› Weekly Binary Options market review March 11 - 15.

Weekly Binary Options market review March 11 - 15.

The binary options market was vulnerable to several geopolitical events, as well as to important macroeconomic reports this past week. Although uncertainty still weighs on traders and investors, the overall sentiment improved significantly compared to the first week of March. Call options for high-yield assets were in demand, especially closer to the weekend as the world’s leading economy is expected to avoid another shock of more tight financial conditions. The Federal Reserve is going to meet this week for the interest rate decision, economic statement and press conference about the monetary policy prospects for the nearest future. Binary options traders’ optimism was driven by the lack of any justification for the regulator to hike the interest rates. Investors rushed to buy call options for US stock indices, lifting major benchmarks to levels never seen since the market crash in October 2018. In contrast, US Treasury yields declined which forced traders to buy put options for the US dollar across the board. The US dollar index lost 0.82% of its value versus the volume-weighted basket of six major currencies. The British pound was overperforming the currency market on the back of positive votes by the UK Parliament. British lawmakers excluded a hard non-deal Brexit scenario and voted for a longer transition period to divorce with the European Union. Although the US-China trade negotiations did not reach any final point yet and the Chinese economy confirmed the slowdown, the negative news was overshadowed by a large tax cut in the second largest world’s economy. Traders were also focusing on buying call options for emerging markets assets this past week.

The trading week started with large volatility in many assets and currency pairs. GBP/USD gained strength, adding more than 1% to the exchange rate on the back of optimistic headlines and rumours about the upcoming Parliament debates. German Exports improved significantly compared to the market expectations (1.5% month-over-month versus 0.2% expected) but industrial productions declined (-0.8% versus +0.5% predicted) and trade balance worsened (18.5B versus 21.2B). That mixture of data did not clarify anything and EUR/USD was trading in a narrow range after the weekend. The US data was initially positive with Core Retail Sales growing by 0.9% in January while a more moderate growth of 0.4% was predicted earlier. Business inventories were flat and US equities were mostly trading in the call-mode but the gains were limited as traders were waiting for more important macroeconomic reports to be published later that week.

Tuesday was much more busy though. Japanese BSI Large Manufacturing Conditions worsened in the first quarter of 2019, forcing traders to buy call options for USD/JPY and EUR/JPY. The Australian dollar struggled to grow despite the overall greenback’s weakness as the Reserve Bank of Australia Assitant Governor Debelle did not show any signs of optimism in his speech about the monetary policy prospects and economic outlook. The data was also weak, Home Loans declined in January, while NAB Business Confidence fell. Therefore, AUD, NZD and JPY options were trading in the put-mode in Asia. Currency traders were watching a huge pack of macroeconomic data from the United Kingdom. Gross Domestic Product came in line with the expectations (0.5% month-over-month), Construction output surged by 1.8% while a decline of -0.3% was expected. Industrial and Manufacturing production improved in January (0.6% and 0.8% respectively), while Monthly 3M/3M GDP change was surprisingly strong (0.5% versus 0.2% predicted). The only weak part of the data was the trade balance which expanded the negative surplus to -13.08 billion pounds compared to the analysts’ consensus of -12.20B. Nevertheless, GBP/USD soared right after those reports, testing highs of 1.3289 amid stronger-than-expected results. However, traders’ sentiment has been changed dramatically after the British Parliament refused to support Brexit deal, voting against Theresa May’s conditions. GBP/USD dropped more than 250 pips till the end of the day as investors were rushing to buy put options for the pair. The US inflation was in the market’s focus during the New York opening. Consumer Price Index grew slower-than-expected in February (1.5% year-over-year compared to 1.6% awaited). Core CPI (excluding food and energy prices) also failed to meet analysts’ forecast. Investors quickly realized that the Federal Reserve had lost the background for a sudden hike of the interest rates next week, and the market reaction was at the call-options side for US equities, which rallied, and on the put-options side for US Treasury yields. As a result, the greenback was sold-off versus major currencies excluding the Sterling.

Japanese data was mixed in the Asian session on Wednesday. Core Machinery orders declined, the Producer Price Index grew, while the Tertiary Industry Activity Index improved. USD/JPY struggled to find a direction as both the greenback and yen were weak. EUR/USD gained further strength in the European trading session on the back of stronger-than-expected Industrial Production report released in the Eurozone, while Spanish inflation figures matched the market forecast. US data continued disappointing hawks as Core Durable Goods Orders report declined, Producer Price Index fell. The greenback kept weakening versus major currencies. Oil traders were surprised by the US inventories report which showed that the demand is still strong while refineries can’t deal with the growing consumption. Crude oil stocks declined, WTI price soared. Traders’ focus turned back to the Sterling as the UK Parliament voted about possible hard non-deal Brexit scenario. British lawmakers added optimism to investors as they took that option off the table. GBP/USD and GBP/JPY surged, recovering all of the losses from the previous day and also printing new highs at 1.3382 and 148.74 accordingly. The Sterling was strong versus Euro and all of the three commodity currencies amid the worst-case Brexit scenario was out of possible outcomes.

Thursday’s reports brought some concerns to binary options traders, especially in the emerging markets sector. Chinese industrial production grew by only 5.3% in February compared to 5.5% expected and 5.7% previously. Fixed Asset investments were in line with the predictions, while Retail Sales improved somewhat and the Unemployment Rate increased. However, global investors absorbed that negative news as the Chinese government announced a huge tax cut reform, trying to support the slowing economy. German CPI and PPI reports showed weaker-than-expected inflation, while Frech reports were in the green. EUR/USD was pressure a bit by put-options buying but the general uptrend remained. The US data was mixed again, Imports and Exports Price Index grew but New Home Sales declined.

The Bank of Japan’s meeting and rate decision was the market-mover on Friday. The regulator left the interest rates unchanged but lowered the assessment of exports volume, which is definitely a negative sign for the Japanese Yen. The press conference did not add any optimism as a softer monetary policy is still on the table. European CPI report was in line with the expectations, while Italian inflation eased in February. US stock indices were supported by stronger-than-expected Michigan Consumer Sentiment, Expectations and Current Conditions.

Bank of Japan’s
Source: brecorder.com

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