Global equity markets have attempted to trade cautiously higher at the end of the week, as a combination of soft U.S. inflation figures, stronger commodity prices and slightly easing geopolitical tensions seems to have had a small impact on risk sentiment.
Asian shares closed mostly higher as markets cheered at the news of Donald Trump’s meeting with North Korean leader, Kim Jong-Un, on 12 June in Singapore. In Europe, stocks have shown some signs of buying momentum, and this could benefit Wall Street later on Friday.
It is worth noting that global equity markets remain highly sensitive to geopolitics and speculation of higher interest rates. Risks in the form of escalating geopolitical tensions in the Middle East and other forms of uncertainties could still create headwinds for the markets at any time.
Dollar softens, but remains King
The Greenback extended losses on Friday, after weaker than expected US inflation figures for April prompted market players to scale back bets of faster rate hikes.
U.S. consumer prices printed below forecasts, rising by 0.2% last month while core inflation remained unchanged at 0.1%. The tame CPI figures are unlikely to materially impact expectations of a rate hike in June. However, the numbers could reduce speculation over the Federal Reserve adopting a more aggressive approach on rate hikes this year. With the widening interest rate differential still supporting the Dollar, losses are likely to be limited.
Taking a look at the technical picture, the Dollar Index has retreated from 2018 highs this week, with prices trading marginally below 92.60 as of writing. The Index continues to fulfil the prerequisites of a bullish trend as there have been higher highs and higher lows. Bulls remain in firm control above the 92.22 higher low. A failure for prices to keep above this level could encourage a decline towards 91.80.
Gold shines on Dollar weakness
It is shaping up to be a positive trading week for gold thanks to a weakening U.S. dollar.
Appetite for the precious metal has received encouragement after the Dollar suffered heavy losses following the release of disappointing U.S. inflation figures. The upside was complemented by geopolitical tensions in the Middle East stimulating some appetite for safe-haven assets. With a softening dollar empowering gold bulls, further upside could be on the cards if prices are able to conquer the $1,324 level.
Taking a look at the technical picture, Gold remains in a wide range on the daily charts with major support at $1300 and a major resistance at $1360. A breakout above the minor $1324 resistance level could encourage an incline higher towards $1,340.
Commodity spotlight: WTI oil
Global crude oil prices have been firmly bullish this week after U.S. President Donald Trump’s decision to withdraw from the nuclear deal with Iran.
WTI crude oil rallied to a fresh three and a half year high yesterday, with prices punching above $71.70 per barrel on prospects of tighter global supply after the U.S. re-imposed sanctions on Iran. The upside was boosted by heightened geopolitical tensions in the Middle East, which fanned concerns of potential supply disruptions. While oil prices have scope to venture higher as bulls exploit geopolitics to power the rally, the question is for how long?
Taking a look at the technical picture, WTI crude is bullish on the daily charts. The upside momentum could inspire oil bulls with enough inspiration to challenge $72.00 in the near term.