Global
markets are attempting to power higher today as investors mostly brush away the
latest escalation in tit-for-tat tariffs between the world’s two largest
economies. The Yuan is also benefiting after Premier Xi Jinping confirmed that
Chinese authorities will not purposely devalue the Yuan in response to trade
tensions. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The
reassuring comments from the Chinese Premier will go a long way towards
reassuring investor confidence in China. Not only will it help stabilize the
Yuan, but it can also play a factor in helping currencies across the region,
when factoring in how important China has become to the global economy. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
There
is also a sense of some relief across investors that the United States could be
softening its stance after it imposed 10% tariffs on an additional $200 billion
worth of Chinese goods, instead of the expected 25%. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
This has provided some quiet optimism that both sides will attempt to return to
the negotiation table later down the line to resolve the prolonged trade
tensions. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With
China unable to stand toe-to-toe with the United States in the tit-for-tat
tariff battle, there were initial concerns over the nation devaluing its
currency to make exports more competitive, despite indications from the PBoC
weeks ago that this was not an option on the table. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
These concerns have once again been wiped away after Premier Li Keqiang this
morning stated that “A one-way devaluation will do more
harm than good to China’s economy.”
The
Pound’s fortunes this week remain tied to the outcome of the European Union
summit. A scenario where there is a fresh breakthrough on Brexit talks could
significantly boost buying sentiment towards the British Pound. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Away from Brexit, investors will keep a close eye on the pending UK inflation
reading which is expected to show CPI cooling to 2.4% in August.
Although
an upside surprise could support the Pound and expectations of further monetary
tightening, Brexit developments may force the Bank of England to stand still.
If economic conditions continue to improve and wage growth respects a positive
trajectory, the central bank could be poised to act with higher UK interest
rates after Britain divorces the European Union in March 2019. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
In the
currency markets, the Euro edged slightly higher during early trade amid Dollar
weakness. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The EURUSD has traded within a wide range for the past few weeks with support
at 1.1550 and resistance at 1.1800. With quantitative easing in Europe coming
to an end this year and the ECB unlikely to raise interest rates until summer
2019, the Euro seems to be on autopilot. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
All eyes will be on Mario Draghi in Berlin this afternoon, as he discusses the
future of economic policy in the Euro Zone. The EURUSD has scope to appreciate
towards 1.1730 if Draghi expresses optimism over the health of the European
economy.
Elsewhere,
Oil prices were steady on Wednesday morning despite an unexpected climb in U.S.
Crude stockpiles stimulating oversupply concerns. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Oil markets could turn volatile and unpredictable as investors tussle with the
conflicting fundamental themes. While geopolitical risk factors in the form of
looming U.S. sanctions on Iran have pushed prices higher, rising global oil
supply and trade tensions have somewhat limited upside gains. In regards to the
technical picture, WTI Crude could appreciate towards $70.76 in the near term
if bulls can secure a daily close above $70.00.
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