Vibrant US Economy and Optimism Around NAFTA Motivate Crude Oil Rally; European Stocks Lower on Italy’s Debt Crisis

Crude oil continues its impressive rally. To the fears of a shortage due to the disruption of supplies from Iran and Venezuela was added some optimism with regard to an increased demand thanks to the international trade increase, which may be reinforced after NAFTA deal and a new portion of strong data. 

As a result, Brent Crude rose by 2.9% to $85.30 per barrel on Monday, but it gave up some gains later and has decreased to $84.9, where it remains at the time of writing. The current levels are the next update of highs since 2014, and the movement is amplified by the mass closing of short positions after the quotes fast had grown to multiyear highs.

The US dollar keeps its trend on growth, given the Fed’s confidence in economic prospects. 

The production ISM, published on Monday, sank from 14-year highs but remains within a territory that marks impressive rates of growth. Employment and order components are at a very high level. The ISM notes that the current index level (59.8) corresponds to the annualized GDP growth of 5.1%. This news became a significant driver for the growth of oil quotes yesterday at the end of the day.

The dollar index is traded near the three-weeks maximums, and the EURUSD pair remains under the 1.16 mark partly because of the investors’ concern around the sustainability of Italy’s debt burden. The common currency and European debt markets have been experiencing an increased demand for safety since the end of last week. European stocks trade mostly lower on Tuesday morning as the Italian debt crisis weighs on the markets.

The populist government has agreed on a budget with a significant deficit, causing a new wave of concern about the risk of insolvency at a debt load of 132% of GDP and under the rising interest rates. 

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However, it is worth noting that the concern about the sustainability of Italian debt markets does not harm the global sentiments yet. It is still very early to compare the situation with the Greek debt crisis: Italy does not threaten to exit from the Eurozone, and the confident growth in the world and in other European countries effectively curbs the spread of risks in other markets.

This article was written by FxPro

“Crypto Sign of Hope”: Legal Uncertainty Suppresses Volatility, But ETH Volumes Are Encouraging

The second day of October and the beginning of the 4th quarter for the cryptocurrency market turned out to be anemic. The Bitcoin (BTC) does not show any price changes second day in a row staying at around $6,500. The Top-100 altcoins are also standing pat. Last week’s star XRP lost almost 3% during 24 hours despite Ripple’s announcement of three major partnerships including an $80 bln. banking giant Banco Santander. It seems that all possible optimism regarding XRP is already considered by investors in prices. At the same time, there is a trend on the growth of networks difficulty: since the beginning of June the difficulty of Zcash network has grown 4.5 times, as for the Bitcoin (BTC) network, the growth of difficulty has multiplied about 1.6 times. While “hodlers” keep waiting for the market reversal, miners are quickly selling the mined cryptocurrency admitting less income or even suffering losses.

It is obvious that at the moment the market is frozen due to legal uncertainty. In the near future, it is American regulators who will determine the direction of the entire sector. Recently the representatives of the cryptocurrency business and companies providing traditional financial services went to Washington to try to speed up the creation of regulation and once again they wanted to explain to the officials the need for a friendly cryptocurrency environment in the United States. Right at the moment, Ripple heads the SAIV lobby group in Washington attempting to influence the US lawmakers. Everything in the world needs to grow up, otherwise, it dies. This law works here too, if the market does not receive any clear signals, new massive sales will be a matter of a very near future.

The largest Asian regulators showed a very negative attitude to the cryptocurrency market. Thus, the Central Bank of India forced Zebpay, the largest crypto-exchange in the country, to stop its activities, banning banks from providing services to cryptocurrency companies. China continues to get rid of all possible crypto activities. New research did not help the market either: WSJ concluded that about $90 million was laundered through crypto exchanges for the last 2 years, although if we would try to imagine the volumes of such schemes within the traditional banking system, it is obvious that the cryptocurrency sector represents a very small share of the shadow business.

The Bitcoin short-term technical picture does not change for a long time, so we turn to the assessment of the situation with ETH. Ethereum attracts buying interest up from the second decade of September, which caused its quotes’ rise from 13-month lows at $164.5 to current $225. It is also notable that from the beginning of the year the trading volumes grew to maximum levels reflecting the return of the demand and they have remained elevated for a long time. On the stock market, this is traditionally considered as a good signal of investors’ demand and maybe a preliminary sign of growth with the nearest target of about $280 from where the recent sale bad begun.

This article was written by FxPro

New Pressure Trigger: Hawkish Fed’s Stance; Global Stocks Decline After Fed Meeting

US dollar adds 0.5% on DXY index after relatively hawkish FOMC comments. During the meeting, the Fed raised the rate by 0.25 points to 2.25%, as it was widely expected by the markets. The growth of the dollar was supported by an upward revision for economic projections of FOMC members. The Federal Reserve System has increased its GDP growth forecast this year to 3.1% from 2.8% earlier and has raised it from 2.4% to 2.5% for 2019. The forecasts that were published up to 2021 do not give hints to the expectations of the downturns, suggesting 3 increases in 2019-m in addition to one more tightening policy until the end of the current year.

Trump’s recent dissatisfaction with the Fed’s rise in rates has not resulted in a change in the rate forecast, which has also supported the dollar. The EURUSD pair has returned to the trading range of the previous 4 months and fell to 1.1700 level.

To our mind, the Fed’s focus on the internal data without considering the growing risks for developing countries risks exerting pressure on the markets. Futures on S&P500 lost 0.7% after the start of Powell’s press-conference. The cautious tone has become a leitmotif for the Asian markets on Thursday morning.

The fears of the Fed’s policy tightening were an important factor of the pressure on developing countries’ currencies, which were dependent on the dollar funding earlier in August and September.

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Later, we saw some rollback as some of the players thought that the markets had gone too far in their sale-off. Strong Fed’s rhetoric noticeably increases the risks of a new wave of pressure on the EM currencies.

The recent reversal of developing country markets and recent records of the American indices have made markets vulnerable to a new wave of pressure. The Fed’s hawkish rhetoric in these conditions can be an ideal occasion to start a new wave of sales in the EM markets and become a trigger for some correction of the US markets.

This article was written by FxPro

Asian Markets Grow Despite Trade Wars, Fed Meeting in Focus

The demand for risky assets continues its moderate recovery in Asia, while US indices are stagnating. The focus of the markets has shifted from the current situation to the outlook, and from this perspective, the American indices seem less attractive.

The Shanghai index A50 has risen to the two-months highs, which is partly helped by the expectations of fourfold weight increase the of Chinese companies in global indices from MSCI. Positive expectations have managed to overcome the short-term caution in front of the negative trade wars consequences. At the same time, economists warn about unequivocal negative consequences of trade conflicts for the world economy.

On the contrast, American indices were losing ground yesterday, despite very strong data. S&P500 lost 0.3% on Tuesday. However, futures on the index have now played these losses following the rise in Asia. The U.S. Consumer Confidence index rose in September to 138.4, 18-year high, thanks to sharp improvement in expectations component. The index is just in a couple of steps from the historical highs on 144.7. Another indicator, Richmond Fed Manufacturing Index, has risen to 29, which is slightly below historical highs since 1993 at 30. 

Strong macroeconomic data often support the currency; suggests more decisive steps for the CB to raise the rate following the increase of inflationary pressure, and increases demand for stocks on higher income expectations.

However, in this case, the caution was outweighed in anticipation of the Fed’s comments on the interest rate. 

The reaction of markets continues to be counterintuitive: the real threats to growth in developing countries are brushed aside by the optimism about weights gain in global indices, while strong consumer confidence and business activity are incapable of fuelling further stock demand. The main reason for this is the fact that the markets look forward and not backward.

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The fears that the US economy has gone through its peak and will continue to slow down are growing now, and the Fed’s increase in rates would exacerbate this braking at the same time that U.S. companies will not be able to maintain an equally impressive revenue growth.

This article was written by FxPro

Global Stocks Mixed as US-China Trade War Intensifies, EM Central Banks Seem to Have Repelled the Attack

Cautiousness returned to the markets at the beginning of the new week on the introduction of bilateral tariffs between the U.S. and China, as well as expectations of the Fed rates rise. It should also be noted that the tightening of the Fed’s policy forces the central banks of smaller countries to tighten their policies as well. The Central Banks of developing countries (Argentina, Turkey, Russia, Philippines) actively raised rates or unfolded their rhetoric towards the tightening in August and September in response to a very serious outflow of capital and the fall of national currencies.

Despite the similarity of form, the consequences for countries and currencies will vary drastically. 

Policy tightening in the United States is a response to increased inflationary pressures because of a strong economic growth and one of the tightest labor market conditions for decades. Measured increases in rates do not hinder the economic growth and even motivate the demand to some extent, as consumers rush to credit at low rates, realizing that soon the lending will rise after the tightening from the Fed.

In emerging markets, it is often a different story. The central banks of Argentina and Turkey have increased the rates very sharply to stop the free fall of national currencies and frightening volatility of the markets. Now, this sharp policy tightening may become a serious strangling for growth in the coming months. Earlier last month, the South African rand sharply decreased after reports of an unexpected recession in the country.

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It will not be surprising if in the coming months we will be more likely to receive reports about slowing growths of developing countries or recessions there (the Central Bank of Russia has already warned about such possibility).

The central banks of developing countries will probably have to fight back the attacks like the one we saw in August and September more than once in the coming months. In doing so, they will have to balance between the policy tightening and growth to maintain the attractiveness of the currency for external investors and avoid the economy knockdown.

This article was written by FxPro

Cautious Mood Has Returned to Stocks, Asian Markets Mixed

American markets ended trading on Wednesday with a slight increase. Asian bourses also experienced growth at the opening, but it was quickly replaced by increased pressure. At the time of writing, Nikkei225 was flat, Heng Seng gained 0.29%. Futures for S&P500 have lost 0.1% on Thursday morning, being near 2910 level, away from the intraday highs on 2913.

From the technical analysis perspective, the U.S. markets experience difficulties with growth on the approach to an important resistance level, from where the market turned to a correction at the end of August. Economic data also support the defensive tone of risky assets.

The number of building permits in the U.S. in August fell by 5.7%, and it is 10% lower than the peak levels of January when the current trend on a decline was marked. The building activity indicators are often considered to be a reliable growth indicator of the consumer sentiment. And this reversal to a decline is a sign of the consumers’ wariness among the rising interest rates environment. It is also worth noting that the current permits volume is about a half of the peak levels of the last-decade construction boom.

Let us add disappointing inflation rates, despite the rise in energy prices and tariff pressures. Current data does not undercut the possibility of two increases by the end of the year, supporting the dollar from falling. However, next year the Fed will probably have to act much more cautiously.

In the Asian markets, it also seems that the recovery rally has exhausted. After two days of growth, Asian markets mixed, returning to the levels of the end of last week.

The housing market in the United States remains a focus of attention with the publication of sales in the secondary housing market, where, as in the construction, there has been a weakening of the indicators for the last few months. 

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In addition, the negotiations between the EU and Britain on Brexit and retail sales statistics can influence the demand for the risks. Yesterday the pound has gone from 2-month highs after the reports that the first day of Britain and the EU Summit had passed without progress.

This article was written by FxPro

Markets Reversed to Growth, Despite New Tariffs on China Import

Trump’s administration announced the introduction of 10%-tariffs for Chinese imports to $200 billion. The news had a moderately negative impact on the markets. The dynamics are limited, as the information about these measures appeared on Monday, which took from MSCI about 1% on Monday. We see something like the traditional reaction of the market “buy rumors, sell facts.”

At the same time, we cannot forget about the long-term negative consequences of the world trade problems. It is cautious to expect a response from China that threatened to abandon the planned negotiations with the United States in case of the trade war escalation.

In addition, trade disputes have already led to a decline in world trade, which last time happened in 2015 against the backdrop of the collapse of oil quotes, and before that was noticed only in 2008. The reduction is detrimental to the demand for raw materials and energy.

Metal quotes have been losing for the third session in a row. Brent oil lost 3.2%, once again stepping from the important resistance around $80 to the mark on $77.25. Under these circumstances, the current rollback of the markets should be seen as a temporary rollback after a sale earlier, but hardly as an excuse for a sustained growth.

The dollar has decreased this week by 0.6%, testing the minimum levels from the first half of July. It is obvious that the dollar is not able to develop the offensive, even though the Fed is moving in full swing to raise the rates in September and December. The weakening of the US currency is also a supporting factor for the markets of developing countries.

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The current dollar deviation risks to increase if the dollar index overcomes the level of support at 93.80. No less important level for EURUSD is the mark of 1.17. If the euro succeeds steadily above these marks, the purchase of a single currency can noticeably increase on the investors’ faith in a further rally.

At the same time, the stock markets have not yet developed a certain dynamic: The index of S&P 500 remains below the important level of resistance (2900), although staying in the framework of the last -week growing mini-trend.

This article was written by FxPro

Emerging Markets Rebound Seems Over, Global Stocks Mostly Lower and Dollar Firms on Renewed Trade Worries

Asian markets have turned to a decline with a renewed force. After the rebound of last week, the index MSCI Asia ex Japan loses 1.2% and is only 1.5% above the 14-month lows. Futures for S&P500 have returned to 2900 area, lost 0.4% from Friday’s intraday highs. The pressure on the markets increased after reports that the U.S. intended to announce the introduction of tariffs for the U.S. goods up to 200 billion as early as on Monday. China threatens to abandon the negotiations announced last week, in case of new tariffs.

We have previously warned that the current recovery of markets is nothing more than a correction rebound after a strong oversold. Both China and the United States are difficult negotiators, and earlier this year there have already been a number of negotiations, which have not resulted in any breakthrough.

In addition to the renewed concern about a foreign trade, the strengthening of the American currency reinforces pressure on the emerging markets. The dollar rose on Friday after the start of an active trading session in America. The dollar manages to hold its positions on the start of a new week on demand for it as a protective asset. The dollar index adds 0.6% to Friday’s lows and is near 94.90, one step away from the important resistance at 95.0. EURUSD once again were unable to sustain in the area above 1.1700 and trades at 1.1630 now.

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The dollar is adding despite the weak data on retail sales, which added 0.1% in August against expected 0.4%. In addition, it is worth paying attention to the sharp (by 0.6%) drop in import prices, which has become another confirmation (after a weak CPI and PPI) of not as serious inflationary pressure as analysts have feared. Despite this, the markets are still ignoring the weak inflation rates, bowing to the fact that a sharp increase in wages in the nearest future will cause a rise in prices.

This article was written by FxPro

Three Reasons for Rebounding Indices in Developing Countries

Global stocks trade mostly higher on Thursday morning on new trade talks between Beijing and Washington. The global positive momentum affects also the developing countries share market which after a sharp decline rebound due to three main reasons.

Positive expectations from trade negotiations

Asian markets are adding after reaching 14-month lows the day before. Positive markets are supported by the reports about China’s invitation to trade negotiations. Previous negotiations did not bring any results and led to a tightening of the rhetoric and tariff expansion. However, the positive markets are fuelled by the sentiment that President Trump’s administration will be slightly more inclined to reach an agreement, having faced a public coalition of 85 industrial groups in the US that oppose the trade tariffs.

Short-term oversold indices

However, an equally important factor is the “fatigue” of the market after a prolonged sale. MSCI for Asia ex-Japan adds 0.5% this morning after touching the oversold area on RSI. Often, the exit from this area increases the craving for profit by speculators, oriented to technical factors that could support the market in the next few days. Futures on Heng Seng 50 add 1.1% per day. After a long sale, the fixation of profit from the weakening can develop a rebound up to the rest of this week, although it is not yet possible to talk about a fundamental reversal to the growth for EM markets.

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Weak US inflation data

In addition, weak U.S. PPI data have a moderately positive impact on the markets. The release below expectations has lowered the fears that the Fed will have to go ahead with raising the rates to suppress inflationary risks having pressed on the dollar and supported the demand for risks.

All of the factors above (positive expectations from trade negotiations, short-term oversold indices and weak statistics on inflation in the USA) are not capable to form a sharp rebound separately, but their combination helps the markets to form the ground.

This article was written by FxPro

Strong Data Supports U.S. Markets and Limits EM Decline, Oil Rises on Hurricane Florence’s Threat

Stocks of the Emerging Markets remain under pressure on Wednesday morning, with positive sentiments prevailing in American markets following strong macroeconomic statistics. MSCI for Asia-Pacific region has been updating its lows since July 2017, losing 0.5% on Wednesday. Hong Kong’s Hang Seng loses 0.2% but is also in the area of 14-month lows. Both of these indices have entered the oversold zone on RSI, which reflects a strong impulse for the decline, but also requires attention to a possible rebound.

However, bears seem to have an upper hand for now on EM against a verbal skirmish between China and the United States regarding the trade. Trump noted that he had a tough stance against China, and Beijing told it would request WTO for sanctions of $7 bln. per year against the U.S. due to non-compliance with the trade negotiation procedure.

On the contrast, the U.S. markets were gaining on Tuesday, relying on strong statistics. S&P500 added 0.3%, having recovered after the data from earlier intraday decline. The Small business optimism index has reached a new high in its 45-year history following the most intensive plans to increase jobs, expand investments and increase stocks. Separately, according to JOLTS report, the number of open positions in July reached a record of 6.94 million, which is greater than the number of unemployed ones that are 6.2 million, also it is noted that the number of those who voluntarily change their work grows. These are the signs of labor market strength, foretelling acceleration of the salary growth that we saw at the end of the last week in Payrolls report in August.

The enthusiasm around the confident growth of the U.S. economy creates expectations of higher rates from the Fed. The markets put 80% chance of the rate rising in September and December versus 71% a week earlier and 60% a month ago. However, this seems to be insufficient for the growth of the dollar. The EM currencies put on pause their decline on the assumptions that strong statistics in the United States will support global growth rates.

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The dollar index has been around the 95.0 level since the beginning of the month. EURUSD has retreated this morning to 1.1580 after a failed 1.16 test yesterday, GBPUSD has returned under 1.30.

Strong U.S. data and the news that Hurricane Florence could become the strongest in history, hurting oil production in the U.S., caused a spike in oil quotes. Brent rose to $79, the level, above which oil has not been sustained since May.

This article was written by FxPro

Global Stocks Fall as Emerging Markets Sale-Off Spreading to Developed Markets

The current weakness in the developing countries financial markets is the longest since 2008. The similarities go further than that: as well as 10 years ago, the aggravation falls in autumn, when the funds actively review their investment strategies, and the reasons are – chronic deficits and high level of debt.

However, then the source of the problems was developed countries, and at one time there was a popular idea of decoupling, proving that the problems of the developed countries would not have a significant negative impact on the developing ones.

History showed how erroneous these hypotheses had been, and the financial world has proved to be complex and interconnected, and all the countries have not been spared the echoes of the global financial crisis. Nevertheless, developing countries recovered faster, providing an increasingly serious share of the world economic growth in subsequent years.

It is likely that this time, in case of serious problems on the financial markets of large developing countries, the developed markets will be able to maintain immunity only until a certain point when the weakening of the markets will be relatively organized. The supporters of a limited influence on the markets of developed countries may also recall that the Asian crisis of 1997 did not cause any recessions in developed countries. But in 21 years the economies of developing countries have multiplied several times.

10 years ago, countries were coping with the global crisis through joint and coordinated solutions, while the growth of populism and protectionism in politics in recent years risks exacerbating local problems and result in the loss of valuable time to find joint solutions.

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Under these circumstances, s& S&P500 index lost 0.5% on Wednesday and futures trading slightly lower, increasingly keeping away from the historical highs achieved a week earlier, despite the strong economic data from the U.S. MSCI has decreased on Thursday morning by 1.8% in the area of one-year lows. Global stocks trading mostly lower on Thursday morning. The dollar index remains near 95.10 since the beginning of the month, having fallen by 0.2% on Wednesday. However, the development of pressure on EM market is able to develop the offensive of the American currency as a safe haven.

This article was written by FxPro

Global Stocks Lower on Trade Tensions, EM Currencies Keep Tumbling and Growing Demand for USD; Amazon Hits a Trillion Dollars

The crisis process is intensifying in emerging economies, which also affects their markets and supports the demand for the dollar. S&P 500 lost 0.2% on Tuesday and returned under 2900 level, despite the Amazon’s growth of capitalization over $1 trillion. Asian markets are declining after the data on a business slowdown in China. The published Services PMI was weaker than expected, declining for the third month in a row to the lowest levels since last October.

MSCI for Asia-Pacific region ex-Japan has been losing 0.5% for the second consecutive day; Nikkei225 has decreased by 0.4%. The Asian bourses remain concerned about the possible announcement of the tariffs expansion for Chinese imports by the United States as early as tomorrow. But the markets are not less concerned about the situation in the emerging markets in different parts of the world.

The currencies of Argentina, Turkey, South Africa and Brazil are considered vulnerable to changes of the investor sentiment due to large budget and current account deficits. Investors, first of all, withdraw money from there due to changing prospects of the global growth. A number of hotbeds of concern and the structural problems of those countries do not allow hoping for a quick solution. Perhaps, the problems will even grow in the coming days. The Argentine peso, the Turkish lira, the South African Rand have returned to the area of historical lows. The Indian rupee and the Brazilian Real have updated their lows to the dollar this week and remain close to these levels.

Against this backdrop, there is a growing demand for the dollar as a safe harbor. The structural deficits in emerging markets are further exacerbated by the introduction of tariffs and threaten to stifle China’s growth.

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The dollar index rose to a maximum of two weeks at 95.65 on Tuesday but lost most of its growth after the data on production activity in the US had been published. It exceeded expectations by regaining the demand for risky assets in the United States and somewhat softening fears. The U.S. is taking away from China the flag of the growth engine for the world economy.

The EURUSD fell yesterday to 1.1530 at one point but starts the Wednesday close to 1.16. On Friday and Monday, this level was an important short-term support, but now it looks like a meaningful resistance.

Among the macroeconomic news, the course of trades in the pair may be affected by the final estimates of Services PMI for the Eurozone countries. It is also important for the markets to publish the U.S. trade balance, which can bring the international trade back into the spotlight of the markets.

This article was written by FxPro

Bitcoin Has Been Growing Cautiously for the 3rd Week in a Row

Since August 31, the Bitcoin (BTC) has added 5% to $7,300, showing its ability to continue the growth after the breaks. The summer lull period is coming to an end and this autumn can bring an increase in trade volumes if significant news triggers appear.

Since the beginning of 2018, the Bitcoin tendency to decrease price peaks has disappointed the market. The Wall Street sharks have prepared the crypto expansion, but nobody has made their position yet.

The large capital is obviously interested in the lowest marks on the market. Retail investors could think that the current marks are a source of opportunities, although, for the professional assessment, the Bitcoin’s dropdown more than 70% from the peaks barely could be considered a successful level to enter into the market taking into account the risks and perspectives. For instance, XRP token at the moment is trading less than 10% off its highs at $0.33 compares to $3.65 at the beginning of the year.

Nevertheless, the largest international corporations were engaged in adapting their business to a new fundamental technology over the past year. Thus, Alibaba and IBM outperformed other companies in the number of patent applications on the blockchain, followed by other well-known brands: Mastercard and the Bank of America. Although these cryptocurrencies are considered to be a byproduct of blockchain technology, a successful synergy may lead a well-known or completely new cryptocurrency to the top of success.

The benchmark currency continues to increase for the third week in a row. Current situation promises a serious fight between the bulls and the bears. According to technical analysis, the downward resistance near $7500 could prevent the further recovery.

RSI on the daily charts has not entered the overbought zone, leaving the potential for the further rate growth albeit it looks very limited. The trade volumes are still low with the tendency to decrease during the previous month. It indicates that the current growth can be hardly considered as a sustainable.

This article was written by FxPro

Manufacturing Slow Down is the Price for Trade Uncertainty, EM Currencies Continue to Lose Ground

The markets are cautiously on buy for American stocks, and the dollar adds on fears that trade conflicts are seriously stifling the business sentiment in Europe and Asia. The MSCI Index of the Asia-Pacific region ex-Japan loses 0.3%, Nikkei 225 decreases by 0.1%. Pressure on the European exchanges increased after the weak production PMI, indicating a negative impact on the economy of the USA trade disputes region.

The dollar index had kept above the 95.00 level by the end of the day and rising today to trade at 95.43 at the time of writing. EUR/USD is traded near 1.16, as at the start of trading on Monday, and the British pound lost 0.8% within a day for the same time to $1.2832. Pressure on Sterling intensified after the news about the decline in production PMI of the country to the minimum since the referendum on Brexit.

Asia’s business activity is also decreasing on fears of increasing trade wars, which causes the outflow of funds from the stock markets and currencies of the region. The Indian rupee updates its historical lows to the dollar, and the Argentine peso lost more than 3% on Monday. The Turkish lira exchange rate did not change a lot on Monday, as the central bank of the country made it clear that it was preparing some measures to combat a huge jump in inflation. In all cases, the central banks of developing countries are forced to tighten their policy by various measures, which will almost inevitably raise credit rates for companies and consumers and will slow the growth.

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PMI indices for Europe are also in decline, but are at a higher level, reflecting a robust growth rate, while in Britain and China the production growth is close to stagnation, and has been losing noticeably since the beginning of the year. The latest estimates for August on the United States will be published today, and we have yet to see whether they confirm or contradict the overall trend. According to previous estimates by Markit, the production activity in the United States decreases but remains at a high level as in Europe. ISM estimates do not mark a certain trend for recent months.

Maintaining a high rate of the economic growth despite the threat of trade wars and tightening of the monetary policy favorably distinguishes the U.S. markets from the rest of the world, creating an objective craving in the dollar and stocks. This draught can be intensified with the onset of autumn as the new fiscal year approaches.

This article was written by FxPro

Markets Under Pressure on Fears of US-China Trade War Escalation, A Busy Week Ahead

Asian markets have been declining for a third consecutive trading session on the fears of the Chinese-U.S. trade tensions escalating. The odds are that Trump will announce the expansion of tariffs for Chinese goods worth from $50 to $200 bln. on this coming Thursday.

Already introduced tariffs significantly suppress investors’ sentiment – India’s companies are gaining an advantage in the production of goods that have already been tariffed, and Russia’s role as an LNG importer for China is growing. The escalation of the trade war risks further disrupting the habitual trade flows in the long term. In the short-term, it risks putting serious pressure on the stock markets. The Shanghai index is traded near the lows of 2.5 years. MSCI Asia-Pacific region without Japan has lost 0.7% this morning; Nikkei225 has decreased by 0.5%.

The demand for protective assets supports the dollar. The dollar index has begun the trading the week at 95.10 – week highs. The EURUSD pair is once again testing support for 1.1600. The Australian dollar at the start of the new week has fallen to 0.7160, the lows since January 2017. The New Zealand dollar sank to 0.66, returning to a decline after a rebound in the previous two weeks. The demand for the protective yen and the dollar can remain the predominant theme of this week in anticipation of important news on the labor market and the announcement of Trump tariffs.

The dollar index in the second half of the week returned to the area above 95 on the turbulence of emerging market currencies, including Argentina and Turkey. These levels of the dollar index continue to act as a strong level of support and attract interest in buying on the dips strategy amid the rising tensions around traditional high-yielding currencies.

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The British pound has fallen under 1.29 this morning, giving back more than 60% of the last week splash, when the EU claimed that they were ready to offer a deal to Britain. From the technical analysis side, the British currency has compensated a short-term overbought and could be under moderate pressure following the global markets.

This article was written by FxPro

Argentine Peso and Turkish Lira Frighten the Markets

The markets have been under pressure on Thursday and at the start of trading on Friday, the cautiousness is growing. Global stocks closed the week lower although US indices finished the week flat.

The events around the Argentine currency were in the spotlight. The central bank of the country raised the interest rate from appalling 45% to unimaginable 60%, amid the depreciation of the exchange rate by more than 20% intraday, and despite the assistance of the IMF, which was offered earlier. This dynamics has brought a cautious attitude to markets and caused the sale-off for the risky assets.

The Turkish lira decreased by more than 6% intraday on Thursday after the events around the peso and against the backdrop of the resignation of a major official in the Central Bank of Turkey. The Lira corrected on Friday to close the week at 6.55.

Despite all the mentioned above, yesterday’s sale of currencies and markets of the developing countries seems too emotional. The main problems are not solved, so after some rollback, we can see that the pressure on these markets may be increased.

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At the same time, the futures on S&P500 are increasing the losses keeping away from the record levels. The fact that at the beginning of the week the indices have risen to the oversold area also works in favor of the rollback development. The rollback can be a harbinger of a deeper correction when taking profit flows from growth on the US markets can coincide with a storm in emerging markets.

Currently, emerging markets currencies remain the main focus of financial markets.

This article was written by FxPro

British Pound Steady on EU Offer to Renegotiate Brexit, Global Stocks Retreat

The British pound maintains its position at 1.3020 on Thursday morning after rising by 1.2% from 1.2870 on Wednesday on the softening tone of the EU in the negotiations about Brexit. The chief negotiator from the EU suggested maintaining close ties with Britain, although outside the single market. These comments provoked the sharpest strengthening of the pound in 7 months by pulling the dollar index downwards. Technically, GBP/USD pair is now vulnerable to some correction after such a strong growth.

Canada’s Prime Minister Trudeau claimed that he had hoped to make a deal on the NAFTA by Friday. Although Canada is not hastening to surrender the important points of the agreement, the parties demonstrate their good will to find agreement. The Canadian dollar continues to rise on expectations that the moment of the greatest uncertainty was left behind.

American S&P500 fixed another update of historical highs on Wednesday, rising by 0.5% to 2915. On Thursday morning, the futures on S&P500 lose about 0.2% due to increased caution of investors and negative dynamics of Chinese bourses.

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The Hong Kong Stock Exchange index has lost 1.2% since morning. Investors are concerned that the date of tariff expansion by the US for Chinese goods over $200 approaches as early as next month. At the same time, the level of negotiations does not allow to hope that these tariffs might be avoided.

The expansion of trade restrictions threatens to slow down China’s economy, which also has a negative impact on positions of the Australian and the New Zealand dollars. These currencies have returned to a decline, not being far from its 1.5 and 2.5-year lows, respectively.

Due to the weakening of commodity currencies and sluggish euro dynamics in the morning, the dollar index played the loss of the previous day, bouncing from its 4-week lows. Despite the weakening earlier this week, the U.S. currency retains a significant potential to strengthening through the increased investors’ nervousness around the prospects of developing and commodity economies in case of a significant slowdown in China.

This article was written by FxPro

US 2Q GDP Above Expectations, Global Stocks Mostly Higher as Trade Concerns Ease; Turkish Lira Collapse Continues

US growth domestic product for the second quarter was revised up to 4.2, instead of the previously reported 4.1%. The data beat analysts expectation of 4.0%.

The dollar is almost unchanged to the major currencies in the past 24 hours; it managed to recover the losses incurred on Tuesday morning. The dollar index fell to 94.35, the lows since August 1 following the surge in demand for risky assets on the news about the start of the U.S.-Mexico trade negotiations. However, the market has returned to the safe-haven demand quite quickly: EM currencies fell under pressure, and the participants of the U.S. stock exchanges fixed the profit after S&P 500 grew to 2900 level. The index earlier this week has finally overcome the downturn since the beginning of the year and has added 2.7% this month, renewing historical highs.

Global stocks trade mostly higher on Wednesday morning as global trade concerns ease following US-Mexico trade agreement. The focus currently shifts to trade dispute between the US-China.

This is a considerably strong movement, so it is reasonable to expect some traction to the fixation of profits by major participants on the final days of the month. In this case, the dollar can get some support after two and a half weeks of decline. In addition, the single currency returned to the area of resistance, having reached the 1.1730 of a dollar, after which the pair turned to decline and is traded now at 1.1680. The British pound, the Japanese yen and the Australian dollar were decreasing on Tuesday to the US dollar. Crude Oil and Gold were losing the part of their earlier gains as well, hitting the wave of profit-taking

The Turkish Lira continues its way down on the rising tensions between Turkey and the United States. The Turkish lira fell by 2.00% to trade at 6.3984 at the time of writing.

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The Mexican peso lost on Tuesday 1.8% to 19.07 per dollar after the details of the bilateral agreement had been announced. With regard to the automotive industry, it provides the U.S. President with the possibility to introduce 25%-tariffs for the import of cars above the level of 2.4 million, which is solely one third higher than the deliveries of the year 2017. The lowering of the peso was reinforced by a general sentiment of currencies weakening in the developing countries during trading on Tuesday.

This article was written by FxPro

Venezuela Can Shake-Up the Cryptocurrency World

The cryptomarket has started Tuesday in a green zone: Bitcoin has added 4.5% coming closer to $7,050. Altcoins shows the similar dynamics: Top-10 cryptocurrencies added from 4% (ETH) to 20% (IOTA). The total cryptomarket cap has increased by more than 12% to $228 bln within a week. It could be considered as evidence that a timid demand appears on the market after a long period of stagnation.

A sharp rate increase showed the DASH coin adding 26% in the latest 24 hours due to the new partnership with Kripto Mobile. According to it, Latin America’s users will get an access to financial transfers via cell phones.

A new partnership was announced in Caracas, the capital of Venezuela, where the economic situation is critical and the official currency bolivar costs almost nothing. Poor economic conditions give a lot of opportunities to cryptocurrencies expansion instead of traditional fiat money.

Venezuela President Nicolas Maduro orders banks to adopt the Petro cryptocurrencies in respond to the country economic crisis.

It means that the revolution could be driven not by a few hundreds of the cryptocurrencies whales, but hundreds of millions people from the third world countries who may create an enormous inflow of liquidity to any cryptocurrency allowing it to become one of the TOP-3. Such a “peoples’” cryptocurrency has definitely all the chances to get the throne back from the Bitcoin.

From the analysis side, according to the stock market rules, the bulls market happens when an asset adds 20% of its lowest level. In case of the Bitcoin, which decreased to $5880 mark, the bulls market will start from the levels near $7055 that is almost reached.

Earlier, we’ve already written that going beyond the limits of the corridor 6000-6600 is able to cause an increase in the activity of the market participants and it looks like this gain we saw yesterday. The growth above $7000 can become an additional support factor for the bulls.

This article was written by FxPro

Global Stock Markets Get a Boost after US-Mexico Trade Deal, Trade War Still a Threat

Mexico agreed to review the trade agreement with the United States on NAFTA. This became the good news for risky assets, including Asian stock markets, inspiring optimism that the trade disputes between the countries will be resolved further in the future. 

The Mexican peso gained 1.7% at one point on Monday after this news. The U.S. stock markets continued to renew their historical highs. The futures on S&P500 took a height of 2900 points, having added 0.6% in 24 hours. MSCI for Asia-Pacific has added up 0.6% since morning on speculation that the agreement with Mexico will begin to reduce of the tensions around the international trade. Global stocks mostly higher on Tuesday morning.

However, this news looks rather like one of the few sunny days during the hurricane season. 

It is increasingly likely that we will see a renewed pressure on Canada. In addition, having tasted the sense of victory in trade disputes, the Americans are unlikely to soften their rhetoric with Europe and China. Most likely, the tensest moment in both cases is just ahead, which is able to return the dollar to growth in the coming weeks. 

The market participants had repeatedly hastened to bet on a breakthrough in negotiations earlier. In fact, the situation with tariffs is still worsening, but the markets are living with expectations, and it explains their growth this week.

The news on Mexico has caused pressure on the American currency. Earlier in August, we had observed the demand for the dollar as safe-heaven, now these bets bonus back. The dollar index lost 0.3% in the past 24 hours, falling to the lows from August 2 to 94.60. This returns DXY to the trading range of May and, in terms of technical analysis, can become a signal to further increase of the pressure on the dollar and can send it to the previous local lows at 93.90 relatively quickly. 

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The EURUSD pair rose on Tuesday morning to 1.1686 and completely erased its fall earlier in August. The prospects of the pair on the part of tech analysis had noticeably improved during the previous week, having put the pair within the reach of the important resistance on 1.1740.

However, the short-term technical picture risks being destroyed by unexpected turns in the rhetoric on international trade negotiations. The harsh rhetoric of the US and the reluctance of China and other countries to make quick concessions was the key driver of the dollar’s growth by more than 9% from April to August. And this situation can easily return in the spotlight.

This article was written by FxPro