Holidays subdue volatility

Prepared by Jeff Halley, Senior Market Analyst

 

Holidays subdue volatility

With both the US and the UK closed for holidays overnight, financial markets enjoyed a quiet start to the week. European shares rose modestly following the European Union elections, which drew a collective sigh of relief from Brussels as voters shifted parties in a larger-than-average turnout, but stayed within the Liberal/Centrist comfort zone.

President Donald Trump said from Japan that the US wasn’t ready to make a trade deal with China yet but that things were progressing nicely with Japan. Canada also made initial steps to ratify the NAFTA mark two agreement, meaning, the US appears content to let China simmer while tidying up various other trade blocs for now.

Asian markets may enjoy a boost today as Bloomberg reports that Alibaba may be about to launch a USD20 billion share offering on the Hong Kong Stock Exchange. Exciting news for Hong Kong and perhaps a sign of things to come as Chinese companies look locally to raise funds instead of an unwelcoming and suspicious US. Cause and effect – two can play the trade war game.

On the data front, South Korean consumer confidence fell more sharply than expected today ahead of Taiwanese consumer confidence and Thailand’s industrial production later this morning. Markets will monitor this data closely for signs that the US-China trade friction is spilling over regionally.

 

FX

The dollar is modestly stronger today following a muted session overnight with both New York and London closed. Notably, the British pound (GBP) gave up the 1.2700 level and fell to 1.2680 as the rally following Prime Minster May’s resignation runs out of steam.

Regional currencies will probably be mostly unchanged following the overnight sessions, boosted by potential IPOs in Hong Kong on the one hand, but tempered by potentially weak local data and President Trump’s social media account on the other.

 

Equities

Equities are set for a boost this morning following a calm but positive session for stocks in Europe and the potential Alibaba offering on the Hong Kong exchange as reported by Bloomberg. Sentiment will remain fragile though with the US President still in Japan as trade talks continue there.

 

Oil

With WTI closed, Brent Crude rose 1% to USD70.00 a barrel overnight as a quiet news front allowed it to claw back last week’s losses slowly. However, Brent faces serious technical resistance in this area, being the break-out level from last week, and the rally still appears corrective in nature.

With ample inventories in the US and trade frictions still at the fore – albeit quiet for the moment – oil’s recovery is fragile, and traders should exercise caution at these levels.

 

Gold

Gold remained almost unchanged at USD1,285.00 an ounce, which is hardly a surprise with both New York and London closed. Bitcoin continues to steal gold’s safe-haven thunder leaving the precious metal marooned in a USD1,270.00 to USD1,290.00 an ounce range.

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
Andrew Robinson

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