Daily Market Analysis and Forex News

Asian stocks and currencies are mixed, as market participants still grapple with the true extent of the Covid-19 outbreak, with the death toll in China edging towards 1,500. The optimism mid-week was quickly dashed upon news that the perceived slowdown in the virus’ spread proved to be a false dawn.

This week’s developments underscore the fact that this situation remains highly fluid, and uncertainties continue to abound, especially around whether the global economy could withstand Covid-19’s economic toll. Until investors are offered a meaningful dose of certainty, markets should see a broadly supportive environment for safe haven assets such as Gold and the Japanese Yen, while emerging-market assets are expected to remain handicapped by the downside risks stemming from Covid-19.

US, China trade tariffs thaw on Valentine’s Day

The lowering of trade tariffs between the US and China today as part of the phase-one trade deal is being overshadowed by the economic risks posed by Covid-19. While lowering barriers to trade may go some ways in alleviating the pressures on the global economy, the ensuing tailwind is expected to be offset over the near-term by the drop in demand due to the outbreak.

Amid the travel bans, manufacturing disruptions, and the pullback in discretionary spending, policymakers may be forced into rolling out more stimulus measures to support their respective economies. The theme of global trade tensions will likely only return to the forefront of the market’s collective consciousness once the coronavirus outbreak begins to show sustained signs of stabilising.

US retail sales could tip Dollar index further into overbought domain

The Dollar index (DXY) has climbed past the 99 line and is trading around its highest levels since October. Dollar bulls are hoping for a positive surprise in the January US retail sales data, which is expected to show at 0.3 percent advance, in order to push DXY higher.

However, with the Dollar index now tipping over into overbought territory, the upward momentum may peter out in the near-term. Still, from a fundamental perspective, the Dollar should be able to retain most of its recent gains, considering the market uncertainties over Covid-19’s economic toll, as well as the US economy’s resilience relative to its developed peers.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Asian stocks and currencies are mixed, despite global investors being given positive signals on the world’s two largest economies. US retail sales climbed 0.3 percent in December while jobless claims came in lower than expected at 204,000. China’s economy grew 6.1 percent in 2019, meeting the official target range for the year, while its December industrial production and retail sales figures topped estimates, confirming the picture of an economy that has bottomed.

The latest slew of economic data suggests that the global economy is stabilising and poised for a recovery amid de-escalating US-China trade tensions. Such an environment should also offer emerging markets the chance to find a more stable footing and provide room for riskier assets to advance higher. Although downside risks such as geopolitical conflicts could rear their head at any time, investors should be able to move forward with cautious optimism knowing that major risks have considerably subsided for the time being.

A steady global economy should also offer a solid platform for equities to climb higher, with the ongoing US earnings season serving as the catalyst for further gains. Even with the S&P 500 and the MSCI World Index already at record highs, stock bulls are still expected to hold court over the coming weeks, despite US equities having ventured into overbought and overvalued territory. Investors expect corporate America to report its first earnings growth since the end of 2018, with yesterday’s new leg up in US stocks boosted by Morgan Stanley’s record annual earnings.

Major central banks, IMF could add more gloss to the global economic outlook

Considering the positive tint to the global economic outlook, major central banks around the world are expected to have enough reasons to refrain from further policy easing in 2020. Markets are predicting that the European Central Bank, the Bank of Canada and the Bank of Japan will leave their respective policy settings unchanged during their policy meetings in the coming week. The economic outlook provided by some of the world’s most important central banks over the coming days may add further colour to the markets, as investors ascertain how much more exposure to risk is warranted in the near term.

The IMF could also set the tone for financial markets at the onset of the week when it releases its World Economic Outlook on Monday. Should the IMF strike a more optimistic tone over the prospects of an economic recovery worldwide in 2020, that could give risk-on sentiment another shot in the arm.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Asian stocks and currencies are mixed leading up to the long-awaited signing of the limited trade deal between the US and China, amid concerns that major differences are set to persist between the two economic giants. Hours before the trade deal is formalised, investors were met with headlines about potential plans by the US administration to block exports to Huawei, coupled with media reports that any further tariff relief affecting $360 billion worth of Chinese goods shipped to the US may only go into effect after the US Presidential elections in November.

With the optimism surrounding the US-China “phase one” trade deal largely priced in, risk assets may be triggered into a knee-jerk reversal if the released details from the signed trade deal underwhelm investors. Still, considering the diminished prospects of a tariff escalation between the US and China, the global economy is expected to enjoy some measure of relief in 2020 after having weathered heightened trade tensions over the past two years. Should the macro data over the coming months point to a meaningful recovery in economic conditions worldwide, that should encourage further upside for riskier assets, with emerging-market assets poised for gains under such risk-on circumstances.

Dollar sees diverging performance against G10 vs. Asian currencies

The US Dollar has seen a year-to-date decline against most Asian currencies, but has strengthened against all of its G10 peers so far in 2020. Although the Dollar index (DXY) remains above the psychological 97.0 handle at the time of writing, the DXY is still expected to ease over the coming months, having posted lower highs and lower lows since October, as investors with heartier risk appetites expand their reach into the markets.

Over the near-term, a better-than-expected print in the December US retail sales figures should also buffer the DXY’s presence above the 97.0 mark, as consumers Stateside continue propping up the economic growth momentum. Further support for the Dollar index may be derived from the waning Pound, amid rising expectations that the Bank of England could lower interest rates this quarter.

Commodities check: Gold, Oil to see contrasting fortunes as global economy recovers

Gold prices have come off overbought levels and are finding a more sustainable footing around the mid-$1500s for the time being, with investors eager for details surrounding the expected rollback in tariffs. Bullion is expected to ease further as long as risk-taking activities can continue in the markets unperturbed while the global economy attempts to take advantage of thawing US-China trade tensions.

Brent is finding its immediate support at $64/bbl, with concerns over the US-Iran conflict now phased out and with investors having mostly priced in the US-China “phase one” trade deal signing. However, key details from the agreement that could significantly alter the outlook on global demand may yet hold sway over Oil’s performance, whereby further indications over the dismantling of tariffs could spell more upside for Oil prices.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Most Asian stocks are seeing out the week on a positive note, after the S&P 500 notched a new record high. Despite the recent US and Iran airstrikes, risk appetite has been largely restored, with USDJPY advancing some 1.3 percent so far this week, while Gold has erased all of its gains this week to trade below the psychological $1550 level.

Investors have been emboldened by signs that both the US and Iran are backing away from the brink of an all-out war. The flare-up in the Middle East was the latest reminder for investors to remain vigilant over geopolitical risks. It remains to be seen whether this is merely a lull in what could be a protracted action-reaction cycle between the US and Iran; such a risk may have to be factored into investors’ respective asset allocation strategies.

Still, the diminished risks of a near-term escalation in the US-Iran conflict mean that market participants can refocus their attentions on the US-China “phase one” trade deal which is set to be signed in the week ahead. The key detail would be the timing of the expected rollback in tariffs. The lowering of these barriers to trade, sooner rather than later, should give the global economy more time to recover and provide cause for investors to add exposure to riskier assets, including those in emerging markets.

Positive surprise in US jobs data to spur Dollar on

The Dollar index (DXY) has now climbed one percent so far in 2020, trading back above 97.4 in the lead up to the December non-farm payrolls (NFP) release. Markets are currently pricing in an NFP print of 160,000, and such a figure would underscore the job market’s resilience as US consumers are being relied on to maintain the growth momentum in the world’s largest economy.

Positive surprises in the headline NFP, wage growth, or average hourly readings could see the Dollar index closing in on its 200-day moving average of 97.706 and stall its downward trend. However, considering that the DXY has been posting lower lows since October, the US Dollar is expected to moderate further, as long as risk-on sentiment remains uninterrupted and the Fed stands pat on US interest rates.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Asian stocks are mirroring the climb in US equities, after all three US benchmark indices posted fresh record highs. Investors are clearly in high spirits during this year-end season, with the 2020 global economic outlook turning brighter in anticipation of the US-China “phase one” trade deal. The buying momentum is likely to be sustained, amid expectations that the manufacturing sectors around the world as well as global trade conditions can take advantage of the expected rollback of tariffs, while major central banks persist with their accommodative stance.

Brent trades at highest level since September

The risk-on mode is also clearly evident in Brent Oil, which is carving a path towards the psychologically-important $67/bbl mark. Investors will be closely eyeing the EIA US inventories data, due later today, to see whether Oil prices can be justified higher. With Brent’s 50-day moving average having already broken above its 100-day moving average earlier this month, Oil prices could climb another leg higher on signs that OPEC+ supply cuts will be extended past March 2020, falling US inventories, as well as evidence of demand-side improvements stemming from thawing global trade tensions.

Risk appetite needs to kick into another gear for USDJPY to push higher

The current risk-on momentum however doesn't appear enough for USDJPY to punch above the 109.6 level for the time being, with the currency pair adhereing to its low-volatility character. As long as risk appetite can hold up, the expected bias for USDJPY is to the upside through Q1 2020, as it carves out slow and steady steps towards the 111.0 level.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.