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- Money Flows before the start of European trading this morning
Money Flows before the start of European trading this morning
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Loading...The timid rise in stock markets continues as traders remain pending on developments around US-China trade rhetoric, with a new round of talks this week in Shanghai.
Asian markets are in the green and the US markets are also lagging behind. This optimism has also crept into European markets, where the futures of major stock indexes indicate a positive start.
The fragile sentiment can be quickly debunked, as the two-day meeting of the US Central Bank begins today. Any speculation will play a direct role in the short-term movements of the major indices.
Investors are likely to stay in the developing world as negotiators from both camps gather for talks starting today, three months after the deal breaks down. Jerome Powell will make a statement tomorrow night, which will likely give a chance to analyze the future trajectory of US interest rates after the central bank lowers them.
Another important topic and determining factor in moods today is the movement of the pound.
The next big support is the bottom of March 2017 around 1.2110 and this area can provide potential relief for buyers.
However, the sentiment pulling the currency down is too crushing at the moment and much more than one level of recovery support will be needed. The only thing we can do here is stand still (the story of catching a falling knife) and wait for a new catalyst to reveal the next movement. The seasonal model for the pound does not do him any favors either. The pound has already recorded record losses against the euro, but if seasonal models are some kind of driver, the situation may worsen next month. The UK currency is near its lowest levels in history / at this time of year / against the euro and seasonality shows that sterling has fallen against the common currency in Avust for the past 4 years. Not only this trend can push the pound down. Adam Cole, chief currency strategist at Royal Bank of Canada, is betting that the new prime minister and the upcoming Brexit deadline in October may drag the currency even further.
At the same time, the corporate season continues at full strength, with market participants watching for signals of a slowdown caused by the trade war.
Mario Draghi did not pull back when he said that economic prospects were getting worse and worse. This week he will get a better idea of how bad he really is.
Growth is likely to slow to 0.2% in the second quarter, which is below a trend that will help the ECB President's efforts to boost inflation a little. Business surveys in the region will provide a detailed look at how companies handle trade tensions and lower demand, and can hamper any hope of better results this quarter. The weak economic background is also affecting corporate Europe, especially car manufacturers, with surprising statements recently made by companies including Germany's Daimler and France's Renault. The growth of services is still helping to overcome this, but it may not be able to support things for long.
There may also be disappointing news about inflation this week, with headline and base rates at close to 1%. A study last Friday showed that long-term inflation expectations are dwindling and it is quite clear what Dragi thinks about it. "We don't like what we see on the inflation front," he said last week.
Trader Aleksandar Kumanov Read more:
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