Currencies

Dollar under pressure

Last week was dominated by geopolitical events rather than by economic data. The Fed hiked rates as expected which was already priced into the markets. Powell restated the strength in the US economy and expressed the hope that it would continue but stopped short of laying out a timeline for the future rate hikes. Then came the news that the US administration had imposed almost $60 billion worth tariffs on many of the Chinese goods and China retaliated as well. The Eurozone leaders were also seen joining in and this led to a lot of risk and fear that it would lead to a global trade war in a slow and steady manner. Looking ahead to the next week, it would be the last week of the month and hence the amount of economic news and data would be less. Also, the market has enough geopolitical news to deal with and this is likely to bring in a lot of volatility in the markets. The pair would continue to consolidate within the range but with the threat of the topside break looking hefty. Despite high resistance by way of the 2008 trend-line, the bull-flag scenario is looking increasingly like it will come to fruition.

Break out from trendline

The GBP remained strong through the week strengthening by 1.3% versus the US dollar majorly supported by increased expectations of rate hike in the next BoE monetary policy meeting. The UK CPI data was lower than expected, the retail sales data came in at 0.8% compared to expectations of 0.4%, unemployment data and Average earnings index was also better than expected that supported the GBP vis-à-vis other currencies. This week we have the GDP data on Thursday and this could set the expectation for the future interest rate path. Expect the GBPUSD rate to test 1.42 levels again this week. Near term support for the pair remains around 1.3990 levels. Any further developments on the Brexit front could also support the GBP movement on the upside. Moreover, the dollar has come under renewed selling pressure, given the growing tensions of a potential trade war.

Equities

Trade-war concerns pressure

Germany 30 European markets fell for most of the week, as trade war fears lingered, and were finally realized on the final trading day of the week. News that US administration has imposed tariffs for $60 billion of Chinese imports sparked panic across Europe over the weekend, sending benchmark indices sharply lower. Looking ahead to next week, on the data front, German employment figures is to be released on Thursday. Risk trends continue to be a dominant for the benchmark, as Europe in general is weak compared to the U.S., which are now weakening as well. The upcoming week will almost undoubtedly see continued worries over a brewing trade war between US and China. So far China has only retorted with tariffs on some $3 billion of U.S. goods, while the U.S. has imposed tariffs on $60 billion worth of Chinese goods giving China plenty of room to retaliate. The German equities would continue to witness some selling pressure as we don’t expect an easy end to the trade war that’s escalating between the U.S. and China. In addition, the Euro has continued to firm against the U.S. dollar, which is considered bearish for equities.

Trade war worries jitters market

US30 post its worst week in more than 2 years wiping out more than 1100 points in just 2 days. The closing on Friday was lowest point since November. One of the main reason for the selloff was when US imposed $50 billion of Chinese imports, for which China said that it won’t recoil from a trade war and gave a detailed plan of tariffs on about $3 billion worth of imports of US goods. The worry is that a titfor-tat escalation between the two largest economies in the world will ruin the solid economic backdrop. Investors had been banking on strong growth this year, but a slowdown in trade and dented business and consumer confidence could change that outlook drastically. Experts are worrying that a trade war would erase the benefits of tax cuts which was the reason for the Wall street rally.

Strong growth forecast

Guess? Inc after announcing the Q4 results spiked to its 52 weeks high amid its best one day gain in nearly 20 years. The result was fueled by rapid growth in Europe and Asia with some signs of recovery in US. More Specifically quarterly revenue grew 17.5% year on year to $792.2 million compared with $674 million a year ago. CEO Victor Herrero said after the earnings that they are expecting to continue the growth sales to be in double digits while also expanding margins due to cost reductions and margin improvement initiatives. He also sees lots of opportunities in Europe and Asia where the company will continue to allocate capital for great returns.

Optimistic outlook for the year

Nike reported results of its third quarter of fiscal 2018 on Thursday, after the closing bell. Revenues of $8.98 billion topped consensus by a sizable $140 million. With the EPS of $0.68 which was substantially higher than estimate of $0.53 helped by low single digit tax rate and also weak dollar which contributed a lot to the upside in revenue. Company saw solid growth of 21% and 36% in footwear and apparel respectively in China. Nike also acquired consumer data analytics company named Zodiac Inc for an undisclosed amount. Investing in the strategy to serve the consumers faster and more personally at scale, Zodiac is said to use proven data models, behavioral analysis to predict the future behaviors rather than simply assuming past trends. We are bullish on Nike.

Metals

Trade war feas spur safe heaven demand

Last week, gold prices gained nearly 2.7% and rallied from from 1315 levels to 1351 levels ending on an 8 week high. These gain came on worries over a potential trade war between the United States and China driving safe-haven demand. Trade wars have the potential to increase inflation significantly and this is considered as a bullish sign for gold. Leek week, Fed also increased the interest rates by 25 basis points. However an interest rate increase was largely expected by the market and since the FED was not able to confirm any hawkish view on dollar, it led way to fall in dollar index and a spur in gold prices. The coming week is expected to be positive for gold, as there is little chance the uncertainties regarding tariffs will dissipate. Moreover, there has been high sell off in the global markets which will further trigger safe haven demand.

Energies

OPEC to extend production cuts into 2019

Last week crude oil reported its highest weekly gains in 8 month as traders saw the potential for OPEC to extend production cuts into 2019. Saudi Arabian Energy Minister Khalid al-Falih, commented that OPEC members will need to continue coordinating with Russia and other non-OPEC oil-producing countries on supply curbs in 2019 to reduce global oil inventories. The oil market extended gains on Wednesday after U.S. government data showed the country's stockpile of crude fell by 2.6 million barrels against expectations of a rise of 2.5 million barrels. Moreover, there has also been increasing geopolitical tensions in the Middle East, and Venezuelan production looks as if it could continue falling for some time. The forecast for next week will remain at bullish, largely driven by a combination of geopolitics and technical. It’s unlikely that the scenario around Iran will resolve anytime soon, and growing tensions around the fluid topic of trade wars will likely bring a weaker US Dollar which could, in-turn, help to push Oil prices higher.

Decline in Inventories

The International Grains Council (IGC) in its report forecasted a further decline in the grains stock, which on one key measure will be the lowest in five years. Specifically, inventories closing at 560m tonnes which is a drop of 46m tonnes year on year and lowest in four years. The inventory decline reflects in part expectations for a drop in wheat output next season with the IGC sticking by a world harvest forecast of 741m tonnes, a drop of 17m tonnes from 2017-18. The report showed drought in Oklahoma static at 48.5% coverage of the state, unchanged week on week, while for Texas, drought coverage expanded to 61.1%. Kansas, the top US wheat growing state, 81.8% was seen as being in drought, which would eventually lead to decrease in production and rise in price.

 

About Century Financial Brokers

Established in 1989, Century Financial Brokers L.L.C.is the region’s leading financial brokerage firm and a well reputed online trading service provider in the United Arab Emirates. Since inception, Century continues to have a strong commitment and dedication towards providing superior and personalized customer experience, and empowering its customers through education, training and support, in line with the values and beliefs of its founder, Mr. Sulaiman Baqer Mohebi, a dynamic and visionary business leader.

Century operates on the world’s leading platform which also provides a wide-range of financial instruments, covering 6 asset classes, across 100 markets worldwide with products ranging from Currencies, Commodities, Indices, Metals, Energies, and Inter-Bank Money Markets for both local and expatriate investors, to meet their diverse trading and investment needs.

 

Source: Matrix PR