The volatility in European markets has surged again due to the ongoing trade tensions between the United States and China. Investor sentiment is dampened by the prolonged conflict, while market focus shifts to the awaited remarks from Federal Reserve Chairman Jerome Powell, which will serve as clues for the next interest rate policy. Additionally, a partial government shutdown in the U.S. adds to the uncertainty as the release of critical economic data is delayed.
On another front, relations between Washington and Beijing have soured following the U.S.’ condemnation of China’s export controls on rare earth minerals, deemed a threat to global stability. In response, China characterized this move as a legitimate form of self-defense. Despite escalating tensions, some analysts believe the market is beginning to overlook these threats, holding onto the hope that both nations will ultimately seek a peaceful resolution. All eyes will be on U.S. economic data releases, which could trigger further volatility.
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Here are the details from Trading Central:
- U.S. Philadelphia Manufacturing Index at 7:30 PM WIB; forecast 4 versus the previous 23.2.
GOLD
Gold prices rebounded at the beginning of the European session, approaching the historic high of $4,242 after facing pressure at the start of trading. The outlook for Gold remains positive, supported by rising speculation of interest rate cuts, geopolitical concerns, and continued purchases by central banks. Furthermore, expectations of weaker U.S. economic data tonight could serve as an additional catalyst for a price increase in Gold.
OIL
Oil prices have slipped during the European session, reaching $58.43 per barrel. Concerns regarding global oversupply coupled with increasing trade tensions between the U.S. and China have put downward pressure on prices. Selling pressure is expected to continue into the evening, with the possibility for prices to test lower levels.
EURUSD
EURUSD has reversed course, strengthening to 1.16754 after facing pressure earlier in the week. The weakening of the U.S. dollar due to trade tensions and expectations of monetary easing from the Fed has been the key driver of its strength. Additionally, comments from ECB officials Wunsch and Kohler, which downplayed expectations for further interest rate cuts, provided extra support for the Euro.
GBPUSD
GBPUSD has surged during the European session, reaching 1.34427. This sharp increase was driven by U.K. GDP data showing a rise of 0.1%, bouncing back from the previous period of -0.1%. The weakening of the U.S. dollar due to expectations of a Fed policy easing also lent additional momentum to this currency pair.
USDJPY
USDJPY rebounded to 151.401 during the European session. Domestic political uncertainty in Japan, following a coalition split between the Liberal Democratic Party (LDP) and Komeito, raises concerns about the stability of the nation’s fiscal policy. However, rising geopolitical risks and U.S.-China trade tensions continue to potentially drive demand for the yen as a safe-haven asset.
NASDAQ
The Nasdaq index has risen to 25,065, buoyed by market optimism surrounding tech companies’ earnings reports, particularly those related to artificial intelligence (AI) development. Nonetheless, the looming threat of U.S.-China trade conflict remains, suggesting that market fluctuations may continue to be significant in the near term.
