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XTB TRADEBEAT

Trump and Kim sign agreement, markets barely respond

Summary:

  • US and North Korean leaders sign an agreement to begin a denuclearization process
  • Asian equities rise, Japanese NIKKEI (JAP225) close to a potential turning point
  • Weakish soft indicators from Australia without any impact on Aussie

US President Donald Trump has hailed a meeting with North Korean leader Kim Jong Un taking place in Singapore underlining that "a lot of progress" has been made. Trump adds that the meeting has gone "better than anybody expected" and right now they are going for a signing an agreement. Even as Donald Trump describes this document as very important and comprehensive there are many doubts whether it will bring any ceasefire between feuding countries. Notice that North Korea’s leader has also praised the meeting suggesting they have decided to "leave the past behind". The first details point that denuclearization is expected to start very quickly, and that two sides have developed a "very special bond". What does it all mean? Well, the first glance might be tricky as these kind of events tend to be a show without any far-reaching consequences beyond applause, shaking hands, and lofty commitments. Investors appear to know it well, hence a markets’ response to the summit’s final fallout is very mild to say the least.

link do file download linkJapanese shares have run into a resistance being a possible turning point. Source: xStation5

Looking at Asian equities one may notice that basically nothing has changed after the summit as all major indices stay trading exactly where there were prior to a torrent of hopeful headlines from Singapore. From a technical point of view it’s worth having a look at the Japanese NIKKEI (JAP225) as it has already approached a relevant supply area which could be a possible turning point. If this level resits buyers’ strength, it could lead to a possible pullback toward 21900 points relatively soon.

link do file download linkConfidence among Australian businesses deteriorated last month. Source: Macrobond, XTB Research

Apart from the summit in Singapore we were offered soft indicators from Australia from NAB. Both business conditions as well as confidence deteriorated in May falling to 15 and 6 from 21 and 10 respectively. Anyway, the Australian dollar keeps trading almost flat in the morning, and it could have been shored up to some extent by a bit lesser than expected slowdown in home loans in April. In the morning the NZ dollar is the strongest currency gaining somewhat more than 0.2% even as the Manpower survey showed a slower implied pace of employment for the upcoming quarter. In turn, the Japanese yen along with the Swiss franc are the worst major currencies as both might have been supported by encouraging remarks flowing from Singapore, move are not particularly significant though.

link do file download linkIncreased risk appetite could help the NZ dollar break a resistance placed at 0.7060. Source: xStation5

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