US open – Trade talks, UK election, gold, oil

Stalled trade talks weigh on optimism

Trade optimism may be starting the wane as stocks pull off their highs and Wall Street eyes a second day in the red.

Source – Thomson Reuters Eikon

Of course, a second day of losses for a market that’s trading at record highs and risen more than 8% in a little over six weeks is hardly cause for panic but the trade headlines have been less promising over the last week or so which may be taking its toll.

We’ve gone from a phase one agreement apparently being reached, ready for signing at this month’s APEC summit – which was then cancelled – to both sides failing to agree on tariff rollbacks, among other things, and a deal this year looking less likely.

While some of Trump’s team have been keen to stress the progress that has and is being made, without an agreement on tariffs, it will all be for nothing. And stock markets, which have rallied since Trump announced the deal, could suffer the consequences of talks once again breaking down.

Sterling unmoved by tedious debate

The first election leaders debate in the UK was just as disappointing and pointless as many feared. Both Johnson and Corbyn were extremely well prepared which means we were treated to an hour of core messaging on repeat, even where it didn’t exactly fit the question, and dodging of difficult questions that people actually want answers on.

This is how these things go now though which begs the question, why do we even bother with them? Not only were viewers left unimpressed – the audience on the night audibly so – but traders didn’t attach much to anything that was said, with the pound barely moving throughout the hour. It was another night to forget for the two candidates for number 10.

GBPUSD Daily Chart

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Gold pares gains as $1,480 holds strong

Gold prices are pretty flat on the day having had another run at $1,480 earlier in the session, only to once again run into difficulties and pare gains. Profit taking quickly kicked in and we’ re trading back around $1,472 having peaked just above $1,478. This just again drives home the message that $1,480 is looking a significant barrier to the upside. A rotation off this level could give bears another lease of life and see last week’s lows come under pressure.

Gold Daily Chart

Overbought oil tumbles as negative headlines flow

Oil prices are creeping higher after experiencing sharp losses at the start of the week as a combination of bearish factors smashed crude which had enjoyed a good six week spell. The reality is that the severity of the declines were probably exacerbated by the fact that it was a little overbought which triggered some hefty profit taking.

Reports that OPEC+ will not back deepening the cuts next month in order to re-balance the market don’t inspire confidence at a time when trade talks have hit a stumbling block and API is reporting a large inventory build. Brent has stabilized at $60 for now but could fall further in the coming days.

Brent Daily Chart

Economic Calendar

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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.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam