We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Bullish
More View more
Real Time News
  • The Singapore Dollar is driven by the Monetary Authority of Singapore, which manages exchange rate instead of short-term interest rates. Learn more on the $SGD and how to trade it. Get your update from @ddubrovskyFX here: https://t.co/eWLM9XZs5Y https://t.co/OWuwGML4Ch
  • RT @FT: Huawei admits that US sanctions are hurting https://t.co/GIT4XSfszx
  • RT @WSJecon: Mexico’s inflation eased in September, coming in line with the Bank of Mexico’s 3% target for the first time in three years ht…
  • My phone's decided to give up the ghost and I've been phoneless for 24 hours. Not coincidentally, I've been a machine tackling errands around the house. What a time to be alive.
  • #Gold remains stuck in a range as a range of conflicting forces battle and fail to take control of price action. Get your $gld market update from @nickcawley1 here: https://t.co/pw7UjkUyqH $XAUUSD https://t.co/YD8L6knjhe
  • Geopolitical developments send oil prices soaring or falling. Get your market update here: https://t.co/0znHZPvPON https://t.co/s358dvMBeR
  • Currency markets may be battered by breakneck volatility if a slowdown in global economic growth triggers a collapse in the fragile market for collateralized loan obligations (CLOs). Get your market update from @ZabelinDimitri here:https://t.co/KfjjtaXs7b https://t.co/sWeSlv33pb
  • The #Dow Jones and #Nasdaq 100 will await key earnings from some of the world’s largest manufacturers and tech companies while the #DAX grapples with freshly-imposed tariffs. Get your equities market update from @PeterHanksFX Here: https://t.co/u2lG19JFt3 https://t.co/OHs4rQEH7T
  • Crude #oil prices are consolidating above a key support zone we’ve been tracking for more-than three months now. Get your market update from @MBForex here: https://t.co/XaACvEpLG4 #OOTT https://t.co/XjmjUt4Par
  • Why trade with Bollinger Bands®? Find out as a day trader, how you can use it to your advantage:https://t.co/dwODDDSsFi @WVenketas https://t.co/SYduJ5k9mL
Are Financial Markets Too Optimistic As Growth Crumbles?

Are Financial Markets Too Optimistic As Growth Crumbles?

2019-02-28 07:30:00
David Cottle, Analyst
Share:

Risky Assets, Weaker Global Data. Talking Points:

  • China’s manufacturing sector backed off yet again in February
  • This is just one more weak data point in a global economy replete with them
  • A trade deal will help, but will hardly cure all ills

First-quarter technical and fundamental forecasts from the DailyFX analysts are out now.

Global growth is unarguably slowing. Why are growth-sensitive assets such as the Australian Dollar apparently so sanguine?

The latest gloomy economic data came from China. Its official manufacturing sector Purchasing Managers Index for February swooned to a three-year low and extended its run of contractionary, sub-50 readings out to a third straight month.

Moreover, this was simply the latest in a queue of weaker numbers which have trickled out from around the world with worrying regularity. In Europe, where Italy flirts with recession and even mighty Germany is clearly in the doldrums, Brexit turmoil seems only likely to depress growth still further.

The US’ own manufacturing PMI remains well above the 50 line. Even so it wallows at 17-month lows. To be sure, global oil prices are well above their December nadirs of $42/barrel, but they might well be a lot closer to that without supply cuts from traditional producers. The $76 peaks of December are far above an energy market hardly shrieking of global optimism.

And yet the Australian Dollar remains well above its formerly dominant 2018 downtrend and the New Zealand Dollar has been creeping back upward since mid-month. Stock markets are showing signs of diminishing momentum, but uptrends there clearly endure.

Australian Dollar Vs US Dollar, Daiy Chart

Why haven’t global growth worries hung heavier?

Well, there is one big risk to the bear thesis that has yet to play out. The prospect that China and the US will manage to cobble together some sort of trade agreement still hangs hopefully over all markets. Donald Trump expressed optimism last week that talks were proceeding well. Indeed, he shelved plans to increase tariffs on Chinese imports and held out the prospect of a summit with his Chinese counterpart XI Jinping if the two countries can move further forward.

While this upbeat narrative is in place, investors seem prepared to bet that the world economy’s wheezing engine can be jump-started once more.

This may of course be untrue. The global cycle looks mature in any case, stocks’ bull run since 2009 is now quite elderly. Ballooning corporate debt is a huge worry, perhaps especially in China and Europe. A trade deal might help but, beyond an initial feelgood factor. it may not be the silver bullet for demand that market optimists seem to think.

Of course, economic weakness will probably also lead in time to yet more monetary stimulus. This is a nexus to which investors have become very used in the post crisis years. Easier monetary policy usually leads to stronger stock markets and yet-more-buoyant risk appetite.

This process may come into view yet again, especially if a trade settlement comes with it. But in the end the data are going to win, and at the moment much of them are looking decidedly ‘risk off.’

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.