Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

US-China trade concerns

Ahead of the Fed meeting conclusion, the risk sentiment had once again taken a turn for the worse with US-China trade concern one to weigh.

Risk sentiment wanes

While little had been expected out of the US-China trade talk this week besides a discussion of the broad framework, President Donald Trump’s unexpected lash out at China, accusing the country of ripping off the US had nevertheless dented sentiment. This may once again be positioning by the President as talks carry on, but with the matter evidently being the biggest item of concern on the table for markets, prices were seen slipping overnight on Wall Street and dragging Asia markets into Wednesday.

The good news here perhaps is the fact that we had Apple’s latest earnings for the quarter ending in June topping estimates while guidance had also beat expectations. Apple’s share price rose 4.5% in after-hours trade after declining earlier in the session. The guidance played to views that demand is stabilizing after consecutive quarters of concern over competition and revenue performance, particularly in regions such as China. While this may not be one to transpire to the likes of Samsung Electronics following the report of a fall in second quarter profit, it bodes well for the rest of the supply chain across Asia.

Bank of Japan’s July dovish hold

On central banks, the Bank of Japan (BoJ) had left their monetary policy unchanged as expected in the Tuesday meeting conclusion with the apparent dovish stance oozing from the policy statement. In particular, the BoJ stated that the bank will “not hesitate to take additional easing measures” should the momentum towards achieving their price target be lost, reflecting the bank’s willingness to move. That said, coming ahead of the Fed meeting, the BoJ clearly lacked the interest to lock themselves in, leaving the Federal Open Market Committee (FOMC) meeting conclusion the key to likewise guide the moves for the BoJ.

As told yesterday, we have seen the US dollar index attempting a break of the highs printed earlier in May after gaining through the week. Strong resistances nevertheless lie ahead and any break on the upside could see prices turn to retrace some of the gains with a sell-the-news phenomenon not ruled out should the Fed disappoint.

Source: IG Charts

China’s PMI

Notably, this morning’s China July PMI release had provided a mixed picture. On one hand, the official manufacturing PMI had surprised on the upside at 49.7, improving from the 49.4 in June and showing the effectiveness of policies targeting the sector. On the other hand, the services PMI had tapered to 53.7 from 54.2. Even as the latter remains in expansion territory, it does appear that some of the pressure had seeped into the services sector as the downtrend further form into July. Against the backdrop of heightened trade concerns, this would likewise cause pressure, but it will also be watching the Caixin numbers to come for confirmation.

Yesterday: S&P 500 -0.26%; DJIA -0.09%; DAX -2.19%; FTSE -0.52%

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

See an opportunity to trade?

Trade forex on our award-winning platform.

Live prices on the most popular forex markets

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading forex provider.

Stay on top of upcoming market-moving events with our customisable economic calendar.