Global bourses wobbled this morning after minutes from the Federal Reserve's last policy meeting disproved previous expectations that the central bank would embark on a series of deep interest rate cuts. With a rather light calendar ahead, investors will now be focusing on the Jackson Hole Central Bankers meetings on Friday for further clues on future monetary policy. The Jackson Hole meeting will also possibly guide markets as far as longer-term positions are concerned.
We’ve seen a slight bullish stock market tone from the US yesterday which has not been followed up in Asia and markets remain on a sideways trend. However, with Gold and other safe-havens on the rise, this may be a sign that we will see a broader decline in global bouses very soon.
Forex Preview: EUR/USD Recovers on Upbeat German PMIs
The EUR/USD recovered this morning after a set of unexpected German PMI data eased concerns over the health of the German economy. Overall we may be better off trading shorter time frames as the volatility has been very limited this week. After initial pushes in the FX market mostly retracements had followed while the ECB Account of its last Monetary Policy Meeting at 11:00 GMT, may also provide some clues on the EUR/USD price action.
Brexit Talks at a Standstill
UK Prime Minister Boris Johnson will set off for the Group of 7 meetings this weekend in France, where he will be faced with a great deal of pressure by the rest of the E.U. ahead of a potentially chaotic no-deal Brexit on Oct. 31. “Coming empty-handed at the EU meetings will not change or reactivate previous debates,” Merkel told Johnson adding that it's not the problem for the EU if the UK chooses to leave the Union but theirs.
Meanwhile, the UK will sign a "continuity" trade agreement with South Korea on Thursday, allowing businesses to keep trading freely after Brexit. If Johnson plays his cards right this weekend, GBP pairs could gain momentum. We would expect some healthy volatility if any major developments arise after the G7 while long-term strength in the Pound could follow. We may also see USD strength should Brexit talks make headway and the US decides to actually slash their interest rate further; in which case the EUR will be the currency that shines through and we may see a lot of buying interest return to the common currency.
Oil Prices Fail to Break Resistance, Gold Steady
Elsewhere, oil prices failed to turn bullish at resistance and turn bearish despite a drawdown U.S. crude inventories. Gold prices meanwhile remained little changed, holding above the key $1,500 level, as investors now look to the Jackson Hole meeting for clues on future U.S. interest rate cuts. If Powell remains hawkish at Jackson Hole this Friday we would expect to see some healthy gains for XAU/USD.
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