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| Kim Jong-un and Donald Trump |
The
market reaction has been mostly positive, and this sentiment is likely to
continue with the expectance that President Trump and Kim Jong-un are to discuss the future of Pyongyang’s nuclear
programme. While the likelihood of North Korea signing a peace treaty is
unlikely at this stage, it does appear that Trump and Kim Jong-un have developed
a bond.
Kim
Jong-un has said the 'world will see a major change' and this is likely to be a
catalyst for further risk appetite in the financial markets. Improved momentum
towards global stocks and further risk appetite attracting investors are a
possibility following the conclusion of this summit. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The talks could be seen as an important step to easing geopolitical tensions in
the region, especially when considering how North Korea has pledged to work
towards ‘complete denuclearization’. A positive outcome to the summit could
open a path for further talks down the pipeline, ultimately supporting global
sentiment.
G7 ‘Trumped’ but
markets unfazed
Global
equity markets are trading mostly higher as investors shrugged off the rough
and rocky G7 summit that took place over the weekend.
The
talks between world leaders and Trump in Quebec were mostly dominated by
disagreements and arguments over trade, fuelling concerns over a potential
global trade war. With Trump injecting a dosage of chaos and uncertainty by
withdrawing from a joint statement with the G7 allies, trade tensions are likely
to remain a recurrent market theme.
Dollar steady
ahead of Fed meeting
The
Dollar is likely to remain supported against a basket of major currencies ahead
of the Federal Reserve decision on Wednesday, which is widely expected to
conclude with a US interest rate hike. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
It is
already considered a foregone conclusion that US interest rates will be
increased in June, so attention will mostly be directed towards the economic
projections and press conference by Fed Chair, Jerome Powell. Investors will most likely scrutinize the fresh
projections and Powell’s conference for clues on rate hike timings beyond June.
King Dollar has scope to appreciate further if policymakers adopt a more
hawkish stance than anticipated, reinforcing market expectations of at least
one more rate hike this year.
From a
technical standpoint, the Dollar Index is in the process of a higher technical
bounce. An intraday breakout above 93.90 could encourage bulls to target 94.00
and 94.30, respectively.
Euro seeks
guidance from ECB
Easing
political tensions in Italy have heavily supported the Euro in recent days with
the EURUSD rising to a near two-week high at the start of the trading week.
With
the European Central Bank meeting scheduled on Thursday, this will be an
important trading week for the Euro. Market expectations remain heightened over
QE potentially ending this year, and investors will mostly likely seek guidance
from the ECB meeting to confirm these speculations. The Euro could extend gains
against the Dollar if Mario Draghi
adopts a hawkish stance and expresses optimism over the health of the European
economy.
Currency
spotlight – USDJPY
The
Japanese Yen has extended losses against the Dollar this morning, with the
USDJPY punching above 110.40 as of writing. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The weakness in the Yen signals an improved risk risk-on sentiment. With the
Dollar likely to remain supported by Fed hike expectations, the USDJPY has
scope to venture higher. A technical breakout above 110.50 could encourage an
incline towards 111.10.
Commodity
spotlight – Gold
Gold
is likely to remain range bound ahead of the FOMC meeting on Wednesday, which
is expected to conclude with a US interest rate increase. While global trade
tensions have somewhat supported the yellow metal, a US rate hike could spell
trouble for zero-yielding Gold. Market players could continue closely observing
how prices behave around the $1300 psychological level. A decisive breakout
above $1300 may trigger an incline higher towards $1324. On the other hand, if
the $1300 acts as a firm resistance level, prices could descend back towards
$1280.
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