European update – China, UK election, gold, oil

Investors taking a breather

Markets are back in consolidation mode on Wednesday, as traders take a breather in what is turning out to be a much more relaxed week than those just gone.

Source – Thomson Reuters Eikon

It really has been an action-packed few weeks in the markets and last week was arguably the peak. A Fed rate cut, trade war headlines, US jobs data and the busiest week of earnings season, it’s no surprise we’re seeing a little fatigue this week.

We are still seeing plenty of trade war headlines with China, it seems, looking to capitalize on Trump’s desire to secure a phase one agreement by demanding the removal of more tariffs. I’m not convinced the White House will abide by the latest demands in return for tariff removals alone. The question is whether these late requests could derail the deal so late in the day.

It’s also gone quiet on this side of the pond, with Brexit being put to one side as both sides move into election mode. It feels like this has been brewing ever since Theresa May’s election disaster back in 2017 and few will not agree that it is completely necessary at this point.

Brexit will naturally be a hot topic on the campaign trail and for many people, may even largely dictate who they back. Especially those who are leaning towards the Lib Dem or Brexit parties who have made the centre-piece of their campaign. Needless to say, it’s going to be a bitter and fierce few weeks.

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Gold dives but falls short of breakout

Gold took a dive on Tuesday as it slipped from around $1,510 to $1,480 and threatened to break out of the tight range it has become stuck within for the last month. Unfortunately though, $1,480 held leaving us range-bound as we have been throughout that period.

The only interesting thing to come from it was that that series of higher lows has technically ended which may undermine the bullish bias that appeared to be building. It can be easy to read too much into these moves but right now, the yellow metal looks to have lost any directional bias that appeared to be growing. If anything, the nature of yesterday’s sell-off may give confidence to gold bears.

Gold Daily Chart

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Oil pares gains on API inventory rise

Oil prices are paring gains today as we await inventory data from EIA. The profit taking comes as risk markets overall experience similar moves and as API reported a surprise rise in inventories on Tuesday of 4.26 million barrels.

The API number is less widely followed than the EIA but does give a possible heads up for what to possibly expect. If EIA reports something similar today we could see further profit taking but it won’t shift the broader trend which has become far more positive.

Brent Daily Chart

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