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The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.
The Euro found consistent buying interest as ECB President Draghi did not live up to the overdone dovish expectations the market had set up for. Even if the ECB did push the forward guidance on rates into the first half of 2020 and details of a new round of cheap funding for banks was officially announced, Draghi offered us one of his most optimistic versions during the press conference. As irrational as it may sound considering the lay of the land from an economic standpoint, Draghi did downplay the downside risks on growth and inflation in what appears to be a clear preference to resort towards a ‘wait-and-see’ script while letting trade war-induced ramifications pan out. Another perfectly logical line of thinking is that the ECB has no choice but to be forced to strike a somehow more positive tone given the absence of further measures in its toolkit. Regardless, the market was happy to endorse the buying of Euros, which by default, led to a broadly weaker US Dollar, even if technically speaking, no much damage was done against its major peers (well-defined ranges established) ahead of the US NFP. It is precisely the outcome of today’s US jobs report that is now the major focus, as it may or may not pose the potential risk to re-ignite further conviction over the notion that the Fed is en route to lower interest rates.
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
US equities keep charging higher as the S&P 500 trades over 1% higher from its Wednesday’s close, underpinned by the current dovish expectations surrounding the next Fed move and hopes of a delay in the Mexican tariffs. The drivers taking stocks into higher ground are not lending the same amount of support to US bonds valuations as micro and macro flows tu back to bearish while the market structure in the US 30 year maturity also supports the negative technicals as the underlying macro script of a weaker global growth outlook and the pricing of lower rates by the Fed dominates.
By scanning through the value of the USD and the Yen, flows in the latter imply a certain degree of complacency as the depreciation in the Yen index towards its worst levels in June comes amid the bearish reversal in US yields, which suggest the currency is starting to look cheap. The weak momentum in the US Dollar is more a function of the stronger EUR post ECB, with the valuation of the world’s reserve currency now on a holding patte until the US NFP outcome, which will be yet another important piece of the jigsaw to judge the odds of lower rates by the Fed in months to come.
When it comes to the assessment of Chinese assets as a barometer of the trade dispute between the US and China via the Shanghai Composite and the Yuan, the message is loud and clear. The market keeps refraining from endorsing any view other than the trade war is here to stay. The current valuations lead to the firm notion of a failure to make progress by month-end at the G20 summit. If that’s the case, a critical prerequisite for a more dovish Fed will most likely be met.
EUR/USD: ECB-Led Demand But 1.13 Too Tough To Crack
GBP/USD: Range-bound Conditions Awaiting US NFP
USD/JPY: Projected Targets Drawn, US NFP To Dictate Next Move
AUD/USD: Defined Range With US NFP Next Catalyst