FX Trader, Loonieviews.net
It’s all quiet on the trade war front, but for how long is anyone’s guess. Fading trade drama and the nonfarm payrolls hangover lifted Wall Street at today’s open. The Dow Jones Industrial Average has stormed out of the gate, rising 191 points (as of 13:45 GMT) while the S&P 500 gained 16 points. Some traders believe the higher than expected unemployment rate and the drop in average hourly earnings may slow the pace of rate increases. Others think the variances were anomalies attributed to more people looking for work.
WTI oil prices are bouncing in a $72.10/barrel-$74.75/b range. Oil bulls expect higher rates from rising global demand, pending US sanctions on Iran crude exports and supply disruptions. Oil bears see lower prices because of expectations of a trade war will reduce demand even as Opec and Russia are increasing prices.
Sterling’s Asia/European morning rally after UK PM Theresa May’s cabinet agreed to a Brexit negotiating strategy ignored the news that Brexit Chief negotiator David Davis resignation. He wasn’t happy with the plan. Foreign Secretary Boris Johnston wasn’t either. He signed the document after describing it as a “polished turd.” He resigned around 14:00 GMT, and GBPUSD dropped from 1.3350 to 1.3260. A break below 1.3250 targets 1.3190.
The lack of trade drama helped to power AUD/USD higher. The uptrend from the end of June low is intact above 0.7400 and today’s break above resistance at 0.7442 targets 0.7580 if 0.7490 is broken decisively. However, the long-term downtrend is intact supported by the different Reserve Bank of Australia/Fed interest rate policies and the ongoing China/US trade skirmish.
Chart: AUDUSD 4-hour:
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
