What happened in the markets in April?
Brexit and the ongoing concerns over the departure of Great Britain from the European Union has been quite the topic this year however this seems to have taken a back seat as concerns about global growth continue to linger. The trade talks between the United States and China which have been having a flow on effect into many markets around the world continues to simmer away on a back burner but remains an issue.
During the month of April, the EURUSD has continued to trade in the medium term down trend which has seen it fall to its lowest levels in nearly two years. The key 1.13 level has continued to play a role and more recently it has provided resistance and forced the EURUSD lower. It has finished off the month by attempting to rally back to a new key level in 1.12 which has support the EURUSD in the last couple of months, however it is likely to receive some resistance from this level now. For the last few months now the EURUSD has been content to trade within a narrow range enjoying support from 1.13 and meeting resistance at the 1.15 level, however in April it has drifted lower and looks unlikely to return back to 1.15 any time soon.
Speaking at a conference on monetary policy last month, European Central Bank (ECB) President Mario Draghi said the central bank is ready to take further action to help the economy if the outlook takes a sudden turn for the worse. Draghi said the bank would take "all the monetary policy actions that are necessary and proportionate". They time may be coming soon. The ECB held interest rates steady again, shortly after the International Monetary Fund (IMF) sharply downgraded its economic growth forecast for the euro zone economy. The IMF downgraded growth in the euro zone expecting it to grow at 1.3% in 2019, which is lower than its forecast had been six months earlier. Purchasing Managers Indexes (PMI) from Germany and France would have failed to ease fears about a euro zone economic slowdown, with German manufacturing data coming in below expectations, and France’s data showing a decline in output.
Like the EURUSD, the GBPUSD has drifted lower in April to be trading near its lowest levels in several months. To finish the month the GBPUSD rallied a little to keep within touch of 1.30 however it has spent the last six weeks or so falling lower from a nine-month high near 1.34. In the last couple of weeks, it has fallen steadily lower with very little signs of support. In early March the GBPUSD fell sharply from an eight-month high back down below the key level of 1.32 before rallying again and reaching a nine-month high shortly afterwards. The other key level presently is 1.27 which may be called upon should the GBPUSD continue to fall lower from its present trading levels.
The United Kingdom government has effectively given up on trying to force through the Brexit deal using the withdrawal agreement bill and has been trying to devise a way to forge a compromise through new indicative votes if talks with Labour break down. Labour’s Sue Hayman has said that cross-party talks on Brexit between the government and Labour have moved on to the “nuts and bolts” of a possible compromise. Hayman said it was “a really constructive discussion” that had been “getting much more into the nuts and bolts of the detail.” She said she now believed the government was “open to moving forward in our direction”. Sources from both sides of government have suggested that discussions were taking a more positive tone.
The AUDUSD has experienced a relatively flat April finishing the month quite close to where it started – in between the 0.7050 and 0.7150 levels. It spent the first half of the month creeping a little higher moving to its highest levels in two months just above the 0.7150 level before falling strongly lower to around 0.6990, which is below the current key level of 0.7050 and a six-week low. Up until recently it had been relying heavily on support from 0.7050 which has supported the currency pair several times in the last few months. The 0.7050 and 0.7150 levels remain key and are likely to continue to play a major role in the price action of the AUDUSD.
The Reserve Bank of Australia’s (RBA) streak of leaving the official cash rate on hold may be in jeopardy. Earlier this month the RBA kept the official cash rate at a record low of 1.5% however even a few weeks ago, a widely expected cut this year “looks inevitable”, many analysts say. That may now be a lot closer after core inflation figures were released. Australia’s core inflation was reported at 1.4% over the year, which is the weakest reading since the current data series was started in 2003. The RBA has a target band of 2-3% which inflation has sat below for the last three years and now more analysts are forecasting a cut to interest rates maybe as soon as next month, when you collate inflation, a downward revision to GDP forecasts and an environment of weak growth.
US equities have been slowly but steadily climbing higher during April which has seen the index move to within close reach of its all-time high. It has finished the month trading a little flat in the last week or so above the 26600 level. It has now consolidated a little in the last couple of weeks and is now receiving support from this level allowing it to remain above this key level. It will be interesting to see if it can maintain the break and potentially start a new range and return to previous highs around 26800 and beyond to all-time highs, which are not that far away.
According to the U.S. Bureau of Economic Analysis, the U.S. economy grew at a 3.2% annual rate in the first quarter, which was greater than expected and its best growth to start a year in four years, exceeding 3% for the first time since 2015. Economists polled by Dow Jones expected growth of 2.5%. Federal economic analysts attributed most of the first quarter’s growth to increases in consumer spending, businesses building their inventories, and increased exports. Personal spending was only up 1.2%, two tenths more than expected as an increase in spending on services and nondurable goods offset a decline in spending on durable goods. Exports rose 3.7% in the first quarter, while imports decreased by 3.7%.
Gold has experienced a relatively volatile April moving back above the key $1300 level, falling sharply in the middle of the month and then finishing attempting to rally a little higher and regain some lost ground. To start the month, gold rallied well to return to back above the current key level of $1300, after it dropped so sharply to finish last month. Gold has previously enjoyed solid support from the key level of $1300, however this level is now likely to provide some resistance. Gold has fallen below this level several times of late however every time, gold has found some buyers and slowly climbed its way back above the $1300 level, however this recent drop could be telling as sellers may start to line up at the $1300 level poised to maintain pressure on gold and keep it below this level.
Previously, ongoing concerns over the global economy, including United States - China trade negotiations were keeping gold well supported, however now a series of more positive data has directly impacted gold sending it lower. In the latest blow to gold, China released its widely anticipated gross domestic product figure, which exceeded expectations. China reported its economy expanded by 6.4% year-on-year in the first quarter of 2019, which was slightly higher than the 6.3% that analysts polled by Reuters had expected. China’s economy also grew by 6.4% in the fourth quarter of 2018. This sequence of positive data has seen gold fall by around 5% from its February highs, which includes signs of progress in U.S.-China trade negotiations and strong U.S. economic data, which has seen market participants increase their risk appetites.
Generally, oil has very slowly but steadily climbed higher throughout the month of April, before finishing out the month dropping sharply and resting on the current key level of $71. In the last week of the month oil surged higher to reach its highest level in six months as it has comfortably moved past the key level at $71. For a couple of weeks to start the month, oil consolidated and traded in a very narrow range right above the $71 level having moved through this level for the first time in many months. This level remains key and has supported oil well to finish out the month after its strong fall.
Oil has continued to be influenced by several external factors, mainly ongoing concerns about global growth and where the global economy is heading, as well as Organization of the Petroleum Exporting Countries (OPEC) supply cuts. However more recently, oil prices have surged higher after the United States announced that all Iran sanction waivers would end by May, which would in turn pressure importers to stop buying from Iran. Last year before sanctions being reimposed, Iran was the fourth-largest producer among OPEC at almost 3 million barrels per day (bpd), however their April exports have shrunk well below 1 million bpd. The United States have now demanded that purchasers of Iranian oil cease by the 1st May or face sanctions themselves.
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