- Equities on the rise but optimism fades ahead of the speech from Xi
- US dollar down against EUR and GBP ahead of some key events later this week
- Bitcoin dives back below $7k
Make no mistake, markets are all focused on Trade Wars these days. Optimism was present today in the morning at the European opening with some markets (especially Portugal - POR20) rising above 1% as traders hoped for negotiations between the US and China. Indeed we pointed in our "the week ahead" analysis that at least a temporary recovery on indices was possible given seasonal benefits and technical situation. On top of that we pointed out at some positive developments on DE30 in a weekly technical outlook.
However, for this positive scenario to materialize we need to escape an escalation scenario and escalation is what investors are afraid ahead of the speech from Xi Jinping - the Chinese president at a local economic forum. The speech will take place at 2:30am GMT making the Asian session more than interesting and possibly decisive for indices in the short run. Let us recall that while Trump hailed his friendship with Xi (on Twitter, of course) he also stressed that China needs to back down in Trade Wars as this "is the right thing to do". Well, one can wonder if Xi - emboldened by his increased grip on power last year - will call it an act of friendship. If not, any call for tougher stance against the US can be met with anything ranging from concerns to market panic.
On the FX front we can see EURUSD gains from Friday being extended today. Let us recall that the NFP report was somewhat USD negative presenting a sub-par employment gain (albeit after an exceptionally strong reading for February) along a modest gain in wages (+2.7% y/y). Monday was pretty much empty in terms of releases but traders will get important prints this week from the US - especially the CPI and the FOMC minutes - both on Wednesday.
Bitcoin prices attempted a recovery above $7k, partly on the news of Soros investments, but it proved to be short lived. News of Korean authorities controlling banks that cooperate with crypto-exchanges was a refreshing reminder that the crypto world is in the phase of increased scrutiny from regulators and authorities. Bitcoin price fell back to $6700 in a response.
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