European Markets and US Futures Higher | Oil And Gold Lower
European markets and US futures are trading higher as traders are hopeful that the US Treasury Secretary, Steven
Mnuchin, may help them to save the day. If the US can reach a deal with China, it will avert the need to impose
sanctions of $50 billion of good from China. The French GDP is also helping in maintaining the positive momentum. It
matched the estimates of 2.5% in 4Q y/y.
It is fair to say that the optimism that traders had about the Trump administration had diminished fairly rapidly and
even his plans for infrastructure spending which was supposed to spur some risk on trade has mostly failed. The bounce
which we are experiencing in the equity market could only be a dead cat bounce. It would only be a matter of time when
we will see the negative impacts of these events trickling into the economic data and that would only create stronger
compounding effect.
It certainly looks like a Cold War, instigated without any doubt by the US. China wasn’t going to sit on its hand and
watch the show without any reaction. If China ramp ups matter further and it starts to take aim against larger US
corporations such as Apple and Boeing, we could see the sentiment getting further hammered.
Oil
While Donald Trump is doing what he does the best; firing and employing. This is creating more uncertainty. President
Trump picks up a former American ambassador to the United Nation as his security advisor. In simple terms, there would
be more pressure on Iran and Trump is more likely to withdraw from Iranian nuclear deal. Oil traders are not going to be
reticent with their bets.
If the US imposes the sanctions once again on Iran, there would only be a one-way trade for oil. Looking at the chart,
the bearish bets are at their lowest level since 2014 while bulls have ramped up their bets last week by 7.7% which is
the highest level since January.
Forex
In terms of currencies, Sterling traders are going to focus on the talks which are geared towards the Irish border. The
idea of the hard border and checkpoints being installed between the U.K. and Northern Ireland is highly unpopular. Any
talks which favour a hard broader between the U.K. and Northern Ireland may have an adverse impact on the currency.
Gold
Geopolitical uncertainty is gathering further momentum as president Trump is preparing a meaningful number of Russian
diplomats from the US. Gold traders are watching the developments around this carefully and despite a massive move in
the gold price last week, the odds are still skewed in favour of another similar move this week. Having said that, the
gold price is taking some rest before it firmly breaks the resistance of $1350