Morning Commentary: Uncertainty = Market Paralysis

Foreign Exchange - Morning Commentary

Uncertainty = Market Paralysis

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
As we arrive this Monday morning, markets and many asset classes are generally subdued and quiet. While global equities remain upbeat and positive fueled by the continued expectation of lower U.S. and global interest rates, other asset classes reflect uncertainty, doubt and confusion. The euro, the second most important currency to the U.S. dollar, traded in a microscopic range of 22 points overnight; it is a prime example of investors’ and traders’ frustration with a clear lack of direction after multiple weeks of bullish and bearish mini-cycles leading us right back to where we were at the beginning of June.
With not much prime market-moving data this week, we can anticipate more consolidation and range bound markets. Without some new trigger, many investors and traders will await the next FOMC meeting at the end of the month for further guidance. But in the short term, market practitioners will be largely “data dependent” with small tweaks to interest rates, equities, commodity prices and foreign exchange rates over the next few weeks unless some unforeseen economic or political event changes the market dynamics.
  • China reported Q2 GDP last night, and it was weaker than forecast at 6.2% after growing by 6.4% in Q1.  This was the weakest quarter of Chinese GDP going back to 1992 and reflects the weakness from the ongoing trade war with the U.S. as business growth feels the bite of the trade tariffs and realignment of supply chains. Elsewhere, factory output and retail sales beat expectation providing a positive net result for Asian stocks.
  • The U.S. Empire Manufacturing survey for July came in much stronger than expected a 4.3 following the dismal June reading of -8.6 which saw the largest one-month drop since July 2001. The better-than-expected result for July is a hopeful sign that the manufacturing decline is stabilizing.
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