As the title suggests, there has been uncertainty in the financial markets today during the European session. Mind you, the day started with some volatility in risk assets as comments from China were lost in translation and we ended up with some fake news. The US President Donald Trump had a meeting with his Chinese counterpart last night and a Chinese official commented today that an agreement had been reached. The stock markets as well as the risk currencies jumped higher. The Aussie was the first to jump on news that the trade war might be over.
But, if it only was that easy. They corrected themselves later saying that they were taking about the agreement over the phone call between the two Presidents on November 1. So, the optimism soon wore out and the risk currencies resumed their bearish trend together with stocks. GOLD moved higher initially in the European session, but has now turned bearish too. The Italian budget for 2019 seems to be agreed at 2.%-2.3%, while Brexit still looks uncertain as the DUP Party of Northern Ireland says that they cannot accept Theresa May’s deal.
The European Session
- Fake News from Trump-Xi Meeting – Donald Trump and the Chinese president Xi Jinping held a meeting overnight and from what I have heard, they didn’t reach any deal because Trump is pushing the tariffs on $200 billion worth of Chinese goods and, if they don’t reach a deal, then the US might impose tariffs on another $270 billion Chinese goods, iPhone being one of the products. But, there was some translation problems as we explained above and risk assets spiked higher, only to turn back down when the news regarding an agreement was false.
- UK’S Lidington on Brexit – The UK Cabinet Secretay David Lidinton said early this morning that it is wishful thinking that the EU will offer another deal to the UK if the British Parliament rejects Theresa May’s deal and May can stay as the leader even if the Parliament rejects it. He is the de-facto deputy of Theresa May.
- The ECB Can Help Italy– According to MNI sources, the European Central Bank is willing to consider the OMT as an option to help Italy. If this is true, then the ECB will buy Italian bonds in large quantity, which will lower the interest that the Italian government has to pay, which would be a really big help.
- DUP Party Doesn’t Accept May’s Deal – Arlene Foster of the DUP Party of Northern Ireland commented this morning that they cannot support Theresa May’s deal and the backstop has to go. She doesn’t think that this Brexit deal will pass the British Parliament.
- Siri Sees Italian Budget at – Salvini’s economic adviser Armando Siri said that the proposed numbers for the deficit for the revised 2019 budget should be around 2.2%-2.3%. But, the government won’t delay key welfare and pension reforms.
- Too Early for OPEC+ Cuts For Kuwait –Kuwait Oil Minister commented that OPEC+ is trying their best to ensure there is enough Oil in the markets to avoid fluctuations, so it is too early to talk about production cuts.
- May Wants Trade Deal With US – UK PM Theresa May said a while ago that she has discussed with the US on trade deals and other countries as well. The UK will have an independent trade policy. But Trump said that the UK cannot have a trade deal with the US if the UK has a Brexit deal with the EU.
The US Session
- EU Governments Back Disciplinary Procedure on Italy – The European governments are said to back up the European Commission’s decision that disciplinary procedures against Italy will be warranted if they go ahead with it. But, I think this issue will be resolved without that.
- FED’s Clarida Speaks – FED’s Clarida said that the FED is focused on inflation expectations. But, Oil prices are falling and that will have an impact on the inflation numbers, so perhaps that is not the best measure for the economy at the moment.
- FED’s Bullard Speaks – FED’s Bullard spoke just now saying that possible cracks regarding the economic growth will shape the debate at the FED in coming years. He added that he expects slower growth in the coming two years, so it will be tougher for the FED to continue with rate hikes.
- US CB Consumer Confidence – The US consumer confidence report will be released shortly. It is expected to cool off from 137.9 points to 136.2 points, although the consumer confidence would still be pretty high in the US.
Trades in Sight
- The previous candlestick formed an upside-down hammer
- The retrace higher is complete
- The 50 SMA is providing resistance
The stochastic indicator is almost overbought
Earlier this morning was a good opportunity to buy EUR/GBP as this pair was finding support at the 200 SMA (purple) and stochastic was oversold. But now, stochastic is almost overbought which means that the pullback will be complete soon and this pair is finding resistance at the 50 SMA (yellow). Besides that, the previous H4 candlestick formed an upside-down hammer which is a reversing signal.
From what I can see right now, the market sentiment is turning negative once again as EUR/USD and commodity Dollars turn lower, while the JPY is getting stronger which means that USD/JPY is declining as well. But, we have seen quite a few sentiment reversals today, so don’t be too sure about this latest move.