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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 market remains is a state of contained activity until the FOMC policy statement + press conference by its Chairman Jerome Powell later on Wednesday. Equities in the US, with our attention always on the S&P 500 as the bellwether, failed to keep the bullish tendencies going amid the resisting tactics by China as part of the trade negotiations. It has been reported by Bloomberg that the Big Panda (China) keeps playing hardball, and that based on accounts from some US negotiators, conces are starting to emerge about the stubboness of China to apply changes to their data protection and intellectual property policies amid the lack of assurances that existing tariffs will be lifted. There is the camp arguing that China is backtracking its initial commitments for a deal to transpire, while others involved in the negotiations believe this is the normal process of any negotiations. By the end of business in NY, the S&P 500 closed down by just under 0.3%.
The USD also continues broadly softer, stripping out a significant spike in US bond yields, which saw about a 50% retracement as the day went by, not helped by a poor print in US factory orders (0.1% m/m vs 0.3% expected). The US 10y yield stands at 2.61% while the 30y exchanges hands at 3.02%. A currency where one could anticipate greater vol, even if it never materialized was the British Pound as the inconclusive state of the Brexit conundrum continues. The latest we leaed is that UK PM May is mulling the possibility of requesting for an extension of Article 50 to June 30, even if rumor has it that the extension could be way beyond this time horizon and all of us stuck reporting the Brexit mess for another year or two, which is the timeframe the BBC speculates in a report on Tuesday. Even if a sideshow due to Brexit, the UK published surprisingly solid employment numbers. As the Economics Team at ING notes, “the UK labor data looks astonishingly strong for an economy that is supposedly slowing on most other measures. If the govement gets a long Brexit extension, a Bank of England rate hike is clearly on the table for the summer.”
The two currencies that enjoyed the greatest buying interest were the Canadian Dollar and the Euro. The trajectory in both currencies was analogous but the rhythm a far cry different story. While the Euro’s rise was slow and consistent throughout the day (aided by a marked improvement in the German ZEW economic survey series), the Canadian Dollar saw an abrupt spike that lasted a few hours as the US session came online only to retrace most of its gains by the end of business in NY. A currency that underperformed the rest during Tuesday was the Australia Dollar, which reflects its degree of sensitivity towards new developments in the US-China trade negotiations. The Kiwi did better, contained in a tight range against the USD. Lastly, the Japanese Yen, amid the drop in the US Dollar and the rise in US yields, that alone led to a diversification away from risk off instruments, with buy-side flows in equities for the first half of the day further promoting JPY sell-side action.
EUR/USD: Steady Buying, Not Sufficient To Break Resistance
GBP/USD: Directionless Flows Ahead Of Brexit Summit
USD/JPY: Reliable Trendline, Move Up Lacks DXY Support
AUD/USD: Shift In Flows Towards Bearish Bias
USD/CAD: Fails To Maintain Downside Advantage Sub 1.33