Global financial markets rallied yesterday on signs that major economies could reintroduce new stimulus measures to prevent a possible economic slowdown. The recession fears were triggered by the US bond yield curve inversion. The People’s Bank of China announced interest rate reforms. The German government is possibly considering new fiscal stimulus measures if the economic data worsens. The US Federal Reserve Chairman Jerome Powel is due to speak at the annual meeting of central bankers in Jackson Hole on Friday. Investors will be watching closely and listening for any signs that the Fed will continue their easing stance and any indication of the pace and timing for more interest rate cuts.

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The Day Ahead

We have a quiet day ahead of us for data. Scheduled data includes the Producer Price Index for July in Germany and August’s CBI Industrial Trends Survey data in the UK. The Weekly API Crude Oil Stock data is also due to be released. Italian PM Conte is expected to address the Senate in Rome while the Fed’s Quarles is due to speak.

Traditional Markets

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Yesterday, the Trump administration announced the decision to delay the ban on Huawei for 90 days. This was perceived as a positive move for US and China trade discussions moving forward when they meet in Washington in September for the next round of face-to-face talks. Investors reacted positively to the news, the main US equity indices traded strongly higher, mainly supported by technology stocks.

Alternative view, Word of Caution

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Commodities / Forex

The US Dollar Index rallied higher on easing trade concerns. The key trading level is at 97.00 which is the current weekly low. Any further upsides are initially capped by the 1 August 98.70 intraday high. The US Dollar Index which monitors the movement of the US Dollar against a basket of six major world currencies (Euro, Japanese Yen, Canadian Dollar, British Pound, Swedish Krona and Swiss Franc) is closely watched by many investors as an important sentiment indicator for currency crosses and also for commodities trading. With US Dollar sentiment turning positive, gold failed to sustain its recent bullish momentum and traded lower on the day initially testing the 1,494 support level. The key trading resistance level for gold is at 1,513 which was the daily closing level on Friday 16 August.

Crypto

Ethereum’s bullish rally is testing the key trading level of 200.00. Upside is capped by initial resistance at 231.00.  A confirmed breakout above 231.00 appears bullish targeting resistances at 260.00 followed by 288.00 and 300.00. Alternatively, a confirmed loss of the initial downside support at 180.00 would support a bearish outlook targeting additional downside supports at 165.00 and 146.00.

Libra

Following hearings back in July where David Marcus, head of Calibra (Facebook’s subsidiary company behind Libra the cryptocurrency and blockchain) testified before the US Senate Banking Committee, US lawmakers are now set to travel to Switzerland with the regulation of Libra in focus.

When asked in the hearings to why the Libra association had chosen to register in Switzerland rather than the United States Marcus claimed “the choice of Switzerland had nothing to do with evading regulations or oversight” and that its a conductive jurisdiction to do business. Now it seems US lawmakers want to find out for themselves.

The six-member delegation led by the chairwoman of the House Financial Services Committee, Maxine Waters, who previously requested that Facebook halt Libra’s development until the purported risks it poses could be properly understood, is going to meet with Swiss Federal Data Protection and Information Commissioner (FDPIC) Adrian Lobsiger.

It will be interesting to see the outcome of this meet, and how discussions around Libra could potentially affect the wider cryptoasset markets.

Rakuten release crypto exchange/wallet service – Rakuten Wallet

Yesterday Japanese commercial giant Rakuten announced the release of their spot crypto exchange/wallet service via their subsidiary company Rakuten Wallet Inc. At this stage, only 3 cryptoassets are supported – Bitcoin, Ethereum and Bitcoin Cash.

Nevertheless, in my opinion, this is a big step as it potentially provides a ‘trusted’ on-ramp for new users to be involved in crypto. Furthermore, this move by Rakuten may inspire other established commercial companies to move in some capacity towards crypto and distributed ledger technology.