Fundamental analytics

WEEKLY RESULTS 03.06-09.06.2019

Markets follow up on statements of the Federal Reserve and ECB about possible reduction of interest rates  

  1. Jerome Powell announced a possible easing of monetary policy

  2. ECB resumes the bank lending program

  3. The European Union is ready to grant a new deferral of Brexit

  4. USA and Mexico try to solve the migrants problem

In the first half of the last trading week the problems related to international trade remained in the focus of attention of investors. Active protectionist policy of the United States of America has greatly lowered the expectations of investors regarding the prospects of the world economy development. The IMF estimates that the trade conflict between the US and China alone could reduce global GDP growth by 0.5%, but the United States is also seeking to exacerbate relations with other countries, including Mexico, India and the EU, which could lead to an even greater slowdown in the global economy. Against this background, traders have been actively adjusting their investment portfolios, giving preference to traditional protective assets.

In the middle of the trading week, the market situation changed significantly after the statement of the Federal Reserve, including the head of the department Jerome Powell, about the possible easing of monetary policy and lowering of interest rates in the context of growing foreign trade risks. Later on, the ECB also announced the possibility of lowering interest rates.

A very volatile trading week ended with a strong reaction of the market to the publication of an ambiguous report on the U.S. labor market.

 

Currency market

The trading week in the currency market was marked by growing volatility due to the strong influence of economic and geopolitical factors.

At the beginning of the week, the majority of the major currencies demonstrated strengthening against the dollar on the background of comments of FOMC members about possible easing of monetary policy and pressure put on the dollar by the aggravation of foreign trade risks.

Due to the weakening of the U.S. currency, despite serious economic and internal politic problems in the EU, the pair EUR/USD for the first time since mid-April was able to rise above 1.1300, but the bulls failed to develop this success. During the last ECB meeting, the regulator announced the launch of a new bank lending program to further stimulate the Eurozone economy. In addition, Mario Draghi did not rule out the possibility of lower interest rates in the event of the economic situation deterioration in the Eurozone, as a result of the aggravation of foreign trade risks.

GBP/USD also took advantage of the temporary weakening of the dollar and was able to strengthen its position in the market. The main event of the week for the British currency was the mass media reporting a possible provision of the UK with a new deferral on Brexit to give the new Prime Minister more time to resolve all the controversial issues and, possibly, to hold a new referendum on Brexit.

On the background of the situation stabilization on the stock exchanges, the pair USD/JPY spent most of the week week in a narrow range and developed a good foundation for the development of upward correction movement in the future.  

 

Precious metals market

The trading week was very successful for gold. Growth of geopolitical risks and downward dynamics of dollar movement supported high level of demand for the yellow metal. Thanks to this, in the middle of the week the price was able to rise above the level of $1340 for the first time since the end of February. Tense situation in the international trading and statements of the Federal Reserve on possible easing of the monetary policy create good preconditions for continuation of the mid-term growth of gold prices, with a high probability of setting the new annual maximums.

 

Oil market

The oil market has been under a lot of pressure almost all week. The price was under pressure from a tense international trading environment and industry data from the United States. The bulls managed to restore their positions only on Friday, against the background of the Minister of Energy of Saudi Arabia statements about reaching an agreement with Russia on a number of important issues in oil products market regulation. The minister also said that the price of oil should be significantly higher than the current level of $ 60.

 

Stock market

The stock market, despite the tense situation in international trading, ended the week in the green zone. The market was supported by the statements of the Federal Reserve and the ECB on the possible easing of the monetary policy and the adoption of additional measures to stimulate the economy in the conditions of increased foreign trade risks. As a result, American DOW, S&P 500 and NASDAQ finished trading in the 2% to 4% growth range, European indices grew 1% to 3% in price and only Chinese trading floors are still traded in the red zone, against the background of strengthening of slowdown in the country's economy signals.

 

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