Negative sentiments arise among investors after early termination of US-North Korea talks

Posted 01 March, 2019

The financial markets have been characterized by negative sentiments just after the US-North Korean summit was broken down and thus the parties failed to sign an agreement.

With the recent events, it becomes clear that the situation on this front is unlikely to change dramatically in the near term. Specifically, the US President Donald Trump will not cancel measures against North Korea as the latter refuses to fulfil the proposed conditions. At the same time, the broken talks should be considered that the relations are getting worse. New talks are quite possible after the recent summit.

The last trading week of February brought massive events to the markets, while investors studied fundamentals that impact global markets. Investors' demand for risk rose early this week driven by optimistic expectations regarding a possible agreement between Washington and Beijing as well as Brexit delay.

The US Federal Reserve Chairman Jerome Powell in his turn once again stated that the Central Bank would take a break in the interest rate lifting. As a result, the US Dollar index was near the 96 mark again and the pound sterling hit the peaks of last July.

Speaking about the global stock indices are rising two-fold beginning from 2019, though investors' confidence is affected by expanding fears of slower economic growth in the world along with geopolitical risks. For now, the key issues include whether US-China trade tensions ends with the mutually acceptable agreement and the UK leaving the EU.  In fact, if the situation escalates at any of these issues next week, investors will hardly dare to run risks.

In the long-run, investors' intentions to risk will be tried by other risks including persisting India-Pakistan tension and further weakening of manufacturing PMI in China in February along with uncertainties in the White House. The markets will become more fluctuating in case of growing impact from these risks.

The main scenario for 2019 sill suggests restrained US dollar strengthening and unchanged interest rate in the USA as well as slower global economic upturn.

The pound will remain sensitive to Brexit issues. Investors may generally be in favourable positions in case of adopting a careful policy staying somewhat optimistic for the short-term. The first month of spring is expected to be highly volatile.

Previous forecast

01 March, 2019 18:08

← Global developments affect major currencies

The rates of the major currencies to the US dollar are affected by global geopolitical tensions and investors’ unwillingness to risk at the moment. Deterioration in the US-China trade negotiations, an early end of US-North Korean second summit and the Brexit uncertainty are among the geopolitical risks that make investors cautious. The volatile market sentiments and a probable slowdown in global economic growth undermine investors’ confidence, affecting the rates of major currencies.

Global developments affect major currencies

Next forecast

27 February, 2019 15:49

Brexit delay prospects fuel sterling pound upturn →

Bullish investors are getting more confident as for the sterling pound growth amid the news that UK PM Theresa May may postpone the Brexit from March 29 to a later date. The development will ease uncertainty around the issue as well as concerns that the UK may exit the EU without any agreement in March. Nevertheless, the delay brings the risk that the UK will end up in limbo. Although the pound may keep on increasing amid expectations of the delay, its mid- and long-term prospects are still dimmed.  The US dollar in its turn has been slack lately.

Brexit delay prospects fuel sterling pound upturn
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