Hot: UAE markets aim to join market rally from US-China trade truce

December 4, 2018 12:05 pm


By: Jameel Ahmad, Global Head of Currency Strategy & Market Research 

UAE markets will hope that it is not too late to join the party and participate in the global market rally when trading resumes on Tuesday, after a number of world asset classes across enjoyed a strong start to the week following the news that a temporary trade truce has been announced between the United States and China last weekend.

Improved risk appetite was seen throughout different asset classes, including a stronger mood for global stock markets, emerging markets, emerging market currencies and commodities like Oil. When you factor in that UAE and GCC indexes are considered as emerging markets, it will be monitored whether they mirror the moves of optimism from the market excitement that a trade truce has been announced.

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With the exception of the Indian Rupee, most of the Dollar’s emerging market counterparts advanced against the USD on Monday including the Chinese Yuan that gained close to 1%. This rally has filtered through to other regional emerging markets and asset classes, including the South African Rand and Mexican Peso that are both more than 1% stronger on trade truce optimism.

What will be noteworthy for the UAE, due to its Dirham being pegged against the Dollar is that the Greenback tumbled lower against a number of its global counterparts in response to the trade truce. It has long been documented that alleviated trade tensions would reduce buying demand for the Greenback; further progress towards the easing of trade tensions, coupled with a more downbeat tone from the Federal Reserve regarding interest rate expectations is presenting an interesting opportunity for traders to take-profit from USD buying positions.

Read: Abu Dhabi’s economic growth, fiscal position, remain strong to 2021

WTI Oil joins the risk-on trade

WTI Oil jumped as much as 5% in the early hours of Monday trading, which goes a long way towards explaining how global market optimism and previous concerns around the impact of trade tensions can have on demand for commodity markets.

In recent weeks Oil has suffered severely from global economic health concerns stemming from trade tensions leading to lower demand for Oil, and if there is further progression with this issue it would be seen as a potential “buy” for Oil.

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Jameel Ahmad is an expert in financial market developments, and specialises in global currencies, commodities and emerging markets. FXTM’s VP of Corporate Development and  
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