Expectations and sentiment for the next week 19.08 - 23.08.2019

The markets went through a rather dynamic week, with days where the risk sentiment changed literally in hours. The market is quite unpredictable right now, as we are still in August. White House speakers, Xi and Trump's tweets were definitely not missing this week, which in this low-liquid and highly volatile market caused enough turmoil and perhaps headaches for a number of investors and traders. Cash flows were sufficiently confused to convert to risky and risk-free assets non-stop.

But a new week is coming. This one is behind us and it is time to prepare for the next seven trading days. What to expect and what would be the attitudes?

Sentiment has remained relatively positive and markets have stabilized, so we expect the stable momentum to remain, with stock markets continuing to rise but cautiously. Investors have one in mind, with growth we think will be limited and bulls will tread carefully. Given that we are still August, do not conclude that everything is a song. Still, the risks of a recession are high because of the bond market that keeps nail traders. US economic data are beginning to weaken, but consumption and inflation remain high, which further upset investors because they assume the Fed may not cut interest rates at the expected rate and size. Global headwinds have not yet turned into a hurricane, as China and the US are still giving divergent sentiment to each other and whether negotiations will eventually take place in September or not.

Given the global uncertainty surrounding the global economy and the trade war, on the FX front, we expect currency pairs such as the New Zealand dollar and the Australian to continue to depreciate. Australia and New Zealand have taken interest rates anyway, which is having a negative impact on the national currency. The yen remains volatile amid a sharp change in risk, so it is very difficult to predict what the final direction the Japanese yen will take. For gold and the Swiss franc, too, the uncertainty is high, because for gold, however, the global bond markets, which are already almost entirely negative, suggest that investors will increase for gold, but again - sentiment is balanced. For the Swiss franc, its sharp appreciation could at any time trigger SNB intervention.

Oil also shows hesitant indications. At risk it reacts very positively, but we see that oil stocks are increasing, as is natural gas, which suggests that demand will be low due to fears of recession. The euro is also in the limbo of uncertainty due to the lack of action by the ECB and the real, serious shadow of the recession that is looming over Germany. The pound remains highly depressed because of political uncertainty in Britain.

Trade cautiously.

Read more:

• Risk off after the escalation in the Middle East, markets are recovering in a period of calm
• The macroeconomic events for today’s trading calendar
• The US government has confirmed the attacks, Trump is calling an emergency staff meeting
• Has the war between Iran and the US started?
• US markets remain under pressure, traders await Iran’s response