Financial market research and analysis

The FTSE 100 opened downbeat on stronger pound. Mining and energy stocks opened flat to positive, although the Qatar isolation and cheaper oil prices keep investors tense and gains fragile.

Gold miners diverge positively as the waning risk appetite pushes the price of an ounce to highest levels since mid-April.

Randgold Resources (+1.47%), Fresnillo (+1.23%)


Softer the Brexit, stronger the pound

The GBPUSD remains well bid ahead of the UK’s snap election due on Thursday, although most of the pound’s strength is certainly due to the broad based weakness in the US dollar.

The short-term volatility in pound is attention-grabbing and should prevent Cable from any major directional move before the result of the election.

According to the latest polls, the Conservatives’ lead on Labour fell to nearly 1% (41.5% versus 40.4%) from about 20% at the time of the election announcement. We remind that the poll was conducted before the latest terrorist attack in London Bridge, and could be readjusted in favour of Tories. Nonetheless, the rapid fall in Conservatives’ popularity hints at a potentially hectic pound market into and after the election.


Qatar crisis to have limited impact on global supply

Oil fell to the cheapest level since May 9th on speculation that the anxiety around the Qatar-crisis may have a limited influence on the global supply. As the Qatar’s isolation occupies the headlines, oil traders are slowly walking away from the market. The negative bias is supportive of the continuation of the weakening in the WTI crude toward the $45 a barrel. Intermediate support is eyed at $45.81 (minor 76.40% retracement on May rise).


Gold, yen gain on softer US dollar, sour risk sentiment

The US dollar traded lower against the majority of the G10 currencies. The US 10-year yields eased 0.72% to 2.1660%. The Federal Reserve (Fed) hawks continued stepping out on worse than expected nonfarm payrolls released on Friday. The FOMC meets next week and the consensus is 25 basis points hike in rates from 1.00% to 1.25%. However, expectations for more Fed action in the second half of 2017 are visibly waning.

The USDJPY broke below the 110.00 mark as money flew into the safe haven assets. The pair is expected to consolidate losses below the Ichimoku cloud cover 111.30 on the global lack of appetite. Nikkei (-0.95%) and Topix (-0.84%) traded lower in Tokyo.

Gold advanced to $1’289 on the back of a global risk aversion due to the Qatar isolation and softer US yields. Positive trend and momentum indicators suggest the possibility of a further rise toward $1’295/1’300 (April resistance / psychological resistance). Traders seek further dip buying opportunities on short-term price pullbacks, also on expectation that the June Fed meeting could not be consistently positive for the US dollar.


RBA maintains status quo, expects softer growth

The Reserve Bank of Australia (RBA) held its cash rate steady at 1.50% as widely expected.

The AUDUSD reversed a part of the earlier losses on mixed RBA concerns. According to policymakers, Australia’s labour market is stronger, yet soft growth in salaries continue weighing on consumption. The RBA expects the inflation to pick up gradually as the economy strengthens.

Yet, Aussie’s gains are expected to meet resistance given that the RBA still believes that the economic growth would soften. The debasement in commodity prices since March continue taking its toll although the mining investment transition is nearly complete and is supposed to limit the Aussie’s sensitivity to the global commodity prices.

The first line of resistance in AUDUSD is eyed at 0.7516 (200-day moving average), before 0.7538 (50% level on March – May decline).

Australia’s ASX (-1.52%) fell sharply, led by decent losses in the energy and mining stocks.