Equity market retain positive sentiment by the end of the week, USD dollar firm
On Friday equity markets retain positive sentiment despite higher risks of new round of China-US relation downgrade related with Huawei story. Though risks on the future of trade agreement between US and China intensified somewhat on Thursday putting pressure on the entire session, US equities managed to stomach it and closed the day in the green. This type of price action is a positive technical sign as US SP 500 managed to consolidate above 2600 and even higher above 2640 points. We might be righteous if we assume that positive expectations for US corporate reports support equity sentiment and bring back the risk interest.
Quite interesting news broke earlier as famous Wall-Street Journal published interesting information. Allegedly, US administration is considering the prospects for China import duties abolishment on a number of China goods as the way to calm down the market and return positive sentiment. However, you never know how to estimate such information inflow as you cannot disregard the possibility of market manipulation or attempts to create a benevolent image of the American administration. We will see what development this story will get. Markets are accustomed with the US authorities current political standards that are best known for often use of “carrot and stick” strategy.
One way or another but equities continue moderate growth today expressing confidence that a trade agreement will still be signed. European markets are experiencing rally today as main indexes gain more than a percent. Pan-European Euro Stoxx 50 index updated highs in the region of 3110 points. Futures for US indices are also in the green, anticipating the positive start of Wall-Street. The oil market, which turned to growth on Wednesday, also supports European and American stocks.
As for FOREX market, the beginning of the session has not been so active. FX pairs were traded within tight ranges. It interesting enough that Friday opening levels for Europe session differed by no more than 1 percent from Monday weekly start levels in major FX. However, the situation has changed ahead of Wall-Street session. We see a quite active phase returning to FX. US dollar is still firm, as US dollar index is at the previous levels around 95.70-95.75 points. Recently, improvements in positive market sentiment led to a weaker dollar, but this trend has not justified today.
Another interesting market today is gold. The gold market was in the spotlight throughout the week as it has been consolidating for last six days within tight formation. Everyone expected the development. But today the situation has changed rapidly once in the middle of the European trading session, there was an sharp exit from the narrow consolidation range of $ 1,285- $ 1,295. Market quotes fell first to the support area of $ 1,285, and then continued to decline in the area of the main support area of $ 1280. It is interesting that the area 1280-1277 is a viscous support zone.
In terms of information background, the day is interesting primarily for two statistical publications. This is the data on US industrial production which turned out to be somewhat better than expected, and consumer sentiment index from the University of Michigan that will be announced later. Statistical data are not so important to change the balance of power in the market, but it will be curious in the context of the sentiment in US economy.