Market caution returns ahead of Davos summit

By Lukman Otunuga, Senior Research Analyst at FXTM

 

Asian shares flashed red on Tuesday as concerns about the economic impact of a coronavirus outbreak in China drained risk appetite.

This unfavourable development could not come at a more critical time with many people expected to travel within China before the Lunar new year. The outbreak presents an economic risk to China and its close neighbours, especially if tourism, air travel and other industries are affected.

Caution from Asia should hit European markets ahead of the World Economic Forum (WEF) in Davos, Switzerland. Business leaders, financial heavyweights and politicians from across the world will discuss key issues revolving around climate change and sustainable business.

There could be some movement across stock markets if global trade developments and geopolitical risks are discussed during the summit.

 

Euro steady after Trump-Macron truce

 

The Euro held steady against the Dollar after France announced an agreement with the United States on a truce in their digital tax dispute.

With the accord lasting until the end of 2020, this is a welcome development for the Eurozone as tensions ease between both sides.

As regards the technical picture, the EURUSD is trading around 1.1095 early Tuesday. A break above 1.1100 may open the doors towards 1.1170. Alternatively, a move back below 1.1080 could trigger a decline towards 1.1040.

 

Commodity spotlight – Gold

 

Gold is set to remain the prime destination for safe-haven buyers this week as developments in China and caution ahead of the Davos summit dent risk sentiment.

The precious metal is trading around $1566 early Tuesday and could challenge $1580 if risk aversion intensifies. A solid break above here will most likely open the doors back towards $1600.

 

 

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