Financial market research and analysis

Trade is once again the big focus as the new week kicks off. Trade optimism lifted Asian markets overnight as trade talks are set to continue for a second week. Talks will kick off in Washington after both sides cited progress in the negotiations from the previous week. With motivation for a deal clear, both sides are racing to hash out a deal before the March 1st trade truce deadline. High level officials including US Trade Representative Robert Lighthizer and China’s vice premier will attend the talks, boosting confidence that progress will be made. The fact that this round will be in Washington means we could get more news flow on developments.

Trade optimism continues to boost a risk on sentiment, with equities across Asia in demand.  The dollar was broadly weaker, although stronger versus the Japanese yen; typical moves in a risk on environment, as flows ebbed out of safer havens.

US markets will remain closed for President’s day public holiday. Moves in the dollar could also be fairly muted on Monday.

Dovish ECB to keep euro gains capped

The euro was seen taking advantage of the weaker dollar, moving higher in early trade after two consecutive weeks of losses. Traders have been re positioning as they expect the ECB to adopt a more dovish stance and keep monetary policy towards the more accommodative side of the scale. This comes as recent data from the bloc highlights the region's low growth and weak inflation. Benoit Couere confirmed that the ECB could look at loosening policy again given that the eurozone’s economic slowdown is more pronounced than originally thought. The euro has pushed back up through $1.13 as the new weeks commences. With such a cautious stance from the ECB, any move higher in the euro could be capped until there is a distinct improvement in data from the bloc. And let’s face it, that could be a long way off.

Few reasons to buy into the buck

The prospect of a more dovish Fed is the only chance the euro has of moving higher. The minutes from the January Fed meeting will be released on Wednesday. Recent Fed speakers have reiterated the Fed’s “patient” approach to further hikes. Dovish minutes are being priced in, which when combined with the risk on sentiment from trade optimism, we expect pressure to remain on the dollar.

Oil hits 3 month high

Oil prices rallied to its highest since November at $56.50.  OPEC production cuts and US sanctions on both Iran and Venezuela are limiting supply. Trade tensions which have weighed on global growth are showing signs of easing boosting sentiment across markets and lifting oil demand prospects. Traders will continue to pay close attention to headlines from Washington this week.

The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please note that 79 % of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing money.