A gloomy outlook is hanging over financial markets after the World Trade Organisation (WTO) joined the growing list of major institutions expressing concerns over the global economy amid trade uncertainty and geopolitical risk.
The WTO cut its global trade growth forecast for 2019 to the weakest level in a decade thanks to US-China trade disputes and unfavourable global macroeconomic conditions. Trade growth is now projected to rise by only 1.2% this year, compared to the 2.6% growth forecast made in April. This darkening outlook for trade comes at a time where the Organization of Economic Cooperation and Development (OECD) has also lowered its global growth forecast to 2.9% in 2019 and 3% next year. Should escalating trade tensions between the worlds two largest economies drain investor confidence and dampen risk sentiment, riskier assets like equities and emerging markets will be in the direct firing line.
All eyes on Johnson's final Brexit plan
This may be another week filled with drama as Prime Minister Boris Johnson is set to unveil detailed plans for Brexit to the European Union before Thursday.
Brexit certainly remains an uncertainty that shrouds markets as the October 31 deadline draws near. Will Johnson be able to pull a rabbit out of the hat by securing a deal? Will the EU squarely reject any proposal brought forward? Whatever the outcome it will certainly impact the British Pound.
The GBPUSD is under pressure on the daily charts. Sustained weakness below 1.2300 should invite a decline towards 1.2200
Commodity spotlight – Gold
Gold initially stumbled into the final trading quarter of 2019 struggling to nurse wounds inflicted from an appreciating Dollar and easing US-China trade tensions. Given how prices extended losses far beyond the psychologically $1500 level, the precious metal was positioned to depreciate further in the near term with $1455 acting as a level of interest.
However, it looks like Gold may experience a change of fortune this week after the ISM Manufacturing PMI in the United States dropped to 47.8 in September 2019 from 49.1 in the previous month. This has been the steepest month of contraction in the manufacturing sector since June 2009 amid trade tensions. With today's disappointing report likely to strengthen the argument for steeper Fed rate cuts, zero yielding Gold is positioned to benefit from Dollar weakness and prospects of lower interest rates in the world's largest economy.
In regards to the technical picture, sustained weakness below $1485 should to inspire a decline towards $1455 in the near term. For bulls to jump back into the game, prices need to push back above $1485.