MARKETS BOUNCE AFTER WASHINGTON SENDS REASSURING MESSAGES
The markets today were higher following assuring messages from Washington on trade issues. During the weekend, President Trump tweeted of his warm relationship with Chinese president, Xi Jinping. He also tweeted that the country would ultimately remove the trade barriers because it would be the best thing to do. Speaking in different Sunday shows Treasury Secretary, Steve Mnuchin and Economic Advisor Larry Kudlow said that the two countries would ultimately solve the trade differences without entering into a trade war.
With no major economic releases planned this week, the issue of trade will be at the forefront of all investment and trading decisions.
The Swiss franc gained ground against the dollar after the State Secretariat for Economic Affairs (SECA) released the employment numbers. The numbers showed that the unemployment rate in Switzerland declined from last month’s 3.0% to 2.9%. This is the lowest level since 2014 and a clear indication that the economy is doing well. The previously released data showed that the unemployment rate dropped to 3.3% and 3.2% in January and February respectively.
After initially gaining, the US dollar fell by about 15 bps against its global peers. The surprise turn came as traders digested the impacts of the weak jobs numbers released on Friday. The data from the labor department revised the data released in February downwards by 50K. It also showed that the economy added fewer jobs than those anticipated by the investors. As the dollar fell, gold which was initially trading down by 0.43% turned positive.
The dollar lost ground against the euro, reaching a high of 1.2310, which was the highest level since Wednesday last week. The upward trend comes after the pair bottomed at 1.2214 last week. As shown below, the pair’s MACD is currently approaching its highest level since Friday while the double SMAs are showing a bullish signal. This is an indication that the pair could continue moving up. However, a short-term move lower is still possible, especially if the MACD passes the weekly high.
The USD/CHF pair bottomed on Wednesday when the pair reached a low of 0.9550. It then started a rally when ADP released better than expected jobs numbers and reached a high of 0.9550. The rally reversed when the labor department released weaker jobs numbers than expected. Today, the weaker dollar story is continuing as the pair aims for the weekly low mentioned above. Following better than expected jobs numbers from Switzerland, and the pessimism about the number of Fed hikes, the pair could continue moving lower.
YTD, silver has fallen by almost 5% against the dollar. The fall is as a result of the ongoing global trade tensions. This is because, while silver is a precious metal like gold, most of it is used for industrial purposes. Gold on the other hand is used mostly for investment purposes. Therefore, when the global economy is unstable, the price of silver tends to go down. Today, after falling by 31 bps, the price of silver recovered from the losses, mostly because of the weakness of the dollar. It is now trading at $16.03, which is higher than the weekly low of $16.15, which is above a key resistance level. If the tensions on trade reduce, there is a likelihood that silver could continue moving up.