FXTM weekly round-up: Italy, Brexit, geopo­lit­i­cal ten­sions con­tinue to pres­sure mar­kets

Financial Mirror (Cyprus) - - MARKETS - Mar­kets Re­port b

Fi­nan­cial mar­kets ini­tially kicked off the trad­ing week on a pos­i­tive note as Chi­nese in­dexes ral­lied more than 4% on ver­bal sup­port from the coun­try’s top of­fi­cials.

How­ever, risk sen­ti­ment later de­te­ri­o­rated on geopo­lit­i­cal con­cerns such as trade ten­sions, Italy’s bud­get woes, Brexit-re­lated un­cer­tainty, and US-Saudi Ara­bia ten­sions. The clear lack of ap­petite for riskier as­sets sent global eq­uity mar­kets tum­bling while safe haven Yen and Gold were back in fash­ion.

The Dol­lar was also a pop­u­lar des­ti­na­tion for safe haven flows amid the mount­ing geopo­lit­i­cal con­cerns with prices pow­er­ing above the 96.00 re­sis­tance level. In the United King­dom, Ster­ling re­mained gripped by Brexit-re­lated un­cer­tainty while the Euro tum­bled fol­low­ing dis­ap­point­ing PMI fig­ures from Ger­many.

Po­lit­i­cal de­vel­op­ments in Italy will most likely re­main in fo­cus af­ter the Euro­pean Union re­jected the na­tion’s 2019 draft bud­get. With the EU stat­ing that the bud­get poses “un­ac­cept­able risks” to both Italy and the Euro­zone, the stand­off is set to in­ten­sify fur­ther.

Away from Europe, on­go­ing US-Saudi ten­sions were in the head­lines for the most part of the trad­ing week with Turk­ish Pres­i­dent Re­cep Er­do­gan mak­ing a speech on the dis­ap­pear­ance of a Saudi jour­nal­ist. Al­though the speech of­fered no new ev­i­dence, it did high­light that geopo­lit­i­cal risk head­lines are back on the front­line radar of fi­nan­cial mar­kets.

In the com­mod­ity mar­kets, Oil prices fell sharply mid­week as the steep sell­off across stock mar­kets fu­elled fears over a pos­si­ble drop in Oil de­mand growth. Saudi Ara­bia’s pledge to meet any sup­ply short­falls com­pounded down­side pres­sures with WTI Oil and Brent Crude hold­ing onto their re­cent losses.

Look­ing at Gold, the yel­low metal re­mains tugged and pulled by con­flict­ing fun­da­men­tal themes. Geopo­lit­i­cal con­cerns across the world have ac­cel­er­ated the flight to safety – ul­ti­mately el­e­vat­ing Gold to a three-month high. How­ever, the pre­cious metal re­mains ham­pered by a broadly stronger Dol­lar and prospects of higher US in­ter­est rates.

The up­com­ing trad­ing week will cer­tainly be event­ful for fi­nan­cial mar­kets with key eco­nomic re­ports and cen­tral bank meet­ings in sharp fo­cus.

\With the eco­nomic cal­en­dar void of any Tier 1 eco­nomic data on Mon­day, stock and cur­rency mar­kets are set to be driven by geopol­i­tics. The CB con­sumer con­fi­dence from the United States will be un­der the spotlight on Tues­day which could offer insight into how con­fi­dent con­sumers are of the US econ­omy.

The Bank of Ja­pan is ex­pected to leave mone­tary pol­icy un­changed on Wed­nes­day, and the same will be ex­pected for the Bank of Eng­land on Thurs­day amid Brexit-re­lated un­cer­tainty. All eyes will be on Fri­day’s US jobs re­port which could not only sup­port the Dol­lar but shape US rate hike ex­pec­ta­tions be­yond De­cem­ber. For in­for­ma­tion, dis­claimer and risk warn­ing note visit: www.ForexTime.com

FXTM Brand: ForexTime Lim­ited is reg­u­lated by CySEC and li­censed by the SA FSCA. Forextime UK Lim­ited is au­tho­rised and reg­u­lated by the FCA. FT Global Lim­ited is reg­u­lated by the IFSC.

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