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