Stocks rise as trade tensions ease, ECB in Focus

Indices

Major US indices ended higher on Wednesday post the announcement that the European Union and the United States will avoid a trade war. President Donald Trump declared that the US and EU will maintain a close relationship with strong trade relations. The positive bias boosted the global stock market. The Dow Jones Industrial Average gained almost one percent to close at 25450, its highest daily close since late Feb. The SPX500 added 25 points to settle at 2841, near a six-month high. SPX500 recovered more than ninety percent of the move lower that happened late January and is approximately six percent up this year. The Nasdaq Composite ended the session on a record high of 7932. However, the tech-heavy index erased the gains during the Asian session after the announcement of Facebook’s earnings. Executives announced that Facebook’s profit margins are going to shrink for several years due to the cost of improving privacy safeguard. FB tumbled more than twenty percent to wipe out as much as $150 billion in market capitalization.

USD

The dollar index which measures the strength of the greenback against a basket of major currencies fell for the second consecutive day to trade a two week low of 94.14 and settle at 94.23. The weak performance of the dollar continued during the Asian session, and the index found support at 94.08, near an upward-trendline combining the lows of the past six weeks. The USDJPY traded at a three-week low of 110.58, near the 50-day simple moving average.

EUR

The Euro rose against the United States dollar to trade at a high of $1.1743 ahead of the European Central Bank meeting. The single currency gained support from the positive remarks of the US-EU meeting as avoiding a trade war will allow the Eurozone economy to perform better. Major central banks addressed in their meetings the risks to the global economy from the rising trade tensions. The ECB is widely expected to keep interest rates unchanged. The Bank stated in its last meeting that interest rates will remain low until at least summer 2019. As a result, investors will focus on the press conference of President Mario Draghi to grasp hints on the future of the ECB's monetary policy.

GBP

The British Pound advanced for the second day as Prime minister May will lead the Brexit negotiations, which will make the divorce much easier. Moreover, the market is pricing-in a high chance of rate hike by the Bank of England on its August 2nd meeting. GBPUSD traded at a ten-day high of $1.3215 ahead of the European trading session. The pair was trading a ten-month low on July 19th post the release of soft economic data.

Metals

The US dollar weakness helped gold prices to inch higher. The gold ounce traded at a high of $1235 near the 200-week simple moving average. The bullion found resistance for two times near the moving average in less than a week. On the other hand, the silver ounce settled at a one-week high of $15.60. However, metals were under pressure during the Asian session.

Oil

Oil prices surged for the third consecutive day supported by the sharp drop in US crude inventories and the suspension of Saudi oil shipments through the Red Sea lane. The Energy Information Administration reported that the weekly US Crude oil inventories fell by 6.147 million barrels last week to a three-and-a-half- year low. On the other hand, the Saudi energy minister that the Houthis attacked two Saudi Crude carriers in the Red Sea which will force the kingdom to suspend exports through that lane. The West Texas Intermediate traded at a high of $69.64, and the Brent traded at a high of $74.80 during the Asian session.

Major Economic Events

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.