As global investors continue to closely monitor the trade developments, fresh headlines from this front fueled risk appetite at the start of a new trading week. The optimism over the deal reemerged after trump announced a postponement of a deadline, which would have triggered fresh trade tariffs on Chinese goods. The US President also pointed to a “substantial progress” in weekend talks between the two countries. If a deal is reached, Trump will hold a summit with Chinese President Xi. Despite investor optimism, there is still uncertainty over striking a deal, considering Trump is a ‘wild card’ and a number of issues that are yet to be resolved. Against this backdrop, Britain’s FTSE 100 turned marginally lower on the day, losing 0.16 per cent to 7,167, France’s CAC 40 is up 0.36% to 5,234, while German DAX 30 rises by 0.31 per cent to 11,493. US stock index futures are rising decently as investors cheer Trump’s decision to postpone the deadline.
EURUSD jumped to three-day highs on Monday, with the pair is approaching the 1.14 barrier again, after three consecutive daily pullbacks last week. Positive risk sentiment lifts demand for the common currency amid further progress in the US-China trade talks. The European currency will continue to monitor trade developments for the direction in the short term, while the economic risks in the region will likely further cap the upside potential despite the abating USD demand. Technically, the euro needs to break above the 1.1370 intermediate resistance in order to regain the 1.14 threshold. Apart from the mentioned factors, this week the pair will also be affected by Fed’s Powell comments on Tuesday and Wednesday, as well as by the preliminary German and euro zone inflation numbers due in the second half of the week.
GBPUSD is also trading higher today, with the bullish impetus is being capped by the 1.31 barrier. Growing speculation that Brexit will be postponed keep the pair afloat at the moment despite the lingering uncertainty surrounding the divorce process. It is reported that May wants to delay the vote in Parliament to March 12th. Both sides mull a technical extension of two or three months. As traders are focused on Brexit, today’s bank of England Carney’s speech is unlikely to affect the pound substantially. The pair is unlikely to break above the 1.31 resistance any time soon due to the remaining Brexit uncertainty. Meanwhile, the immediate support comes around 1.3030.
Brent crude opened with a bullish gap but failed to resume the rally and after a short-term consolidation, the prices had to extend the bearish correction. As a result, Brent dipped back below the $67 figure and dropped to four-day lows around $66.30. The catalyst behind a fairly aggressive profit taking was Trumps statement. The US leader said oil prices were getting to high and called on OPEC to ‘relax and take in easy’. The barrel will likely remain under some selling pressure in the short term as investors continue to digest Trump’s rhetoric, while the bigger picture shows that the fundamentals still suggest the barrel will remain elevated as oversupply fears continue to abate as well as concerns over global growth.
Gold prices are looking for a directional impetus at the start of a new trading week. The bullion slings to the $1330 figure, while the $1320 handle continues to act as the immediate important support, standing on the way to the $1300 psychological level. On the one hand, a muted dollar demand helps the yellow metal to stay afloat, while the prevailing risk-on tone caps the upside potential in gold. As long as the trade-related optimism persists, the bullion will hardly be able to climb back to and above last week’s highs around $1346.
Nathan Lambert, Head of Global FX Analytical Department