greatly helped improve mood in European market hours. Chinese support measures to boost auto sales helped improve European automotive shares while a rebound in energy sector shares also added strength to market bulls resulting in major indices seeing sharp recovery activity today.
Precious Metals: Despite broad-based risk aversion, metals considered as safe-haven assets enjoyed a field day as caution escalated over high death toll count in the US. This, along with broad-based downgrade in the economic forecast for the ongoing quarter, kept gold and other rare metals fundamentally supported.
Crude Oil: Crude oil price saw a sharp spike in the global market today with the price of both WTI & Brent futures reaching more than 25% on President Trump’s comments. Hopes for another cut back deal in oil production and end of price wars greatly helped improve demand outlook providing oil bulls with fundamental support.
DXY: The US Dollar Index stands at 100 as safe-haven demand underpinned USD following a huge jump in the US covid-19 death toll. But the impact of stimulus measures from the US Federal Reserve and government keeps USD from seeing a sharp rise against other major global currencies.
On The Lookout: Headlines surrounding Saudi-Russia price war and peace agreement details are in main focus. While President Trump hasn’t mentioned exact deadline, his comments that an end to price war will arrive shortly and hopes new production cut agreement which will reduce output by 10 million BPD greatly have greatly affected market mood.
Traders now await concrete progress and official confirmation from involved parties which, if confirmed, is likely to further improve ongoing recovery rally. However, prospects for gains in the long term is highly limited as global growth forecast, and economic activity will remain greatly affected until the ongoing covid-19 pandemic is brought under control.
US Jobless claims which hit the market in late European session saw another sharp surge in jobless count compared to last week. Later in the day, traders await release of US factory orders and Canadian Trade Balance in American market hours and Australian Retail Sales and Japanese Services PMI in Pacific-Asian market hours.
Trading Perspective: In the forex market, major currencies are trading positive on improved risk sentiment, and momentum is likely to continue given worse than expected US jobless claims count, which weighs down the US Greenback. Wall Street is also expected to see mixed activity on global and local cues. While crude oil price recovery helped US Futures see sharp gains earlier in the day, by late European session, most of its gains were reversed over the news of high death toll in USA and lockdown in Florida.
EUR/USD: The pair is trading in red despite broad-based risk sentiment as European PPI data was disappointing. However, improvement in auto and energy sector shares helped improve economic outlook providing support to Euro and preventing further declines.USD remains firm on safe-haven demand, suggesting that the pair is likely to move range-bound near mid-1.08 handle in North American market hours.
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