News & Analysis

Weekly Summary – The Clock is Ticking

May 10, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

The Clock is Ticking – Brexit and Tariffs

Trade tensions and Brexit noises reverberated across the global markets this week. The simmering frictions between Washington have been rattled the global stock market this week.

“The S&P500 is poised for its worst week since before Christmas.”

Trade Tensions Twist – “Beautiful Letter”

After days of conflicting news which put investors on edge, the “Beautiful letter” received by President Trump from President Xi calmed some nerves. For the first half of the week, the flows were directed in the US dollar and the Japanese Yen.


Source: Bloomberg Terminal

Market participants were taken aback by the tariffs threat over the weekend. We saw both Washington and Beijing issuing several conflicting trade news. However, towards the end of the week, China’s Vice Premier Liu He joined the delegation to Washington for the negotiations and President Trump acknowledged receiving a “beautiful letter” from President Xi.

Towards the end of the week, traders moved away from safe-havens. Major currencies edged higher against the US dollar. The movement in the FX markets shows that currencies were mostly headline-driven rather than fundamentals.


Source: Bloomberg Terminal

In the stock markets, negotiations are into place and halted the sell-off, but as of writing, major indices were still in the red as the reality in the state of trade talks was still far from conclusive and lack of worthy developments.

World Equity Indices (%Change)


Source: Bloomberg Terminal

Brexit

Brexit remains chaotic, but the key takeaway for this week is the Memorandum of Understanding (MoU) between London and Dublin guaranteeing reciprocal rights of citizens after Brexit. While the MoU is not legally binding, it does cover some commitment from both governments to maintain the common travel area and may ease tensions of a hard UK-Irish border.

However, it should be highlighted that the arrangement is about the movement of people not of good and services which remain a key setback for Brexit. The British Pound slide against nearly all major G10 currencies across the week dragged by Brexit and trade tensions.


Source: Bloomberg Terminal

As the risk-off sentiment prevails across the week and traders are seeking safety with currencies like the US dollar and Japanese Yen, we take a look at the GBPJPY pair:

After four consecutive days of being in the red, the pair appears to find some support on the near-term support line at 142.211. The RSI on the daily chart also indicates that the pair is in oversold territory and could entertain short-term buyers.

GBPJPY (Daily Chart)


Source: GO MT4

Reserve Bank of Australia and New Zealand

The RBA and RBNZ stand out this week amid the other central bank meetings. Given the currency weakness in both economies, there were growing calls for a rate cut. While the RBA maintains the interest at 1.50%, the RBNZ cut interest rate from 1.75% to 1.50% leading the way with Australia in tow.

Both Australia and New Zealand have the same official cash rate, and the RBNZ went ahead to tackle the problem of the economic slowdown. The central bank is the first among the developed countries to slash interest rates.

Both currencies are fundamentally weak, but the Kiwi lost further ground against major G10 currencies with the rate cut while the Aussie dollar managed to keep some upside traction.

Oil Markets

Despite trade tensions and political rift between the US and Iran putting downside pressure from the fundamental side, weekly oil reports supported the upside momentum of oil prices. Both WTI and Brent Crude are in the green for the week as of writing.

UKOUSD and USOOSD (Weekly Chart)


Source: GO MT4

Cryptocurrencies

It was a mixed performance in the crypto-space. Bitcoin rises above $6,000, a key psychological target and reached a new 2019 high. It could be attributed to Fidelity Investment’s announcement that the company will be launching a cryptocurrency trading service “within a few weeks”.

BTCUSD (Hourly Chart)


Source: GO MT4

 

Monday, 10 May 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
13.009 0 0.114 0.034 0.103 0 1.098
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0