IMF may also be cutting its global growth outlook under the current circumstances.
US futures and European markets are trading lower as the global investor sentiment remains fragile. Clearly, investors have nothing to cheer about and this is despite the fact that we have seen the US making a trade deal with Mexico and Canada. What is impacting the market most is the announcement that the IMF may also be cutting its global growth outlook under the current circumstances and the situation over in Italy is becoming more serious.
It was Greece which used to keep investors on their toes but lately, Italy has taken this job. Italian bond yields are under major stress and this remains the playground among speculators. Yesterday, we have seen the Italian 10-year bond yield rising again as investors have started to price in the risk factor. The massive sell-off for the Eurozone is a further evidence of this and the currency is paying a heavy price because of the Italian crisis. The head of the European Commission made matter even more arduous for the Italian finance minister after reminding him that the country is heading towards a Greek-style crisis. This statement alone pushed the Italian bond price at their weakest level in nearly four years. The fact is that the Italian government needs to reconcile its expensive campaign promises but then at the same time, Italy is no Greece and the European Commission need to understand this element very clearly. The Italian government also needs to understand that when it submits its budget to the commission in mid-October, the odds should be stacking up in their favour. The country cannot afford to have rejection as this will not be only bad for bond yields but also for the currency as well.
Moving away from the European crisis, there is a significant amount of focus on the trade deal but not enough optimism around the China-US trade deal. The current optimism is fuelled on the back of hopes that Donald Trump would be able to strong-arm China as well just like he did with Canada. Both Mexico and Canada left the NAFTA behind and decided to join a trade agreement which is built on Donald Trump’s demand. The new trade agreement will be called United States-Mexico -Canada Agreement. The hopes are very little to none when it comes to US-China agreement because the same strategy isn’t working with China.
Bitcoin Struggles to Break Resistance
As for the crypto market, Bitcoin price is consolidating on the back of a low volume. We are struggling to break the resistance of 6800 and 7000. The support of 6000 remains a major focal point. Having said this, one trend which is very clear for us is that retail industry is becoming less and less convinced about the new ICO industry, this is also evidently clear by looking at the capital raised in the past few months and compare this amount to last year. Having said this, the operation on the OTC desk is very difficult, bigger wallets are only adding to their positions with each drop in the currency. They prefer the price to remain more stable as this assures the general public that Bitcoin is no longer a volatile currency.
Gold Traders Focused on Powell’s Speech
In the gold market, there is no evidence that the bulls have gained any kind of strength. Of course, the main economic data which has the ability to move the gold price needle substantially is the upcoming US NFP on Friday. But, what can also bring some volatility for the gold price is the Jerome Powell’s speech, the Fed chairman. Yesterday we had a pretty weak economic (ISM manufacturing PMI and construction spending), this is something which Jay Powell will have to explain. The Fed needs to keep the economic data close to their heart and if the data shows weakness they need to make sure that there is a fair adjustment in their policy. The Fed is firmly on the path for another rate hike this year but given the ISM manufacturing number and if we start to see similar weakness in other numbers like the housing market and consumer sentiment, then all bets are off.
