Talking Points:
- Risk appetite returns.
- Gold back in demand.
- Growing demand helping oil.
Forex
Traders’ appetite for risk returns as trade war worries ease, restoring faith in the dollar. USD ISM Services data beating analyst expectations added a fresh impetus for investors to long the dollar sending it 0.5% higher against the yen. Its gains weren’t so prosperous against the dollar however, up only 0.1% after Italian election results strengthened the case to back the euro. A major determinant for EUR/USD will be Thursday’s ECB interest rate decisions. Although a rate rise is virtually ruled out at this stage, it will nonetheless be important to gauge hawkishness to provide an indication of when QE will be wrapped back. Elsewhere, positive UK PMI data succeeded in pushing the pound higher against the dollar.
Gold
With Wall Street extending Friday’s late rally and the dollar rising 0.1% against a weighted basket of currencies, Gold dropped down to $1320/ounce. The precious metal is now trading in a historical area of support and resistance but if risk appetite continues to strengthen, the safe haven asset could drop a bit further than anticipated.
Oil
Oil prices gained ground amidst report of further stockpile declines at the key US storage and delivery point of Cushing, with Crude Oil jumping to $62.5. However, if the US equity markets continue to weaken, we may not be through the worst yet.
Cryptocurrency
The market cap for this new asset class continues to creep higher as crypto fundamentals strengthen even further. China’s CPPCC conference confirms that while China has already clamped down on ICOs and fiat to crypto trading, the government will step up its support for turning block chain technology into real-life applications. Adoption is already well underway in Europe with European Banks completing their first live securities transfer on R3’s block chain platform, strengthening the bullish case.
