Oscillating risk sentiment within markets

Huawei breather for markets

While it is not unexpected, the extension for the easing of Huawei sanctions had added to the relief for markets at the start of the week. This comes on the footsteps of President Donald Trump’s latest suggestion of US-China communications, altogether providing a boost for Wall Street on Monday. Both the Dow and the S&P 500 index were seen edging higher by over 1.0%, though notably, prices remain within a consolidation, reflecting little change in the current rangebound trade while awaiting various central bank updates this week. Haven assets on the other hand is perhaps worth watching given the paring of some gains in the session.

Specifically, for gold prices, the bullish bias remains on the back of both the growth and trade tension uncertainties but the short-term price movement risks slipping from the current consolidation of between $1494.0 and $1523.6 levels. This is also with the potential for the US dollar to strengthen this week on the back of any less dovish than expected rhetoric from Fed officials. Watch for any break of the support level, but buying interests will be expected to remain.

Source: IG Charts

Greenback strength

Notably, the greenback strength had been rather apparent at the start of the week. The US dollar index, measured against six major currencies, was seen surging to an over 2-week high following some less than dovish rhetoric from Boston Fed President Eric Rosengren. As the only dissenter for the July rate cut, this may not have been a surprise. That said, his views that the US economic conditions are still positive and easing policy could build up greater risks had certainly hit home coming on the back of the recent data releases. While the market continues to fully price in a 25-basis points cut for the September FOMC meeting, the expectation for anything more had been significantly pared back on Monday. Ahead of the Fed’s Jackson Hole symposium where the market had been looking forward to a dovish tilt, Fed Rosengren’s lack of alteration in views also alludes to the likelihood of room for disappointment, one to watch.

Asia open

The sustained improvement in risk sentiment coupled with the stronger greenback bane for Asia markets had seen to a mixed and muted trade for the region going into Tuesday. A light data day lies ahead with the focus set ahead to the August Reserve Bank of Australia (RBA)’s meeting minutes. Following the pause, any material details providing clues as to when or what is necessitated for the RBA to move once again would be one for the Aussie to react upon.

Yesterday: S&P 500 +1.21%; DJIA +0.96%; DAX +1.32%; FTSE +1.02%