Trump is very much at the centre of the main market-related headlines this week, not for the first time it’s safe to say.
Last week, the attention was on the central banks as the Fed and ECB adopted a more accommodative tone and opened the door to easing measures this year, with the former now entirely priced in for a rate cut in July. This week sees focus shift to trade and geopolitics, which will likely make it a very interesting week for oil markets.
We saw a resurgence in WTI last week as various events seemed to line up favourably for oil bulls. Whether it was the sudden escalation in the Gulf of Oman – and nearly a far more severe one had the US not shown some restraint late in the day – the improved prospects for Sino-US trade talks, unexpected drawdowns in crude inventories or just the stock market rally, everything lined up to bring some relief to the sell-off.
While oil prices had stabilized in recent weeks, any rallies had faced still resistance – even those built on worrying events in the Gulf – giving the indication that sellers remained in control. The events of the last week though have seen that resistance broken and should talks at the G20 go well later this week, alleviating some of the risks to the global outlook, oil bulls may feel reinvigorated.
Gold continues higher on soft dollar
Gold is creeping higher again on Monday, as the dollar once again finds itself in the red. The yellow metal rose more than 4% last week as traders exited the dollar and paved the way for gold to take off. The Fed naturally had a lot to do with this on Wednesday as it opened the door nice and wide to rate cuts, with markets fully pricing one in for next month.
The only question now is what’s left to price in when you consider just how dovish traders have become when it comes to the Fed. Especially when you consider that we may have some good news later this week from the G20 which may force traders to rethink their expectations for interest rates, given that the trade war is a huge risk to the economic outlook.
Bitcoin rally a blast from the past
Bitcoin is very much back in the headlines, as the cryptocurrency surged through $10,000 for the first time in more than a year and reminded us all of the good old days of late-2017. The launch of Facebook’s Libra seems to be primarily behind the surge in bitcoin, with traders likely eyeing the news as legitimizing the industry which has come under scrutiny since falling more than 80% from its peak.
Clearly we’re still seeing the same behavioral trends that we saw in late-2017 and early-2018 which should make the coming weeks interesting, to say the least. Adoption is obviously key for this space so the Facebook news is obviously being viewed positively but the same questions around bitcoin will still persist, regardless of this and whatever movements we see in the near-future.