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Here is what you need to know on Tuesday, December 8:
Stocks and currencies ended Monday’s session on a mixed bag amidst fresh market chatter on another US stimulus package and alternating headlines surrounding the Brexit negotiations.
On that side of the channel, the UK will start its vaccination campaign today and several countries are expected to follow suit later in the month and in early 2021. On the same front, the pandemic continues its relentless march, although market participants (and global assets) keep looking past the coronavirus crisis and anticipate a strong recovery next year.
The ZEW survey will shed further details on the economic sentiment in both Germany and the broader Euroland later today, while another revision of the Q3 GDP figures in the bloc will also be in the limelight.
EUR/USD, in the meantime, is expected to move into a cautious stance in the next hours ahead of the key ECB event on Thursday. The dollar remains immersed into the bearish territory in spite of occasional bullish attempts, while the quid keeps suffering the Brexit limbo.
In the commodity space, the barrel of the European reference Brent crude eases further from recent tops near the $50.00 mark as traders continue to digest the recent OPEC+ decision to gradually increase its oil output starting in January.
Gold extends the bounce off last week’s lows in the $1,760 area and looks to be headed towards the $1,900 mark per ounce.
Stocks and currencies ended Monday’s session on a mixed bag amidst fresh market chatter on another US stimulus package and alternating headlines surrounding the Brexit negotiations...READ MORE
Here is what you need to know on Monday, December 7:
The first full week of December kicks off with a mixed market mood. New US sanctions on Chinese officials weigh on the market mood while weak Nonfarm Payrolls raise hopes for a stimulus package. The FDA is set to approve a COVID-19 vaccine later in the week and Brexit talks continue at a higher intensity.
Nonfarm Payrolls and stimulus: The US gained only 245,000 jobs in November, nearly half the expected increase. The spread of the virus in America and the lapse of several federal support programs are taking their toll. Investors hope that the figures will convince Congress to strike a new stimulus deal, perhaps along the lines of the $908 billion bipartisan proposals. Reports suggest Senate Majority Leader Mitch McConnell is reluctant to move.
Virus fears: The seven-day average of daily coronavirus deaths has hit 2,171, topping the record seen in the spring. Hospitalizations are at a peak of over 101,000 and average daily cases is nearing 200,000. California has enacted strict limits and other states are also curbing movement. Infections remain elevated in Germany and edging lower in other large European countries.
Vaccine hopes: The US Food and Drugs Administration (FDA) is set to approve the Pfizer/BioNTech covid immunization on Thursday, opening the door to the first injections on the following day. The UK will administer its first inoculations on Tuesday. Optimism about vaccines keeps markets bid.
Sino-American tensions have risen again amid a report stating the US is preparing new sanctions against around 14 Chinese officials. Beijing said it firmly opposes new restrictions.
Brexit: UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen spoke on Saturday and agreed to extend talks. Intense negotiations continue in Brussels with reports on compromises yet without a breakthrough. Chief EU Negotiator Michel Barnier told envoys that disagreements remain on the three contentious issues – fisheries, governance, and the level-playing field. GBP/USD is trading around 1.34, off the highs seen late last week.
EUR/USD is changing hands above 1.21 after German industrial output beat expectations at 3.2% in October. Markets await the European Central Bank's decision on Thursday, with a potential expansion of the bond-buying scheme eyed.
Gold is consolidating its gains around $1,840 while oil price edge lower, with WTI around $46.
Cryptocurrencies are off their highs. Bitcoin is changing hands at around $19,000.
The first full week of December kicks off with a mixed market mood. New US sanctions on Chinese officials weigh on the market mood while weak Nonfarm Payrolls raise hopes for a stimulus package. The FDA is set to approve a COVID-19 vaccine later in the week and Brexit talks continue at a higher intensity...READ MORE
The next week is all about compromise. Can the UK and EU avoid a damaging no deal at the end of the month? Will Congress agree on a stimulus package and spending bill to prevent hardship for businesses and households and avert a government shutdown? Can EU leaders overcome their differences and sign off on the 2021-27 budget and Covid-19 relief package? It’s time for some deal making.
The focus in the US remains on the coronavirus and the growing restrictive measures aimed at thwarting its spread. Many states are at risk at reaching healthcare capacity and concerns are high that it will get worse by Christmas. Some states are seeing record high cases and the likelihood of more shelter-at-home orders will start to weigh on businesses. Pressure is growing for Congress to due to more and this should be a critical week for breaking the stimulus stalemate.
On Thursday, the November inflation readings should signal price pressures are still not a concern. The monthly reading should tick higher to 0.1%, while the year-over-year reading softens to 1.1%. Weekly jobless claims will be released, and the recent restrictive measures could start being reflected with this reading. Friday will provide the University of Michigan’s preliminary December consumer sentiment reading, which should show a further deceleration in confidence.
Campaigning for the two Georgia senate seats is about to enter a maddening pace. President Trump will give his support to Republican incumbent Senators David Perdue and Kelly Loeffler at a rally on Saturday. Democrats need to win both seats to have a split Senate, with VP Harris having the tie-breaking vote. Most political experts expect the Republicans to win at least one of the races and keep control of the Senate. Democrats will need to deliver a strong turnout but that will be difficult to motivate the younger voter.
The EU is sticking to its guns over the 2021-27 budget, which includes the €750 billion recovery fund. Opposition from Poland and Hungary to the rule of law clause has caused significant friction but the other 25 member states have signaled they’re prepared to persevere and have a plan B for the recovery fund that doesn’t require the backing of the two countries. An emergency budget would then be enforced from next year which would cut spending considerably. With Hungary and Poland being significant beneficiaries of the funding, it seems their hand is not as strong as they wish.
We’re at a critical stage now on Brexit with the next few days potentially seeing a deal signed or talks break down. EU leaders want to review the deal and next week’s summit, with there being less than four weeks until the end of the transition. Markets appear dangerously confident of a deal which poses not just downside risk, but significant weekend risk as well given the point we’re at.
The country has exited lockdown although life isn’t much different for most of the country, with the restrictions that remain in place. The MHRA moved quickly to approve the Pfizer vaccine which means it will be ready for distribution from next week to the most vulnerable. This is a massive step forward but it will still be months until it is available to the masses which means restrictions aren’t going anywhere just yet. Still, after the year we’ve all had, a few months is nothing.
Brexit remains the number one risk for the economy, with officials working hard towards a deal but the same old issues remain. A breakthrough could come in the next few days, one way or another.
The lira has broadly stabilized over the last few weeks following the sacking of the country’s central bank governor and resignation of its finance minister. Last months rate hike satisfied the demands of the markets for now but the currency remains very weak, historically speaking and vulnerable to further shocks.
US lawmakers are pushing for sanctions on Turkey as part of a defence spending bill which put the lira under a little pressure on Friday. I don’t think the impact will be overly significant though, which the currency likely having priced in a less friendly relationship with Biden from January.
A wrath of Chinese data is expected to show the economic recovery is not losing any momentum. Trade data is expected to show modest increases in both exports and imports (dollar terms). New yuan loans and aggregate financing are expected to increase significantly.
The Reserve Bank of India left interest rates unchanged this week as the country continues to battle stagflation. India entered technical recession last week and inflation is above the upper end of its target range. There are calls for the government to do more rather than lean on a central bank that is limited in what it can do without exacerbating the inflation problem.
The New Zealand Dollar continues to move further away from the 0.7000 level. The RBNZ is expected to keep the pace of bond purchases at NZ$800 million at QE auctions. Economic data releases this week will include REINZ House Sales, Business Manufacturing PMI and Food Prices for November.
The Australian dollar has been on a tear benefitting from the rally in commodities. A relatively quiet week on the data front from Australia will see an update from the NAB on business conditions, third quarter house price index and Westpac’s December consumer confidence index. The focus from Australia will remain on the diplomatic spat with China.
A busy week in Tokyo will start with household lending data that is expected to bounce back. The final third quarter GDP reading will likely be revised slightly higher on quarterly basis from 21.4% to 21.5%. Japan’s current account surplus should also rise higher as the export-driven economy was strong in October. Core machine orders should show a significant improvement from the drop seen in September. Lastly, Japan’s November producer prices index could turn positive on a monthly basis.
Key Economic Events
Saturday, December 5th
– Brexit negotiations are expected to inch towards a deal, but last-minute hurdles could derail a breakthrough
– President Donald Trump tries to assist the two Republican senators that are in the runoff elections on January 5th.
Sunday, December 6th
– No events
Monday, December 7th
– The deadline for setting the 2021 budget is here and all eyes will be on both Poland and Hungary and whether they will remove their veto.
– The UK parliament debates the Internal Market Bill amendments
– Holiday for Spain and Italy’s Milan
Germany Oct Industrial Production M/M: 0.7% estimate v 1.6% prior
Australia services index, ANZ job advertisements
Switzerland foreign-currency reserves
Japan leading index
China trade, foreign reserves
Tuesday, December 8th
– White House hosts coronavirus vaccine summit
– Holiday in Italy, Spain, Portugal and Austria.
Euro-area Q3 Final GDP
Japan Q3 Final GDP, household spending
Australia business conditions
Germany ZEW survey
South Africa Q3 GDP Q/Q: 64.5% estimate v -51.0% prior
Wednesday, December 9th
– German Chancellor Merkel speaks to the Bundestag during the 2021 budget debate.
– UK House of Commons debates the Taxation (post transition period) Bill
– Italian PM Conte tries to win the vote on the European Stability Mechanism reform
– Weekly EIA crude oil inventory report
US wholesale inventories
Germany trade data
Bank of Canada rate decision: Expected to keep Interest Rate unchanged at 0.25%
Australia consumer confidence
Japan core machine orders, machine tool orders
South Africa CPI, retail sales
France industry sentiment
Thursday, December 10th
– The ECB rate decision is expected to keep rates steady and deliver an increase and extension to its pandemic bond-buying program and provide banks access to more long-term loans.
– A crucial EU leaders summit will discuss the budget, stimulus and Brexit.
– Czech parliament’s upper house will vote on PM Babis’s request to curb a portion of the tax overhaul.
– Bank of Canada’s Deputy Governor Beaudry delivers the Economic Progress Report.
– The FDA reviews the vaccine made by Pfizer/BioNTech, potentially granting access for distribution within 24 hours.
US initial jobless claims, CPI, Treasury monthly budget statement
UK Oct GDP M/M: 0.4% estimate v 1.1% prior, industrial production M/M: 0.3% estimate v 0.5% prior, RICS house prices
South Africa current account, gold production, manufacturing production
France industrial production
Czech Nov CPI M/M: 0.1% estimate v 0.2% prior
Friday, December 11th
– Michigan consumer sentiment index for December is expected to decline from 76.9 to 76.3. The US is dip slightly after falling to a three-month low in November. The coronavirus cases are surging all over the country and likely triggering restrictive measures that will damage sentiment.
US PPI, University of Michigan sentiment, Baker Hughes rig count
New Zealand food prices, manufacturing PMI
Industrial production: India, Italy, Mexico
Sovereign Rating Upgrades
– Spain (Fitch)
– Switzerland (Fitch)
– Norway (Moody’s)
The next week is all about compromise. Can the UK and EU avoid a damaging no deal at the end of the month? Will Congress agree on a stimulus package and spending bill to prevent hardship for businesses and households and avert a government shutdown?...READ MORE
Here is what you need to know on Friday, December 4:
Markets are mixed and the dollar is off Thursday's lows as traders await the all-important Nonfarm Payrolls report. Brexit acrimony is weighing on the pound. Oil and the loonie are rising following an OPEC+ deal and ahead of Canada's jobs report.
The dollar has stabilized after suffering a downfall on Thursday. One of the reasons for the dollar's comeback and the cooling in markets has been a drop in chances for a stimulus package. Senate Majority Leader Mitch McConnell said he still prefers a small relief deal rather than the large, near $1 trillion one.
The US Nonfarm Payrolls report for November is set to show an increase of 469,000 jobs, down from 638,000 in October. The Unemployment Rate is set to decline from 6.9% to 6.8%. Investors want to see if the recovery is still on track or if the second wave of the virus has hurt job growth.
US daily COVID-19 infections hit a new high above 210,000, hospitalizations remain above 100,00, and mortalities are nearing the spring peak. In the old continent, Italy extended its nationwide restrictions through January.
Vaccine 1: Dr. Anthony Facui, America's lead epidemiologist, cast doubts about the UK's fast approval of the Pfizer/BioNTech jabs, but then backtracked his words.
Vaccine 2: Pfizer announced that is unable to meet its goal of supplying 100 million doses of its COVID-19 immunization but rather 50 million, due to supply chain issues. The pharmaceutical company still intends to provide a billion doses in 2021.
Brexit: UK officials said that the prospects of a deal have receded after the EU toughened its positioned in response to fresh demands from France. After intense talks in London, Chief EU Negotiator Michel Barnier will return to Brussels for quick consultations. GBP/USD is off the highs near 1.35 but has retreated.
WTI Crude Oil has jumped above $46 after OPEC+ members agreed to extend production cuts into 2021 following long days of talks. Gold is holding onto gains and changes hands at around $1,840.
Similar to the US, Canada is also projected to report fewer jobs gained in November. The jobless rate is set to remain at 8.9%.
Cryptocurrencies have stabilized on high ground, with Bitcoin holding around $19,300.
Markets are mixed and the dollar is off Thursday's lows as traders await the all-important Nonfarm Payrolls report. Brexit acrimony is weighing on the pound. Oil and the loonie are rising following an OPEC+ deal and ahead of Canada's jobs report...READ MORE
The US will publish this Friday the November Nonfarm Payrolls report and is set to bring more pain to the USD. The country is expected to have added 481K new positions in the month, below the previous 638K. The unemployment rate, however, is seen improving from 6.9% to 6.8%. Average Hourly Earnings are expected at 0.1% MoM and rising by 4.3% YoY, below the previous 4.5%.
The dollar is fragile heading into the release, in a decline that’s hard to justify from the macroeconomic side. US data has been quite consistent with economic recovery, and while it may not yet be at pre-pandemic levels, it is heading in the right direction. Australia and the UK are behind the US, while other economies, such as the EU, are far beyond in the run. Brexit is a drag for the pound and the shared currency, but there’s little to justify EUR/USD trading at 1.2100 or GBPUSD at 1.3400.
Covid vaccines, trade tensions between the US and China, Brexit and a US stimulus package, introduce loads of noise in the markets these days. In this scenario, US employment data will likely have a limited impact on currencies.
Leading Indicators suggest further pressure on the greenback
While the previous NFP was kind of encouraging, the economy added just 638K new positions in October. At this point, the economy recovered roughly 55% of the 22 million jobs that were lost with the pandemic. The expected 481K win for November will barely move the bar.
The ISM Manufacturing PMI employment sub-components contracted sharply, below the 50 threshold. The Services PMI employment reading, however, improved from 50.1 to 51.5. Consumer confidence suffered a major setback in November, amid resurgent coronavirus cases.
The ADP report showed that the private sector created less than anticipated jobs, printing at 307K. Finally, the JOLTS Job Openings report showed that hiring also slowed in the last two months reported.
Dollar’s possible reaction to different scenarios
The broad dollar’s weakness has left the currency quite oversold across the board. A corrective movement´s chances are high, and an upbeat employment report could be the catalyst, exacerbated by profit-taking ahead of the weekend.
A better-than-anticipated report may also underpin equities and the generally positive mood, favoring the most European currencies and commodity-linked ones. Given Brexit talks, the GBP may not be the best trading choice. Canada is also publishing its employment figures on Friday, so USD/CAD may be too noisy. EUR/USD and AUD/USD may be the best options.
EUR/USD’s overbought conditions may see it correcting south, yet as long as it holds above 1.2000, bulls will remain in control.
The US will publish this Friday the November Nonfarm Payrolls report and is set to bring more pain to the USD. The country is expected to have added 481K new positions in the month, below the previous 638K. The unemployment rate, however, is seen ...READ MORE
The GBP/USD pair continued scaling higher through the mid-European session and jumped back to three-month tops, around the 1.3435-40 region in the last hour.
Following the previous day's pullback and a subsequent bounce from sub-1.3300 levels, the pair caught some fresh bids on Thursday and was being supported by a combination of factors. The US dollar remained depressed amid the latest optimism over the first approval of a COVID-19 vaccine and reviving hopes for more US fiscal stimulus.
Wednesday's disappointing ADP report added to the recent market worries about the potential economic fallout from the continuous surge in new coronavirus cases in the United States. This, in turn, puts pressure on the US Congress to agree on additional fiscal stimulus measures to aid the US economy and kept the USD bulls on the defensive.
The British pound got an additional boost after Ireland’s Foreign Minister, Simon Coveney said that there was a good chance that Britain and the European Union would secure a trade deal in the next few days. Adding to this, the British Education Secretary Gavin Williamson said that the UK and EU are making good progress on the Brexit trade deal negotiations.
Bulls shrugged off the pessimism led by comments from an EU diplomat, saying that issues such as the level playing field and fisheries are still outstanding. This comes on the back of the EU chief Brexit negotiator Michel Barnier's overnight remarks that Brexit talks have reached a make-or-break moment, though did little to prompt any selling around the GBP/USD pair.
Investors will keep a close eye on Brexit developments, which should continue to play a key role in influencing the sentiment surrounding the sterling. Apart from this, Thursday's US economic docket – featuring the releases of Initial Weekly Jobless Claims and ISM Services PMI – will be looked upon for some short-term trading opportunities.
The GBP/USD pair continued scaling higher through the mid-European session and jumped back to three-month tops, around the 1.3435-40 region in the last hour.READ MORE
Here is what you need to know on Thursday, December 3:
The US dollar remains on the back foot amid a mix of positive and adverse developments. US coronavirus cases and worsening relations with China weigh on sentiment, while stimulus and vaccine hope boost sentiment. Brexit and OPEC+ talks and NFP hints are eyed.
US fiscal stimulus: House Democrats endorsed the trimmed-down $908 billion relief bipartisan program presented by several senators. The growing chances of a deal have been supporting markets. President-elect Joe Biden aims to provide further support once he takes office in January.
Gold has been consolidating its gains, trading at around $1,832. Hopes for a deal in Washington have been underpinning the precious metal.
Sino-American relations: Congress has passed a bill that intensifies scrutiny of Chinese companies and outgoing President Donald Trump is set to sign it. This bipartisan effort is another downer for stocks.
Daily US COVID-19 cases have hit a new high near 200,000, daily deaths are at around 2,700, close to the spring peak, and hospitalizations surpassed the 100,000 level. The grim figures, after a Thanksgiving-related hiatus, have cooled market enthusiasm.
The US economic calendar features weekly Unemployment Claims, which are set to edge lower after two consecutive rises. The ISM Services Purchasing Managers' Index is forecast to decline, but continue pointing to growth. The PMI's employment component serves as a hint toward Friday's Nonfarm Payrolls.
German Chancellor Angela Merkel announced that covid-related restrictions will be extended until early January as Europe's largest economy is struggling the curb the spread of the disease.
EUR/USD is shrugging off news from Germany and holding onto gains above 1.21. Markit's final Services Purchasing Managers' Indexes and eurozone Retail Sales are due out during the morning.
Covid vaccine: The UK continues preparing for injecting the first Pfizer/BioNTech vaccines on December 8. European and US regulators are set to give their green light later this month and Moderna's immunization is also undergoing an approval process.
Brexit: France has warned it may veto a trade deal if it is dissatisfied with the outcome. Paris suspects that Chief EU Negotiator Michel Barnier, a Frenchman, would give too much ground to London. Intense talks continue with fisheries, governance and a level playing field being the points of contention.
The OPEC+ meeting is resuming after delegates were unable to agree on extending oil production cuts into 2021. WTI Crude is changing hands at around $45, stable.
Cryptocurrencies have somewhat calmed, with Bitcoin consolidating around $19,000.
The US dollar remains on the back foot amid a mix of positive and adverse developments. US coronavirus cases and worsening relations with China weigh on sentiment, while stimulus and vaccine hope boost sentiment. Brexit and OPEC+ talks and NFP hints are eyed...READ MORE
The bearish momentum surrounding the greenback remains unchanged and motivates DXY to keep the trade in the 91.70 region so far, where sits the 8-month support line.
Against this, bets for a deeper pullback remain on the rise and target the psychological support at 90.00 ahead of the April 2018 lows near 89.20.
Occasional bullish attempts need to surpass the 93.20 level (November 11) to mitigate the downside pressure somewhat. However, as long as DXY trades below the 200-day SMA, today at 95.95, the offered stance is forecast to persist.
The bearish momentum surrounding the greenback remains unchanged and motivates DXY to keep the trade in the 91.70 region so far, where sits the 8-month support line.READ MORE
Gold (XAU/USD) stalls its rebound from five-month lows of $1765 in the European session this Tuesday, as the 100-hourly moving average (HMA) guards the immediate upside near $1797.
Gold attempted a solid comeback after the recent sharp declines, mainly in response to the broad-based US dollar weakness, as the month-end dollar demand faded. The focus shifted back to the coronavirus vaccine-driven economic recovery hopes, which diminished the greenback’s safe-haven appeal.
Also, the continued escalation in the virus infections globally combined continues to cast a dark cloud on the economic prospects, lending support to gold’s recovery.
However, the XAU bulls now turn cautious ahead of the highly influential ISM Manufacturing PMI data and Fed Chair Jerome Powell’s testimony. Also, the risk-on action in the European equities and US stock futures caps the bounce in the non-yielding gold.
Gold charted a symmetrical triangle breakout on the hourly chart earlier in the Asian trades, having recaptured the 50-HMA at $1784. However, the bulls are facing strong resistance just below the 100-HMA barrier, as the Relative Strength Index (RSI) has turned south, near 65.50. However, the technical indicator still suggests that the recovery mode remains intact.
Alternatively, the 50-HMA support could offer an immediate reprieve to the bulls. A break below which the multi-month lows of $1765 could be back in play.
Gold (XAU/USD) stalls its rebound from five-month lows of $1765 in the European session this Tuesday, as the 100-hourly moving average (HMA) guards the immediate upside near $1797...READ MORE
Here is what you need to know on Tuesday, December 1
Markets have resumed their gains and the dollar is on the back foot once again as the dust settles from end-of-month flows. Optimism about vaccines and Brexit counter concerns from Powell and Yellen about the US economy.
New month: November ended with a drop in stocks, correcting only a fraction of the considerable gains recorded during the month. The US dollar bounced back on Monday. After the dust settled, the greenback is on the back foot, equities are upbeat and also gold is edging higher toward $1,800.
GBP/USD has resumed its gains within the range amid upbeat comments about Brexit talks. Negotiators continue talks in London and strive to reach a deal this week. Fisheries and a level-playing field remain the thorny issues.
EUR/USD is trading above 1.1950 after touching the 1.20 level on Monday. The preliminary November Consumer Price Index figures for the eurozone are set to show subdued inflation after German statistics fell short of estimates. Christine Lagarde, President of the European Central Bank, will speak again on Tuesday and will probably reiterate her commitment to adding stimulus later this month.
Vaccine: Moderna completed its COVID-19 immunization Phase 3 trial, confirming around 94% efficacy. The firm announced it submitted an application for emergency usage and a hearing is due on December 17. The Pfizer/BioNTech vaccine may be approved in the UK in the next few days and in the US next week. Another effort from Novavax is also gaining traction. The news underpins gains.
Jerome Powell, Chairman of the Federal Reserve expressed concern about the current spread of the virus in prepared comments ahead of Tuesday's testimony. While he committed to supporting the economy, Powell did not hint if additional bond-buying will be announced later this month. \
Janet Yellen, Powell's predecessor at the Fed, was officially nominated as President-elect Joe Biden's Treasury Secretary. In an initial reaction, she echoed worries about the suffering in the months ahead but vowed to keep the American Dream alive. The most recent figures show yet another record in coronavirus hospitalizations, above 96,000.
AUD/USD has resumed its gains amid US dollar weakness and on the background of the Reserve Bank of Australia's rate decision. The RBA left interest rates unchanged at 0.1% as expected.
The US ISM Manufacturing Purchasing Managers' Index is set to edge down from the highs but remains on solid ground. The forward-looking indicator serves as a hint toward Friday's Nonfarm Payrolls report.
The Chinese Caixin Manufacturing PMI and a parallel figure from Japan both beat estimates, adding to the upbeat mood. Final industrial sector surveys are due out for the eurozone and the UK.
WTI Crude Oil is battling the $45 level after OPEC+ members failed to reach an agreement on extending production cuts and are set to extend talks in the next few days.
USD/CAD is battling the 1.30 level amid the moves in petrol prices and ahead of Canada's Gross Domestic Product release. Third-quarter GDP is set to leap by 47.6% annualized after collapsing by 38.% beforehand.
Bitcoin is consolidating its gains above $19,000 after flirting with all-time highs on Monday, hitting records on some exchanges but not on others. Ethereum and XRP remain at the top of their recent trading ranges.
Markets have resumed their gains and the dollar is on the back foot once again as the dust settles from end-of-month flows. Optimism about vaccines and Brexit counter concerns from Powell and Yellen about the US economy...READ MORE
Fiscal policy in the euro area is critically important given the hit that the service sector took, Christine Lagarde, President of the European Central Bank (ECB, said on Monday.
Lagarde further explained that the monetary policy cannot be as targeted as the fiscal policy and reiterated that the fiscal package must not be delayed significantly.
These comments don't seem to be having an impact on market sentiment. As of writing, the EUR/USD pair was up 0.23% on a daily basis at 1.1990.
Fiscal policy in the euro area is critically important given the hit that the service sector took, Christine Lagarde, President of the European Central Bank (ECB, said on Monday...READ MORE
Light at the end of the tunnel – and also 1.20 is within reach – but a downtrend correction cannot be ruled out as EUR/USD hits a three-month high.
The good news pushing the euro higher comes from the vaccine front. British regulators could be the first out the door in approving the Pfizer/BioNTech COVID-19 vaccine. As BioNTech is a German firm, approval in the EU will likely follow shortly. Moderna's inoculation will likely follow. Even if European and American authorities wait longer, the first immunization program to receive the green light in the West is set to boost markets.
The US dollar has also been on the back foot as investors take profits on stocks and buy US bonds. The drop in yields is making the greenback less attractive.
On the other hand, coronavirus is still rampant in the US – where hospitalizations have hit a new high above 93,000 – and Germany. The drop in US infections is likely temporary, a result of reporting issues around the Thanksgiving holiday. Contrary to Spain and France, the old continent's largest economy is struggling to contain the disease and has extended its "lockdown light. "
Germany's economy minister said that that the covid numbers are still "much too high" in most regions. Such comments may limit any euro gains.
The common currency may also struggle with updated inflation figures. Spain and Germany are set to report preliminary Consumer Price Index statistics for November and they will likely serve as a reminder of economic weakness. Christine Lagarde, President of the European Central Bank, is set to speak later and repeat her message of adding stimulus in the upcoming meeting.
The case for a "fakeout" – a quick move above 1.20 before a sharp correction lower – also comes from end-of-month flows. After EUR/USD advanced from the 1.16 handle early in the month, money managers may balance their portfolios and sell the common currency.
All in all, the trend remains to the upside, but another leg higher could trigger a downfall.
Light at the end of the tunnel – and also 1.20 is within reach – but a downtrend correction cannot be ruled out as EUR/USD hits a three-month high...READ MORE
Here is what you need to know on Monday, November 30:
A busy week kicks off with stocks, gold, and the dollar all edging lower together as November draws to an end. Fresh Brexit optimism is supporting the pound while oil is struggling with OPEC+ disagreements. Vaccine developments and data releases are eyed.
Gold has been extending its downtrend decline after cracking below $1,800 last week. Cascading stops and optimism about a coronavirus vaccine seem to be pushing the precious metal lower. End-of-month flows may trigger high volatility.
The dollar is on the back foot alongside falling US Treasury yields. EUR/USD is standing out by nearing 1.20 German and Spanish inflation figures are due out during the day. Christine Lagarde, President of the European Central Bank, will speak later in the day.
Brexit: UK Foreign Secretary Dominic Raab expressed optimism about reaching a deal, pending a compromise from Brussels on fisheries. He added that both sides have made progress on other topics such as competition and state aid. GBP/USD is edging up toward 1.3350. Talks continue in London.
Vaccine: The UK regulator may approve vaccines by Pfizer/BioNTech and Moderna as early as this week. The American FDA may do so late next week.
US COVID-19 cases and deaths have dipped from the highs, but the data may be skewed due to the Thanksgiving holiday. Hospitalizations have hit a new high above 93,000.
US Pending Home Sales are set to show strength in the housing sector. Investors are eyeing November's Nonfarm Payrolls due on Friday.
WTI Crude Oil has dropped below $45 ahead of the virtual OPEC+ virtual meeting. At the time of writing, there is no agreement on further cuts as some countries want an easing in output restrictions.
Chinese Manufacturing and Services Purchasing Managers' Index both beat estimates, showing strength in the world's second-largest economy.
Cryptocurrencies have been extending their recovery after tumbling down late last week. Bitcoin is changing hands at around $18,500.
A busy week kicks off with stocks, gold, and the dollar all edging lower together as November draws to an end. Fresh Brexit optimism is supporting the pound while oil is struggling with OPEC+ disagreements. Vaccine developments and data releases are eyed...READ MORE
A busy end to a chaotic year
December may normally be associated with everything slowing down as we ease our way into the festive period but as with everything else in 2020, this is no normal December. Donald Trump is continuing to fight the election result and is going out swinging, Brexit talks are somehow still ongoing, the EU budget and rescue fund is at risk, the Fed and ECB may add to the enormous stimulus efforts of central banks this year and OPEC+ may have one final trick up its sleeve. A few more twists and turns to come, it seems.
The upcoming week will provide crucial updates to both the labor market and manufacturing sector. The coronavirus spread and growing restrictions being imposed across the country have yet to really impact manufacturing and hiring until possibly now.
On Tuesday, the ISM manufacturing report is expected to show last month’s reading was the peak of the current recovery. The highly watched index is expected to decline from October’s 59.3, which was the highest level since September 2018, to 57.8. The fourth quarter slowdown is widely expected, but what might start becoming the consensus is for the first quarter to deliver an economic contraction.
The last nonfarm payroll report of the year comes ahead of a live Fed meeting. FOMC officials should be ready to act as softening jobs data could lead to permanent damage to the labor market. The upcoming nonfarm payroll is expected to see 500,000 jobs created in November, but given the recent weakness investors might not be too surprised if we saw hardly any job gains.
The formation of the Biden’s cabinet has been clearly one that embraced diversity and experience with the Obama administration. Wall Street has been positive to Biden’s picks for Secretary of State and Treasury Secretary. Tony Blinken has experience under both the Clinton and Obama administrations and is viewed as someone who will be able re-engage US allies. The selection of Janet Yellen as Treasury Secretary will raise expectations that the Fed and Treasury will be able to coordinate policy action early next year.
The upcoming Georgia Senate races will start to draw attention, but it seems very unlikely Democrats will be able to pick up both seats.
The battle continues between Hungary and Poland and the other 25 member states of the European Union over the “rule of law” clause tied to the 2021-27 budget, with the two countries vowing to stand side by side in its fight against Brussels. It’s difficult to see the way out of this, with both countries refusing to back down despite being massive financial beneficiaries as EU members. Two weeks to go until the EU summit and a deal looks unlikely, with other states insistent on the clause, which has been inserted to directly counter years of efforts in both countries to undermine it.
Face to face talks will continue on Saturday as Michel Barnier returns to London after undergoing self-isolation. Progress has slowed during virtual talks and can hopefully gather some momentum once again, with there being barely any time left to reach a deal and get it ratified. We’re seeing more public rhetoric once again, but that’s perhaps to be expected as we get into the final points. With talks taking part every day, there is increased weekend risk, with the markets currently not factoring in the possibility of negotiations collapsing, leading to no deal.
Rishi Sunak presented the spending review this week, while the government also put in place new restrictions as the country comes out of lockdown next week. Although most people won’t really notice the difference, with almost the entire country in tiers two or three. Brexit is the big risk now for the UK, with Covid cases falling again, although Christmas will undoubtedly be problematic on that front.
The lira remains volatile but conditions are improving despite a small setback over the last week. The government and central bank have a small grace period now in which to prove to investors that there will be no going back to the kinds of policies that triggered the plunge in the currency to record lows earlier this month.
Manufacturing and services PMIs headline the data releases from China next week as the country continues to perform solidly, despite countries around the world once again struggling to come to terms with another wave of Covid-19.
The wine industry was the latest to fall victim to China’s assault on Australian imports, with duties of between 107.1% and 212.1% being imposed. Again, markets are showing little sign of being particularly concerned by the tariffs but that may change if China turns its attention to more core industries.
The RBA rate decision next week is the standout event although no change is expected.
Next week offers a selection of tier three data in Japan which should have little impact although the stock market is continuing to make solid gains as part of the vaccine rotation recovery move.
December may normally be associated with everything slowing down as we ease our way into the festive period but as with everything else in 2020, this is no normal December. Donald Trump is continuing to fight the election result and is going out...READ MORE
Five factors are all playing against the EUR/USD pair, in the opinion of FXStreet’s analyst.
“COVID-19 cases and deaths continue rising in the old continent, the epicenter of the disease. France and Spain both announced record numbers of mortalities on Wednesday.”
“The eurozone remains split between the camp demanding to mutualize the debt and show solidarity, and the one opposing it, led by Germany. The potential political crisis is weighing on the common currency.”
“After skyrocketing to 3.283 million in the week ending on March 14, jobless claims Thursday’s report for the week that ended on March 21 could be even higher. Goldman Sachs foresees 5.25 million claims. Devastating figures could be positive for the safe-haven US dollar.”
“Republicans are not enthusiastic about President Donald Trump’s calls for infrastructure spending. If they change their mind, the dollar could fall but until then, the market mood could stay downbeat.”
“Bloomberg reported that US intelligence agencies suspect that Chinese confirmed cases and deaths are far higher. The news implies a worse trajectory and protracted economic suffering, weighing on sentiment and benefiting the US dollar.”
Five factors are all playing against the EUR/USD pair, in the opinion of FXStreet’s analyst...READ MORE
EUR/USD Wednesday’s four-hour chart is painting a mixed picture, according to FXStreet’s analyst
“Momentum on the four-hour chart has turned negative after several positive days – a bearish sing. On the other hand, EUR/USD has topped the 100 and 200 Simple Moving Averages, but only just.”
“Resistance awaits at 1.1050, which has separated ranges in mid-March. It is followed by 1.1090, a temporary cap on the way up.”
“Some support awaits at 1.10, the confluence of the 100 and 200 SMA. The next cushion is at 1.0930, Tuesday’s low.”
“Momentum on the four-hour chart has turned negative after several positive days – a bearish sing. On the other hand, EUR/USD has topped the 100 and 200 Simple Moving Averages, but only just.”READ MORE
The US-based ratings agency S&P Global said in its latest report on Wednesday, credit ratings of most Australian banks are not at risk of a downgrade, in the face of the coronavirus crisis.
“Expect credit losses at banks in 2020 to more than triple from 2019 levels as the pandemic disrupts business.
Our forecast that the Australian economy will strongly rebound toward the end of the current calendar year following a significant downturn underpins our analysis.
Warned of a more severe and longer-lasting downturn, potentially due to a sharp fall in property prices and materially weaker economic outlook, would trigger downgrades for banks.”
AUD/USD breaches 0.6100
AUD/USD has come under fresh supply and drops back below the 0.6100 level amid a renewed risk-aversion wave that boosts the haven demand for the greenback across the board.
At the press time, the Aussie trades at 0.6080, down 0.86% on the day.
The US-based ratings agency S&P Global said in its latest report on Wednesday, credit ratings of most Australian banks are not at risk of a downgrade, in the face of the coronavirus crisis...READ MORE
Here is what you need to know on Wednesday, April 1:
Investors are not tricked on April Fool’s Day and are in a gloomy mood. Asian stocks and S&P futures are down at the beginning of the second quarter after the first quarter was the worst since 2008.
The US dollar is gaining some ground across the board after a volatile close to the quarter. President Donald Trump has issued a grim warning, talking a painful two weeks, while his advisors discussed various estimates of mortalities. Nearly 190,000 people have been infected in the US, with the death toll topping 4,000. The White House is considering cutting tariffs as another easing step.
EUR/USD is under pressure as the death tolls in Spain and France continue rising, while infections in Italy seem to level off. Final manufacturing Purchasing Managers’ Indexes for March are projected to confirm only moderate contraction – yet this is due to a quirk in the methodology that counts delays as a positive factor. Eurozone countries remain at odds over corona-bonds. France, Italy, and Spain want a debt sharing scheme, while Germany and the Netherlands oppose it.
GBP/USD is trading below 1.24 after a volatile Tuesday, as the UK continues suffering rapid contagion. Final UK Manufacturing PMI is forecast to show a minor downgrade.
US data stand out later in the day. ADP’s private-sector jobs report is set to show a loss of around 150,000 jobs, in a precursor to the official Non-Farm Payrolls report.
Later on, economists expect a considerable fall in March. The Employment Component serves as another hint towards the NFP.
In China, the Caixin Manufacturing PMI came out at 50.1, indicating minimal growth and in line with the government’s figures. The statistics failed to cheer markets.
Oil prices are hovering around the lows, with WTI trading at the $20 handle. Saudi Arabia and Russia are considering a meeting to discuss petrol prices after launching a price war earlier this year. Trump spoke with Russian President Vladimir Putin earlier this week.
Cryptocurrencies have been on the back foot, with Bitcoin trading around $6,300.
Here is what you need to know on Wednesday, April 1:READ MORE
Late-2008/2009 offers a highly relevant historical analogue for the near term USD outlook, Richard Franulovich from Westpac Institutional Bank reports.
“The parallels with recent USD price action are obvious; the DXY squeezed 9% higher over a more compressed two week period by 20th March, only to give back roughly half those gains by month’s end, reflecting broad global policy relief and an easing in USD-funding scarcity.”
“But if late 2008/2009 is any guide the USD is likely to stabilise soon and resume a broadly strong tone. Back in 2008/09, once the initial USD squeeze and partial reversal were complete, the USD subsequently regained its footing and held solid well into mid-2009.”
“If that scenario plays out again in 2020 that would imply currencies are on the cusp of once again broadly track in line with their sensitivity to risk aversion.”
Late-2008/2009 offers a highly relevant historical analogue for the near term USD outlook, Richard Franulovich from Westpac Institutional Bank reports...READ MORE
U.S. oil prices rebounded sharply on Tuesday, after falling to the lowest level since 2002 amid a demand slump due to the coronavirus pandemic and a glut of supply thanks to a Russia-Saudi oil-price war.
West Texas Intermediate crude CLK20, +5.62% jumped over 5%, or $1, to $21.17 a barrel, after briefly dipping below the psychologically important $20-a-barrel level on Monday. The May contract tumbled 6.6% to settle at $20.09 a barrel on the New York Mercantile Exchange.
The global benchmark, May Brent crude BRNK20, +2.64% rose 42 cents, or 1.5%, to $26.82 a barrel, after an 8.7% slump to $22.76 a barrel on ICE Futures Europe, ahead of the front-month contract’s expiration at Tuesday’s settlement. WTI marked its lowest finish since February 2002, while Brent saw its lowest settlement since November of that year, according to Dow Jones Market Data.
The rebound Tuesday came as U.S. stock futures and European equities also, rose after China’s official purchasing managers’ indexes both beat expectations, and slowing new coronavirus cases in places like Italy. Wall Street equities saw another upbeat session on Monday, driven by health-care stocks and hopes for a vaccine.
“A joint action from oil producer countries to lower production could encourage a certain recovery in oil prices,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note to clients. “But any supply-side intervention should be sizable to match the historical decline in demand, with an estimated 5 million barrels decline in daily oil demand only due to grounded planes globally.”
U.S. oil prices rebounded sharply on Tuesday, after falling to the lowest level since 2002 amid a demand slump due to the coronavirus pandemic and a glut of supply thanks to a Russia-Saudi oil-price war...READ MORE
EUR/USD has been on the back foot as a turbulent quarter is drawing to an end. How is the world's most popular currency pair positioned on the charts?
The Technical Confluences Indicator is showing that euro/dollar has robust support at 1.0972, which is the convergence of the Fibonacci 61.8% one-month, the Simp[le Moving Average 5-one-day, and the Fibonacci 38.2% one-week.
Further down, the next significant cushion is at 1.0880, where the previous yearly, the SMA 50-4h, the SMA 200-1h, and the SMA 10-one-day meet up.
Resistance levels are spread out, with one hurdle awaiting at 1.1046, which is the confluence of the Fibonacci 23.6% one-day, the previous 4h-high, and the 100-day SMA.
Further up, 1.1091, is where the Fibonacci 61.8% one-day and the previous monthly high converge.
EUR/USD has been on the back foot as a turbulent quarter is drawing to an end. How is the world's most popular currency pair positioned on the charts? ...READ MORE
Coronavirus crisis extended some support to the USD’s safe-haven status on the first day of the week, Haresh Menghani, an analyst at FXStreet reports.
“As coronavirus lockdowns tightened across the world, a prolonged period of uncertainty extended some support to the greenback's and helped ease the recent bearish pressure.”
“The pair witnessed a modest pullback during the Asian session on Monday and for now, seems to have snapped six consecutive days of the winning streak.”
“Hovering around the 200-DMA, below the 1.1100 round-figure mark, developments surrounding the coronavirus saga might continue to play a key role in influencing the pair's momentum amid absent relevant market-moving economic releases.”
Coronavirus crisis extended some support to the USD’s safe-haven status on the first day of the week, Haresh Menghani, an analyst at FXStreet reports.Key quotes :READ MORE
Here is what you need to know on Monday, March 30:
The haven demand for the US dollar is back in play starting out a fresh week, allowing the greenback to recover some ground after last week’s plunge, although S&P 500 futures are rebounding and therefore, suggesting limited upside.
The optimism spurred by the US $2 trillion stimulus and global relief measures deployed to fight the coronavirus pandemic fades, as investors remain worried about the intensifying virus spread and mounting global recession fears, with lockdowns announced by most governments.
USD/JPY fell sharply towards 107.00, as the safe-haven yen drew bids amid falling Asian stocks and Treasury yields, although the losses were capped broad US dollar rebound. However, EUR/USD and the cable suffered the most, correcting last week’s surge. EUR/USD dropped back below 1.1100 ahead of the German Preliminary CPI report while GBP/USD surrendered the 1.24 handle.
Meanwhile, the Australian and New Zealand dollars also slipped against the greenback, despite the Chinese central bank’s surprise Repo rate cut. The Canadian dollar traded with sizeable losses, as oil prices slumped, with pandemic fears denting the oil demand outlook.
Coronavirus spread intensifies so does the economic risk around the world, with nearly 34,000 deaths reported. The US has emerged as the latest epicenter, with more than 137,000 cases and 2,400 deaths and lockdowns are toughening worldwide. US President Trump backtracked on its plans to re-open the economy by Easter, instead, he extended the social distancing guidelines until April 30. Across the Atlantic, Italy’s death toll is now the highest in the world at 10,023, Spain’s fatalities continue to climb while the UK warned of a six-month lockdown as New York state death toll tops 1,000.
Gold has come under heavy selling pressure and now heads back towards $1600 mark.
Cryptocurrencies are attempting a minor recovery after the weekend slump, with Bitcoin trading around $6,200.
Here is what you need to know on Monday, March 30:The haven demand for the US dollar is back in play starting out a fresh week, allowing the greenback to ...READ MORE
Thanks to swift action worldwide by central banks, global equities avoided a disastrous place, a possible combination of a 1930’s like depression and the 2008 financial crisis. In just a matter of weeks, massive monetary and fiscal stimulus was injected into the global economy, showing financial markets central banks and government leaders were not taking any chances with the shock that was about to hit consumption and production, also providing key relief to funding markets.
The unprecedented actions by the Fed has put a tentative top for the dollar, however the flight to safety could return if the duration and severity of the economical and financial disruptions worsen over the next couple weeks.
The focus next week will remain on the spread of the virus in Europe and the US. Unfortunately, it seems that stringent mitigation measures have not helped the curve as much as many have hoped for in the US, Italy and Spain.
A good amount of attention will also fall on the US labor market. Following the meteoric rise in last week’s jobless claims, traders will look to see if the number of unemployment filings continues to surge. Friday’s non-farm payroll report will also be closely watched as the US economy is about to have its first negative reading since October 2010.
Congress got the job done getting a $2 trillion stimulus package and now markets will try to figure out all the details. The calls for the fourth phase of stimulus will start to pick up as the virus spread intensifies across the US, but the passing of the massive economic support package has bought Congress some time for now.
The next few months will be key for the Presidential election and if the virus starts to test the healthcare systems of several red states, expectations could shift for a Biden upset in November.
The UK is in lockdown, unfortunately the measures weren’t implemented in time to save the Prime Minister and his Health Secretary, both of whom have tested positive. If only there was something they could have done. The pound fell 1% on the news – for some reason – but has since rebounded to trade 2% higher on the day. I’m not sure that’s even particularly irregular in these bizarre times.
The number of cases and fatalities is rapidly rising in the UK now and the hospitals are already overwhelmed, with emergency facilities now being set up in various cities and former NHS staff coming out of retirement to assist with the crisis. This is likely to get much worse before it gets better but now that the country is in lockdown and taking it seriously, the peak may not be too far away.
This was looking like a turnaround week for Italy until Friday when the country recorded 919 more deaths, taking the total to 9,134. There were positive signs this week though but the fear is that the virus has taken hold in the south – with many of the cases until now in the north – which is poorer and potentially less able to deal with the spread. This could be a very worrying phase two for Italy which has already suffered considerably.
Spain is still some way behind Italy in terms of fatalities but the numbers are rising at an alarming rate. The country reported 769 deaths on Friday, taking the total to 4,858. Spain has the fourth highest number of cases and has threatened to become the European epicentre but recent efforts may bear fruit.
Once again, the eurozone is showing why it’s years away from being anything resembling the United States of Europe. In times of need, rather than being decisive, countries are squabbling over whether to collectively raise funds to support the regions economy with “coronabonds”, as other countries are doing, or use a bailout mechanism which typically imposes strict conditions on a country. This is not going to help any anti-euro feeling within these countries as the block shows that, once again, in times of desperation, it can’t be relied upon.
While the rest of the world grapples with the spread of the coronavirus, China is looking to see signs that their economy is bouncing back. On Tuesday, China’s March official PMI reading could rebound strongly as many parts of the economy in March have resumed production.
The yuan will closely be watched following its worst week against a basket of its major trading partners since August. The PBOC may remain active in defending the yuan in order to keep markets calm.
The focus in Hong Kong will primarily remain on the coronavirus and the increased efforts on thwarting its spread. While Mainland China is having much progress with the virus, Hong Kong just saw its biggest daily increase. On Tuesday, Hong Kong’s February retail sales readings will show how bad of a hit tourism and domestic demand had due to the coronavirus. February and March data are expected to be terrible for Hong Kong and most of that is already priced in.
On Monday, the Monetary Authority of Singapore is widely expected to act aggressively and ease poliy further by both re-centering and reducing the slope of its currency band.
India could not wait to cut rates and boost liquidity. In what is becoming a recurring theme for central banks, the RBI acted on Friday, a full week in advance of their regularly scheduled policy meeting. The RBI is making sure markets know that they are being aggressive and that they still have tools they can use if the outlook deteriorates further.
India’s current lockdown measures will likely see the data get terrible in April, with hopes that a rebound will start in May.
Australia is in wait-and-see mode. They are preparing for several months of social distancing and anticipate further fiscal and monetary stimulus will be needed shortly. Traders may not put much weight with the upcoming retail trade and housing prices data. On Wednesday, some focus will fall on the minutes to the RBA’s emergency meeting.
The spotlight for New Zealand will primarily remain on the spread of coronavirus cases. The country has raised their lockdown level to four and incremental updates on the escalation of cases will likely be met with calls for further action by the RBNZ.
On Tuesday, the ANZ Bank New Zealand will release the business confidence index that will show a sharp decline in confidence and with the outlook.
Now that the Olympics have finally been postponed, investors are going to anticipate that the upcoming economic data and surveys will be a very high baseline that are not yet reflecting the coronavirus impact and minimal boost the Olympic games were to provide the economy.
The release of the BOJ Q1 Tankan Survey and February industrial production data will probably not move the needle.
This week has provided some welcome reprieve for oil prices, although even now they’re not trading too far off the lows. Even stabilization is welcome after an extraordinary period, with the impending global recession being compounded by the oil price war to smash prices to bits. The sell-off may have slowed but there’s still a lot of vulnerability to the downside and while $20 may have provided support so far for WTI, I wonder whether that will continue to be the case in the coming weeks.
Gold is holding onto its recent gains after rebounding strongly earlier this week as the Federal Reserve announced its unlimited, open-ended, quantitative easing program. That, combined with other measures, eased the upside pressure on the dollar and saw it pull back around 4%, aiding the rally in gold back to levels you would expect to see in times like this. It’s still seeing resistance around $1,640 but as long as we don’t see any more sharp shocks in equity markets, this will likely come under much more pressure.
Not a lot has changed as far as bitcoin is concerned over the last few days. It is continuing to trend higher but momentum has been dropping as it faces difficulty around $7,000. The improvement in general sentiment in the market appears to be supporting moves in cryptos but that may change. A break of $7,000 could be the catalyst for more sharp rallies but it could still see some resistance around $7,500.
Thanks to swift action worldwide by central banks, global equities avoided a disastrous place, a possible combination of a 1930’s like depression and the 2008 financial crisis. In just a matter of weeks, massive monetary and fiscal stimulus was...READ MORE
The US dollar remains on the back foot after plunging on Thursday alongside the third consecutive rise in stocks, yet S&P futures are pointing to a downside correction. Investors are cheering the Federal Reserve's unlimited Quantitative Easing program announced early this week, backed up by Chair Jerome Powell's commitment to supporting the economy. He said the Fed would "not run out of ammunition."
The Fed's previous efforts to ease the distressed demand for the dollar are bearing fruit as well. Another factor is the Senate's $2 trillion fiscal package which will likely be approved by the House later on Friday. T
US jobless claims leaped to 3.283 million, an increase of 1,053% and far above expectations, as companies let workers go, temporarily or permanently. The devastating figure seemed to add pressure on the dollar but did not deter the market.
GBP/USD was one of the primary beneficiaries of the dollar's sell-off, rising above 1.22 after trading at the 1.14 handle earlier in the week. The Bank of England left its policy unchanged in its third rate decision this month and after slashing rates and expanding its QE program. Chancellor of the Exchequer Rishi Sunak unveiled a plan to support almost all those who are self-employed.
While the Australian and New Zealand dollars also surged against the greenback, the Canadian dollar lagged as oil prices remain under pressure.
Coronavirus continues spreading around the world, with over 530,000 infected and more than 24,000 deaths. The US has surpassed China with the number of cases with yet another surge in New York state. Italy and Spain have seen some stabilization in mortalities, yet hospitals in these countries are overwhelmed, and the number of cases remains elevated. Additional figures will be followed by markets. Data from these Spain early in the day, New York, and finally Italy, are all set to rock markets.
EU leaders are split on the need for common bonds, dubbed "corona-bonds" as Germany remains opposed to sharing debt, opposing demands from France, Italy, and Spain. Negotiations are set to continue. The European Central Bank continues buying bonds, easing its capital key rules, and ready to dust off the Outright Monetary Transmissions (OMT) program from 2012. EUR/USD has also gained, trading well above 1.10.
Chinese Industrial Profits year-to-date through February are down 38.3% yearly, the worst on record.
The University of Michigan's final Consumer Sentiment measure for March may show a downgrade, reflecting shoppers' concerns.
Gold has been consolidating its gains trading above $1,600 but below the highs.
Cryptocurrencies are holding up in familiar ranges, with Bitcoin trading around $6,600.
The US dollar remains on the back foot after plunging on Thursday alongside the third consecutive rise in stocks, yet S&P futures are pointing to a downside correction. Investors are cheering the Federal Reserve's unlimited ...READ MORE
GOLD AND CRUDE OIL TALKING POINTS:
Gold prices were steady close to two-week highs in Asia on Friday. The coronavirus’ horrible impact on the global economy was underlined by truly horrific US employment data in the previous session but hopes for more, major governmental rescue action seems to be cushioning the blow.
A US package worth an estimated $2.2. trillion has passed the Senate and is reportedly expected by Speaker Nancy Pelosi to get through the House of Representatives later on Friday. That’s despite some market-rocking rumors that it might have been difficult to form a quorum there.
Leaders from the Group of 20 leading industrial powers pledged on Thursday to inject more than $5 trillion to the global economy to fight the pandemic and shield populations from its worst economic effects. Those effects have been on especially brutal display in the last 24 hours, notably in news that more than three million Americans signed up for joblessness-related benefits last week.
No wonder gold looks perky then. Admittedly the market remains beset by the impulse among some investors to cash out in order to cover losses elsewhere. However the febrile economic atmosphere engendered by the contagion, to say nothing of rampant money-printing, seems set to underwrite a strong underlying bid for the asset this year.
Focus in the market and indeed all others will remain on Congress as the week winds down. President Donald Trump took a call with his Chinese counterpart Xi Jinping Friday which was apparently cordial, constructive but neither side gave much more away.
Crude oil prices rose at the start of the session but pared their gains as it went on.
They are finding some support in the same state-aid hopes which have listed other markets. However, staggering Global Positioning data, which reportedly suggest an 82% drop in major US cities’ congestion, along with the ongoing price war between major oil exporters Russia and Saudi Arabia, are likely to make this fleeting.
Prices have left the lows of mid-March far behind but the market doesn’t look terribly confident at its current, two week highs. Daily trading ranges have narrowed. This doesn’t seem likely to last however and the direction of any break in the current narrow daily-close trading range could be instructive. Should consolidation be seen around the $1600/ounce handle, that could be a sign that the bulls are preparing themselves for another try at this month’s near-18-year highs. A slide back below that point could be a sign that the recent lows are back in play but, given the clear levels of fundamental uncertainty now dogging markets, prolonged weakness for gold seems highly unlikely.
Buffeted by headwinds both general to all markets and specific to its own, crude oil is having far more trouble than gold in leaving behind this month’s notable lows. Once again smaller daily trading ranges testify to heightened uncertainty, understandable though that may be. That said, the bulls have failed to regain even the $27.70 area from last week which forms the first obvious resistance point for this market.
If they can’t into this week’s close then it will hard to avoid the conclusion that the path lower is open once more, even if the $20/barrel point is likely to remain a formidably psychological barrier,
Gold prices were steady close to two-week highs in Asia on Friday. The coronavirus’ horrible impact on the global economy was underlined by truly horrific US employment data in the previous session but hopes for more, major governmental rescue action seems to be cushioning the blow...READ MORE
The Asian equities tracked the Wall Street rally on Friday, induced by the US $2 trillion stimulus package. The market mood, however, remained cautious amid no stopping in the coronavirus spread globally. The US outstripped China with the most infections while there is no signs of a slowdown in the number of cases across Europe.
Most major Asian markets rallied over 1%, barring the Australian stocks, which sank over 5% amid rising concerns over the virus impact on the economy following stricter measures announced by the Australian PM Scott Morrison. The tepid risk tone was well reflected by the losses in the US equity futures while broad US dollar sell-off extended on the US fiscal stimulus-led easing funding pressures
Amongst the G10 fx space, USD/JPY lost over 1% and fell back on the 108 handle while the Aussie rallied to a nine-day high above 0.6100, as markets cheered the upbeat telephonic conversation between US President Donald Trump and his Chinese counterpart Xi Jinping about the virus.
EUR/USD tested the 200-DMA hurdle on its corrective advance from sub-1.07 levels while the cable briefly regained the 1.2300 level before reverting to 1.2250-70 region amid concerns over the EU-UK post-Brexit trade talks.
Oil prices kept its recovery mode intact above $23 mark and added to the gains in the Canadian dollar, as USD/CAD breached the key 1.4000 level. Meanwhile, gold prices trimmed losses and regain $1640 amid persistent dollar weakness.
Main topics in Asia
USD/MXN Price Analysis: Mexican peso drops from seven-day top as S&P downgrades Mexico
EU lawmakers back aid for virus-hit economy in remote vote – Reuters
Tokyo area March overall CPI +0.4 pct YoY
China reports 55 COVID-19 cases in Mainland
US House of Representatives sets two hours of debate on coronavirus aid bill Friday beginning at 1300 GMT
Planned negotiating rounds on the UK's future relationship with the EU have been abandoned – The Guardian
South Korea reports 91 new coronavirus cases and eight more deaths
US Pres. Trump: Could open up farm belt, parts of the mid-West, 'other places'
House may not vote on the US coronavirus relief bill on Friday - Reuters
New Zealand's Robertson: Wage subsidy may cost NZ $12 billion
Australian PM Morrison: To tighten enforcement on self-isolation for citizens returning from overseas
RBI slashes key repo rate by 75bps to 4.40% to fight coronavirus impact
US Pres. Trump: Discussed in great detail the CoronaVirus with China’s Pres. Xi
China’s Pres. Xi: Willing to offer support to US for coronavirus control
There is nothing of relevance due on the cards from the European session, in terms of the economic data releases. Therefore, the fx markets will continue to remain at the mercy of the US dollar dynamics and broad risk trends amid heavy news flow, as coronavirus-related updates dominate.
The Bank of England (BOE) quarterly bulletin will be eyed ahead of the US data flow, due at 1230 GMT, including the Core Personal Consumption Expenditure (PCE) – Price Index and Personal Spending figures. Next in focus remains the UoM Consumer Sentiment data for March due at 1500 GMT.
The House of Representatives vote on the US Coronavirus Bill will grab some attention later in the American morning, with a two-hour debate set up ahead of the voice voting.
Next of note remains Baker Hughes US Oil Rigs Count data due at 1700 GMT, which will wrap an eventful and hectic week.
EUR/USD probes 200-day MA on US dollar weakness
Dollar sell-off is again fuelling gains in EUR/USD, pushing the pair higher to key average hurdle. Downside risks persist as the virus outbreak is showing no signs of slowing down in the Eurozone.
GBP/USD fails to hold above 1.2300 amid UK’s coronavirus woes, Brexit pessimism
GBP/USD remains well bid above 1.2200, having pulled back from the highest levels in nine days reached above 1.23. Coronavirus cases in the UK surge. The EU-UK Brexit talks stalled, UK PM Johnson accused to put Brexit over breathing.
US Michigan Consumer Sentiment March Preview: Outlook equals consumption
March sentiment expected to fall upon revision. Widespread job losses will drive overall sentiment down. Weaker consumer sentiment will likely mean lower consumer spending.
Gold risk reversals flip for calls
Gold calls are claiming higher implied volatility premium than puts for the third straight day, indicating investors are adding bets to position for strength in the yellow metal.
The Asian equities tracked the Wall Street rally on Friday, induced by the US $2 trillion stimulus package. The market mood, however, remained cautious amid no stopping in the coronavirus spread globally...READ MORE
The Fed's unlimited QE, $2 trillion US stimulus package weighed on the USD. Thursday's key focus will be on the US macro data, Haresh Menghani from FXStreet informs.
“Persistent offered bias around the US dollar, all against the backdrop of the Fed's unlimited QE, was seen as one of the key factors driving the pair higher. Investors further took comfort from the passage of a massive $2 trillion US stimulus package.”
“On Thursday, the European Central Bank is scheduled to release the monthly Economic Bulletin.”
“The key focus will be on the US initial weekly jobless claims for the week ended March 20. Economists are looking for claims to soar to 1,000K as compared to the previous week's reading of 281K.”
“The US economic docket also features the release of the final GDP print, which is expected to confirm that the economic growth stood at 2.1% annualized pace during the final quarter of 2019 and might fail to provide any meaningful impetus.”
The Fed's unlimited QE, $2 trillion US stimulus package weighed on the USD. Thursday's key focus will be on the US macro data, Haresh Menghani from FXStreet informs...READ MORE
CRUDE OIL AND GOLD TALKING POINTS:
Crude oil prices were back close to where they began Thursday’s Asia Pacific session as it began to wind down. Early gains were pared into the afternoon’s proceedings as investors nervously awaited key US labour market data.
In US hours markets will learn how many Americans signed on for unemployment benefits for the first time in the week to March 21, with millions of new claimants now expected to be added to the roster thanks to the coronavirus’ economic ravages.
This prospect has loomed over the passage of a $2 trillion stimulus and assistance bill through the US Senate, powering it towards a vote in the House or Representatives on Friday. Energy marked participants will be particularly aware that such government action huge as it may be can only help once recovery starts. It can’t of itself bring about the crucial lowering of infection rates.
The price war between major exporters Saudi Arabia and Russia threatens crude oil markets with a massive supply glut at a time when demand is collapsing. Sure enough US crude inventories rose by 1.6 million barrels last week, a ninth consecutive week of gains.
Gold prices fell back, reportedly as investors again rushed into cash to cover losses incurred elsewhere. This pattern has been much seen in the precious metal market this year, with prices falling despite the clear economic uncertainty against which the likes of gold and silver supposedly hedge.
This market can still expect plenty of support should those US labor market numbers come in anything like as weakly as investors now fear.
That price clash may be one fundamental reason why US crude oil prices have made so little headway even as the hope or reality of various large stimulus programs worldwide has lifted other markets. For now prices remain very close to the seventeen-year lows plumbed earlier this month, with the bulls unable to gird themselves for a serious attempt at even near-term resistance in the $27.22/barrel area.
Multi-million claimant rises in the US labor data could well make another test of those lows unstoppable. A moribund jobs market will clearly destroy near-term energy demand as supply is about to ramp up.
Gold prices have similarly faltered ahead of key resistance, in this case the psychological $1650 level. It must be likely that another upside test will come shortly, but for the moment downside focus is on a broad band of support between the lows of early March and those of February.
In the current environment slips back toward this level may well represent little more than a better opportunity to go long, but those who do so will need to be aware that this market will remain vulnerable to slippage whenever investors need cash to cover losses elsewhere.
Crude oil prices were back close to where they began Thursday’s Asia Pacific session as it began to wind down. Early gains were pared into the afternoon’s proceedings as investors nervously awaited key US labour market data...READ MORE
Here is what you need to know on Thursday, March 26:
The US Senate finally passed the $2 trillion stimulus bill to mitigate the impact of coronavirus, and the House will soon take it. However, the market's enthusiasm has faded away. The move is partly a "buy the rumor, sell the fact" reaction but also the details of the package, which include a significant chunk of loans rather than grants.
The euro and yen are – whose economies have current account surpluses – are gaining ground against the greenback while the dollar is beating the pound and commodity currencies. The present action in money is a break from the "dollar vs. everything" trade that has been seen earlier as there seems to be no distress.
Coronavirus has taken the lives of over 21,000 and has infected around 470,000. Spain suffered its grimmest day with 738 deaths, while the signs of "flattening the curve" are seen in Italy, where the number of new infections has stabilized. US cases near 70,000, yet New York City is somewhat optimistic. The Japanese government is considering adding restrictions amid an increase in cases.
The focus today is US weekly Unemployment Claims, which may soar to 1.5 million and perhaps higher. Lockdowns have triggered massive layoffs. Some estimate the figure could be north of three million.
The US also releases final Gross Domestic Product figures for the fourth quarter of 2019 – pre-crisis levels. Economists foresee a deep recession due to Covid-19. Jerome Powell, Chairman of the Federal Reserve, is scheduled to give an interview ahead of the data. The Fed stunned markets on Monday by announcing an open-ended Quantitative Easing (QE) program.
GBP/USD trading has been extremely volatile, and the Bank of England's third rate decision in as many weeks may trigger additional ups and downs. The BOE may introduce more QE or loans but is unlikely to cut its rates.
The European Central Bank is considering dusting off its old Outright Monetary Transactions (OMT) program that allows it to buy unlimited government bonds from specific countries, providing another boost to their economies.
On the other hand, Germany and the Netherlands are reportedly opposed to issuing common European bonds, dubbed "corona-bonds." EU leaders will hold a videoconference later in the day. The news follows a letter by nine countries, including France, Italy, and Spain, demanding to share the debt burden.
Gold is consolidating around $1,600, looking for a new direction. Oil is on the back foot, with WTI hovering around $24.
Cryptocurrencies have been edging lower, with Bitcoin trading around $6,600.
Here is what you need to know on Thursday, March 26:The US Senate finally passed the $2 trillion stimulus bill to mitigate...READ MORE
EUR/USD Wednesday's four-hour chart is painting a positive development. Yohay Elam, an analyst at FXStreet, takes a look at the EUR/USD pair technical picture.
“Momentum on the four-hour chart has turned to the upside, a positive development, yet EUR/USD still trades below the 50, 100, and 200 Simple Moving Averages. The picture is improving.”
“Resistance awaits at the daily high of 1.0840, the daily high, followed by 1.0880, Tuesday's peak, which also converges with the 50 SMA.”
“Support awaits at 1.0750, Tuesday's low, and then by the 2020 trough of 1.0640.”
EUR/USD Wednesday's four-hour chart is painting a positive development. Yohay Elam, an analyst at FXStreet, takes a look at the EUR/USD pair technical picture...READ MORE
Traders scaled back their open interest positions by around 12.7K contracts on Tuesday, according to preliminary data from CME Group. Volume, instead, rose for the second session in a row, this time by nearly 150K contracts.
Gold looks capped around $1,650/oz
Prices of the ounce troy of the precious metal appears to have met strong resistance in the $1,650 area. Declining open interest in gold coupled with positive price action hints at the likeliness that further gains look limited around the $1,650 per ounce for the time being, opening the door at the same time for a potential consolidation or correction lower.
Traders scaled back their open interest positions by around 12.7K contracts on Tuesday, according to preliminary data from CME Group. Volume, instead, rose for the second session in a row, this time by nearly 150K contracts...READ MORE
Here is what you need to know on Wednesday, March 25:
The market mood remains upbeat as the US Senate reached a deal on a $2 trillion stimulus package after around-the-clock talks. Stocks remain bid after staging the strongest rally since 1933 on Tuesday. American politicians are getting their act together as the number of domestic cases topped 55,000 and the World Health Organization said the world's largest economy is set to be the next epicenter of the disease.
The agreement includes cheques to most Americans, aid to small businesses, unemployment insurance, tax deference, and more. The bill is set to turn into law by the end of the week. Some of the funding comes from the Federal Reserve's unlimited Quantitative Easing program announced on Monday.
While Asian stocks are on the rise, S&P futures are on the back foot, potentially pointing to a "sell-the-fact" reaction to the stimulus deal.
President Donald Trump said he wants to see the lockdowns removed by Easter, in around three weeks' time, while state and local officials are adding restrictions to curb the spread of Covid-19.
Preliminary Purchasing Managers' Indexes from the US, the UK, and the eurozone plunged in services sector activity while manufacturing is holding up due to quirk in the calculation, counting delays as a positive factor.
Commodity currencies are the most significant beneficiaries on Wednesday, with AUD/USD recapturing 0.60 and NZD/USD also advancing despite a nationwide lockdown. USD/CAD has dropped below 1.44 as WTI Crude Oil closes on $25. Crude oil inventories are eyed.
Another winner is GBP/USD which is trading well over 1.18, which is extending its recovery as Brits get used to their lockdown. UK inflation figures for February will likely be ignored by markets as it predates the crisis.
EUR/USD is hovering around 1.08, relatively stable after Italy reported a rise in the number of deaths and Spain's number of mortalities continues rising quickly. Epidemiologists want to see the curve flattening. The final German IFO Business Climate for March is set to confirm a sharp drop in confidence.
India has joined the long list of countries imposing lockdowns, ordering around 1.3 billion people to stay at home.
Gold is battling $1,600 after breaking above the round number on Tuesday. The precious metal is benefiting from the Fed's figures.
US Durable Goods Orders for February are forecast to show falls, but the pre-crisis figures will likely be overlooked in favor of updated coronavirus figures from all over the world. Over 400,000 people have been infected and nearly 19,000 have died all over the world.
Cryptocurrencies have been consolidating their gains, trading above $6,500.
Here is what you need to know on Wednesday, March 25:The market mood remains upbeat as the US Senate reached a deal on a...READ MORE
Despite the slump in the UK and Euro area services sector activity as well as the contraction in the factories, which points towards a recession, the risk-on trading action in the European trading remains unperturbed.
Markets continue to cheer the stimulus measures deployed by the German government and the US Federal Reserve (Fed) to tackle the economic fallout from the coronavirus pandemic. Further, the prospects of the US Congress reaching the economic package deal against the virus spread also added to the renewed optimism across the global markets.
The market mood received a further boost amid signs of a likely slowdown in the virus spread in Italy, the new epicenter of the outbreak. Italy’s new coronavirus cases fall for a second day to near 700, slightly less than the previous day.
Consequently, S&P 500 futures extend the rally by 5% and hit the limit-up band of 2,333.50. Among the European indices, the pan European benchmark, EuroStoxx 50 is up 5.80%, Germany’s DAX jumps 6.50% while the UK’s FTSE 100 jumps 4+% and French CAC 40 gains nearly 4% so far this session.
Despite the slump in the UK and Euro area services sector activity as well as the contraction in the factories, which points towards a recession, the risk-on trading action in the European trading remains unperturbed.READ MORE
The GBP/USD pair climbed to fresh session tops, with bulls now looking to build on the momentum beyond the 1.1700 mark despite mixed UK PMI prints.
The sterling regained some positive traction on Tuesday and was being supported by the UK Prime Minister Boris Johnson's stricter lockdown measures to combat the COVID-19 pandemic.
The bid tone surrounding the British pound remained unabated following the disappointing release of the UK Services PMI, which was largely negated by slightly better Manufacturing PMI print.
The flash version of the UK Services PMI dropped to 35.7 in March, showing a sharp contraction in the business activity, while the UK Manufacturing PMI edged lower to 48 vs. 45 expected.
Meanwhile, some notable US dollar weakness, amid easing concerns over tightening liquidity, remained supportive of the pair's bid tone through the early European session on Tuesday.
It is worth recalling that the Fed on Monday announced to buy unlimited amounts of Treasury bonds and mortgage-backed securities to support the economy struggling from the coronavirus pandemic.
It will now be interesting to see if the pair is able to capitalize on the momentum or once again meets with some fresh supply at higher levels as the focus now shifts to the release of the US PMI prints.
The GBP/USD pair climbed to fresh session tops, with bulls now looking to build on the momentum beyond the 1.1700 mark despite mixed UK PMI prints...READ MORE
The single currency is prolonging the upbeat mood on Tuesday and is helping EUR/USD to break above the key 1.0800 barrier to print fresh 3-day highs near 1.0870.
EUR/USD gains ground on USD-weakness
EUR/USD is advancing for the third consecutive session on Tuesday, extending the optimism seen at the beginning of the week and managing well to surpass and keep business above the key barrier at 1.0800 the figure.
The pair is deriving support pari passu with the corrective downside in the greenback, all after the Federal Reserve announced an open-ended programme of purchases of Treasuries and MBS on Monday, adding to the other stimulus measures released in previous days.
In addition, better-than-expected preliminary manufacturing PMIs in Germany and the broader Euroland for the current month have been also lending legs to the ongoing recovery in the shared currency.
Later in the day and across the pond, February’s New Home Sales are due seconded by the Richmond Fed manufacturing gauge and the advanced Markit’s Manufacturing/Services PMIs for the current month.
What to look for around EUR
EUR/USD remains in recovery-mode at the beginning of the week, always following USD-dynamics, developments from the coronavirus and the response from central banks. On the latter, the recently announced extra measures from the Fed has been collaborating further with the rebound in the pair from recent YTD lows. On the macro view, better-than-forecasted PMIs in both Germany and the broader Euroland opened the door to some respite in the prevailing downtrend of fundamentals in the region, although the underlying stance still remains well on the negative side.
EUR/USD levels to watch
At the moment, the pair is gaining 0.98% at 1.0832 and a breakout of 1.0866 (weekly high Mar.24) would target 1.0992 (monthly low Jan.29) en route to 1.1015 (55-day SMA). On the other hand, immediate contention emerges at 1.0635 (2020 low Mar.23) seconded by 1.0569 (monthly low Apr.10 2017) and finally 1.0494 (monthly low Mar.2 2017).
The single currency is prolonging the upbeat mood on Tuesday and is helping EUR/USD to break above the key 1.0800 barrier to print fresh 3-day highs near 1.0870....READ MORE
EUR/USD has eroded the 35 year uptrend at 1.0782/74 on a weekly basis. Karen Jones from Commerzbank analyzes the EUR/USD pair technically.
“1.0782/74 was major support and it has been broken. Failure here is considered to be a major breakdown and targets 1.0352, the 2016 low, on the way to 1.0000.”
“Rallies should find initial resistance at 1.0926/41, the September and October lows.”
EUR/USD has eroded the 35 year uptrend at 1.0782/74 on a weekly basis. Karen Jones from Commerzbank analyzes the EUR/USD pair technically...READ MORE
Here is what you need to know on Monday, March 23:
The constant increase in coronavirus cases and deaths, alongside the failure of US politicians to strike a deal on fiscal stimulus is weighing heavily on markets. US stock futures hit limit down alongside Asian stocks, and bonds are in demand. The drop in US yields is weighing on the dollar vs. majors, with EUR/USD recovering above 1.07 and USD/JPY dropped under 110. The greenback is gaining ground against commodity currencies, oil is falling, and gold remains pressured under $1,500.
Coronavirus has taken the lives of over 14,000 people and infected more than 330,000. The death tolls in Italy is especially devasting, nearing 6,000. The eurozone's third-largest economy announced tighter restrictions, closing non-essential factories. Spain's death toll also extends its rapid increase, with the government announcing that the state of emergency will last through at least April 11.
German Chancellor Angela Merkel is in self-isolation after a doctor she was in contact with tested positive for Covid-19. She announced more rigid limits on movement. Eurozone Consumer Confidence is set to show a significant drop later in the day. Members of the European Central Bank say more can be done after last week's €750 billion in new bond-buying.
In the UK, Prime Minister Boris Johnson hinted of tougher measures to enforce social distancing after the public seemed to flout the guidance over a sunny weekend. London announced vast support to employees losing their jobs.
US coronavirus cases reached 35,000, the third-highest in the world as testing has been ramped up. James Bullard, PResident of the Saint Louis branch of the Federal Reserve, said the unemployment rate could hit 30% and Gross Domestic Product could fall by 50% in this planned shutdown. Bullard said everything is on the table while Neel Kashkari, his colleague from Minnesota, said that the Fed has more tools.
Senate Democrats voted against a fiscal stimulus bill brought forward by Republicans as it consisted of too few strains attached. Democrats are opposed to unlimited bailouts. Reports suggest the size could exceed $2 trillion dollars and would include 50-year bonds funded by the central bank. Frantic negotiations continue in Washington.
Finance ministers and central bankers of the G-20 will hold a video conference later on but are unlikely to issue a statement.
The Bank of Japan stepped into markets by offering ¥800 billion of repo operations. Tokyo is under growing pressure to cancel the Olympics due in late July.
NZD/USD: The Reserve Bank of New Zealand announced a Quantitative Easing program while the government places the country on lockdown. NZD/USD has been one of the biggest losers, falling around 1%. The Reserve Bank of Australia kicked off QE last week. In the eurozone and in Britain, printing new money seemed to help the currencies.
Cryptocurrencies are edging higher after ticking down over the weekend. Bitcoin is trading just under $6,000.
The constant increase in coronavirus cases and deaths, alongside the failure of US politicians to strike a deal on fiscal stimulus is weighing heavily on markets. US stock futures hit limit down alongside Asian stocks, and ...READ MORE
The UK is not taking the coronavirus lightly, despite initial criticism against the government to the contrary. The number of cases now stands at 3,983 with 177 deaths, a significant acceleration on a day earlier. Much darker days lie ahead but both the government and Bank of England have announced huge fiscal and monetary easing packages and made clear that they will continue to add to them as the situation develops.
The pound sold off heavily this week, despite these efforts, including an incredibly volatile day on Friday in which the currency gave up most of its earlier gains. It’s not likely to get easier for the country or anything associated with it. The BoE meets next week but the way they’re easing at unscheduled meetings, I’m not sure that’s even particularly important any more.
The ECB disappointed the markets by not cutting interest rates at the meeting last week but responded with a massive surprise QE program on Wednesday that made up for it. The temporary bond purchases, until the end of the year, named Pandemic Emergency Purchase Program, took pressure off the rising yields across Europe. Central banks aren’t taking this lightly so we can probably expect more unscheduled announcements for weeks to come.
The data is about to get ugly for the US economy. It is a worrying time for many Americans and the next jobless claims release will be the opening act to a string of terrible economic data releases. Filings for unemployment benefits are going to skyrocket well above their record high that occurred during Hurricane Sandy in 2012. With half of US workers receiving hourly pay, filings for restaurant, retail, hotel, and travel businesses could see well over a million claims filed for the week ending March 21st. Expectations are all over the place with one analyst eyeing 3-million jobless claims.
The Fed has been very active in delivering stimulus and so has the government. Washington has already passed two phases of virus relief with the big $1.3 trillion economic stimulus potentially set to get voted on early in the week.
The lockdown efforts will likely intensify in the US and all eyes will be on how quickly healthcare capacity is reached. Any slowing in the spread of the coronavirus could prove to be supportive for risk appetite, but all early signs suggest that will probably not be the case.
The Democrats have quickly settled on former-VP Joe Biden as the nominee, technically not official, but pretty much guaranteed. Biden will lose a lot of momentum as social distancing will prevent him from holding rallies. US politics should take a backseat for a couple months until Washington is able to do everything they can for providing support to those impacted by the coronavirus.
Industrial Profits due next Friday. Investors pricing a recovery China for now as new coronavirus cases are plummeting to zero. Faces an external demand shock from coronavirus.
A resurgence of coronavirus sees double dip. Authorities tightly managing stock market and currency volatility. Stocks could suddenly collapse if authorities step aside.
Economy mired in a deep recession due to coronavirus slowdown. On the plus side, protests have subsided to almost nil. No significant data or events next week. Cathay Pacific slashes capacity by 96%.
Covid-19 could weigh on the economy leaving national champions like Cathay Pacific bleeding. Sentiment on equity market very fragile.
A huge winner from oil price collapse will help the RBI stagflation fight. No data of significance. Credit markets under strain post the RBI takeover of Yes Bank
A sudden spurt of coronavirus cases could overwhelm health system. INR and Nifty as risk of declines as investors flee. Credit markets could become very tight as Yes Bank failure delivers another blow to the banking system. Cap for Yes Bank withdrawals ends next week. A bank run has the potential for domino in the financial sector.
Panic buying of consumer staples as coronavirus cases increase. The slowdown in the domestic economy as borders are shut. RBA cut rates and announced a massive QE programme. Will do what it takes. AUD crushed, hitting multi-decade lows. Massive stock market volatility. Members told to decrease the number of trades by 25%.
There is a real risk of heavy intervention by the RBA. The stock market may introduce trading curbs and/or shorten trading hours.
No significant data. Containment measures appear to be working well with low number of cases. Like AUD, NZD has been heavily sold, hits GFC low. Remains vulnerable to further resource price drops. RBNZ cut rates to 0.25% and preparing other measures if needed. No sign of housing market stress or job losses.
Spike in coronavirus cases will put pressure on NZ stocks. More likely is a massive short squeeze as NZD is hugely oversold.
Doubts persist over true numbers of coronavirus cases. BoJ no cut but increased QE. Fiscal stimulus package from the finance ministry is still imminent. No data of note. High risk of Olympics cancellation, blow to the economy. Nikkei refusing to rally when rest of Asia and the US do is a bad sign.
Doubts persist over Japans true coronavirus numbers. Risk of Olympic cancellation. Delayed response from the government on the fiscal front. Any of these factors can send Japan equities much lower, quickly.
The dollar has come back into favour and rapidly, despite a slew of measures from the Federal Reserve to support the economy and ensure the plumbing of the financial markets continues to function. The dollar has been soaring to trade at its highest level since the start of 2017. Expect to see a lot more focus on emerging markets as a result, particularly those with large dollar-denominated debt and current account deficits.
It’s been a wild ride for oil and today was no different. Early gains were short-lived and heavy losses followed once again. It’s the perfect storm for oil which is facing a global recession and an oil price war. The latter can be avoided but no side is showing any indication that it’s going to blink first.
Gold prices appear to be stabilizing but its role in the markets right now is anyone’s guess. Today’s it’s rebounded alongside the improvement in risk appetite, while falling for much of the week as central banks around the world threw the kitchen sink at the coronavirus. Their efforts are not in vain but we’re not seeing the surge in demand for gold that we’ve seen in the past when the market is flooded with liquidity. I feel there may be a lag effect, with investors still liquidating gold positions to fill holes elsewhere but only time will tell.
No one will be more relieved than crypto fans about the rebound over the last 48 hours. After falling 63% from mid-February to mid-March, it’s now rallied more than 70% in less than a week to trade close to $7,000. It will be difficult to maintain these gains though as I don’t think the worst in the markets is behind us and cryptos have clearly been among the victims. Worse days may still lie ahead.
The ECB disappointed the markets by not cutting interest rates at the meeting last week but responded with a massive surprise QE program on Wednesday that made up for it. The temporary bond purchases...READ MORE
Gold continued gaining some positive traction through the early European session and shot to fresh daily tops, around the $1514-15 region in the last hour.
The precious metal once again managed to attract some buying ahead of the $1450 strong horizontal support – or YTD lows set at the beginning of this week – and snapped two consecutive days of losing streak. The early Asian session downtick remained limited amid mounting fears over the economic crisis from the coronavirus pandemic.
This coupled with some aggressive US dollar long-unwinding trade provided a goodish lift to the dollar-denominated commodity. A coordinated effort by central banks across the world helped ease market concerns about tightening liquidity conditions and prompted some USD profit-taking, all against the backdrop of the recent strong bullish run.
Gold continued gaining some positive traction through the early European session and shot to fresh daily tops, around the $1514-15 region in the last hour...READ MORE
Economist at UOB Group Lee Sue Ann assessed the recent announcements by the ECB.
“In an unexpected move, unveiled late on Wednesday (18 March), the European Central Bank (ECB) announced a new EUR750bn bond-buying programme, called the Pandemic Emergency Purchase Programme (PEPP).”
“In a nutshell, this programme will last until the end of 2020, and will target both publicand private-sector assets.”
“In the press release, the Governing Council of the ECB stated that it was committed to playing its role in supporting all citizens of the euro area through this extremely challenging time and would ensure that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb this shock.”
“Just slightly less than a week ago on 12 March, the ECB had disappointed markets by keeping its three key interest rates unchanged; but pledged instead to re-open its dormant quantitative easing (QE) programme to support the economy as it grapples with the COVID-19 pandemic.”
“In all, we think the ECB has made a fairly aggressive move here… Whilst we think that these monetary policy measures will be better complemented with even more fiscal measures; this is, for now, definitely Lagarde’s “whatever it takes” moment.”
“In an unexpected move, unveiled late on Wednesday (18 March), the European Central Bank (ECB) announced a new EUR750bn bond-buying programme, called the Pandemic Emergency Purchase Programme...READ MORE
Here is what you need to know on Friday, March 20:
The US dollar takes a breather and is retreating after raging across the board throughout the week, as stocks find some calm after a wild week amid the coronavirus crisis. The respiratory disease has already taken the lives of over 10,000 people worldwide, with over 244,000 infected.
The Federal Reserve expanded its dollar swap program to additional central banks on Thursday after the initial move on Sunday to ease the pressure on the greenback. In the US, California issued a state-wide order to stay at home and New York mayor Bill de Blasio warned the city could run out of medical supplies. Lawmakers in Washington continue working on a relief bill aimed to be concluded by Monday. Other states may follow California.
EUR/USD is trading at the 1.07 handle after hitting 1.0652 on Thursday, the lowest since 2017. The European Central Bank introduced a new Quantitative Easing worth €750 billion to support vast government spending in Europe as several countries are under lockdown.
Italy has surpassed China in the number of deaths from coronavirus and is considering extending and deepening its restrictions. The disease continues spreading in Germany, France, and Spain with the latter seeing hospitals filling up.
GBP/USD is trading at the 1.16 handle after ranging over 300 pips on Thursday. The Bank of England surprised with the second rate cut in a week and also enlarged its QE program by £200 billion, an increase of around 45%. The move came as the new governor Andrew Bailey and his colleagues feared disorderly market action as Brits braced for a lockdown.
Prime Minister Boris Johnson said Britain could turn the tide within 12 weeks after closing schools and taking other measures. Chancellor of the Exchequer Rishi Sunak is set to introduce new measures to support the economy later in the day. Brexit talks in doubt: David Frost, Chief UK Brexit negotiator is in self-isolation after showing symptoms of Covid-19 and as his European counterpart said he tested positive.
Oil prices have been surging into Friday, with WTI already some 30% off the lows of nearly $20 on Wednesday. The Canadian dollar has recovered, with USD/CAD trading at the 1.43 handle after topping 1.46 earlier this week. Canadian retail sales figures for January, before the crisis, are on the agenda today.
AUD/USD is also bouncing from the 17-year lows and is around at the 0.58 handle as the Reserve Bank of Australia began implementing its QE program. NZD/USD is also some 100 pips higher on the day, at the 0.57 handle.
USD/JPY is battling 110 after surpassing the round number on Thursday. The currency pair is moving with the dollar with the yen losing its safe-haven status.
US weekly jobless claims leaped to 281,000 from 211,000 in the first sign that the crisis is set to trigger unemployment. President Donald Trump has reportedly asked states not to publish employment figures while Goldman Sachs sees unemployment hitting 2.25 million. US Existing Home Sales for February are due out today
On Wall Street, a considerable amount of options expire on Wall Street, in what is called "quadruple witching" – that usually causes high volatility. With markets already wild, it could add fuel to the fire.
Cryptocurrencies are on the rise with Bitcoin topping $6,000 and other digital assets following suit.
The US dollar takes a breather and is retreating after raging across the board throughout the week, as stocks find some calm after a wild week amid the coronavirus crisis. The respiratory disease has already taken the lives of over 10,000 people worldwide, with over 244,000 infected...READ MORE
Bank of Canada (BoC) commits to do what is necessary to keep system running, Dawn Desjardins, a VP & Deputy Chief Economist at the Royal Bank of Canada reports.
“The BoC Governor did not make any new policy announcements today but ran through the long list of policies put in place to support the financial system and ensure that credit is available to households and businesses.”
“The bank has been clear that there are more policy levers that could be pulled in the toolkit. These include lowering the overnight rate to the lower bound of 0.25% and employing additional non-traditional measures.”
“The Governor said that what is important is that the programs can be scaled up or down as needed.”
“The private sector is also working to help Canadian households with Canada’s banks allowing customers to defer mortgage payments for up to six months if faced with disruptions associated with the crisis.”
Bank of Canada (BoC) commits to do what is necessary to keep system running, Dawn Desjardins, a VP & Deputy Chief Economist at the Royal Bank of Canada reports...READ MORE
WTI plunged again as Saudi Arabia instructed Aramco to keep production at 12.3m barrels per day. News for the sector continued to deteriorate, economists at ANZ Research inform.
“The market took little comfort central bank policy measures to lessen the economic impact. However, it was ongoing supply-side concerns that really pushed crude prices lower.”
“The Saudi Ministry of Energy directed state-producer Saudi Aramco to continue to supply crude oil at levels of 12.3mb/d over the coming months. Russia, a key member of that agreement also appears to be battening down the hatches.”
“The collapse in Brent crude below USD25/bbl has resulted in several OPEC members calling for new action. Iraq urged the group to hold fresh talks to address the crisis. For the moment, key members Saudi Arabia and Russia have rejected those calls.”
WTI plunged again as Saudi Arabia instructed Aramco to keep production at 12.3m barrels per day. News for the sector continued to deteriorate, economists at ANZ Research inform...READ MORE
EURO, EUR/USD TECHNICAL ANALYSIS, GERMAN IFO DATA – TALKING POINTS
Early into Asia’s Thursday trading session, ECB President Christine Lagarde announced a 750b Euro coronavirus stimulus package and reasserted the central bank’s commitment to the Euro. For seasoned traders, this kind of rhetoric echoed a similar message her predecessor Mario Draghi expressed when he said monetary authorities will do “whatever it takes” to save the Euro from the regional debt crisis in 2012.
The cycle-sensitive Australian and New Zealand Dollars fell while the Euro ticked higher following Ms. Lagarde’s comments. Jobs data from Australia crossed the wires but failed to elicit a notable market reaction as traders anxiously waited for the RBA rate decision. AUD fell after the central bank cut interest rates to another record-low at 0.25 percent and will target “yields on three-year government bonds of around 0.25%”.
EURO AT RISK OF AGGRESSIVE LIQUIDATION AHEAD OF GERMAN IFO DATA
Preliminary German IFO data for March in the upcoming European session may amplify EUR/USD losses after ZEW data earlier this week sent the Euro tumbling below key support. While markets are rarely paying attention to economic indicators now amid blaring headlines from the coronavirus, German data – at least, for Europe – still has the capacity to move markets.
As the “steam engine of Europe”, the growth outlook for Germany has the potential to send a continental chilling effect if the region’s economic hub begins to sputter. IFO business climate, current assessment, and expectations components will be closely watched by traders, particularly the latter due to its forward-looking nature.
New coronavirus infections are now occurring mostly outside of mainland China with Europe become the new epicenter of the pandemic according to the World Health Organization (WHO). The European Central Bank Governing Council will be holding an emergency call on a response to the virus following France’ Finance Minister Bruno Le Maire saying monetary authorities should intervene quickly and “massively”.
Despite the coronavirus aid package, it is unclear how effective it will be in stimulating growth with rates in negative territory and member states being fiscally restricted by regional budgetary rules. Germany’s Chancellor Angela Merkel said the government will do everything required to help distressed companies as CDS spreads on ensuring sub-investment grade European corporate debt hover at Eurozone debt crisis-level highs.
SWISS NATIONAL BANK RATE DECISION, OUTOOK
The Swiss National Bank is expected to hold interest rates at -0.75 percent following the release of their annual report which will likely carry gloomy undertones as part of the pessimistic zeitgeist permeating market mood. Consequently, this may pressure the EUR/CHF exchange rate which is already trading at a five-year low and less than four percent away from the plunge it experienced in January 2015.
EUR/USD TECHNICAL ANALYSIS
EUR/USD has shattered below the 1.0981-1.0989 support range – dating back to the last two months of 2019 – and is now retesting the prior descending resistance channel (labelled as “Downtrend Beta”). The upcoming data may catalyze another aggressive selloff in EUR/USD and push the pair below the multi-year swing low at 1.0789 and lead to a resumption of the prior steep downtrend.
Preliminary German IFO data for March in the upcoming European session may amplify EUR/USD losses after ZEW data earlier this week sent the Euro tumbling below key support. While markets are rarely paying attention to...READ MORE
Traders trimmed their open interest positions once again on Tuesday, this time by around 10.3K contracts, in light of advanced figures from CME Group. In the same direction, volume went down by around 152.6K contracts.
WTI now targets $25.00/bbl
Prices of the barrel of WTI remain well entrenched into the negative territory and are now challenging the $26.00 mark. However, decreasing open interest and volume should allow for some rebound in the near-term, helped by the ongoing extreme oversold condition of the commodity.
Traders trimmed their open interest positions once again on Tuesday, this time by around 10.3K contracts, in light of advanced figures from CME Group. In the same direction, volume went down by around 152.6K contracts...READ MORE
Gold extended its sharp intraday slide and weakened farther below the key $1500 psychological mark through the early European session.
The precious metal failed to capitalize on the overnight goodish intraday bounce and an early uptick to the $1546 region. Traders seemed rather unimpressed by a fresh leg down in the global equity markets, which tends to undermine the commodity's perceived safe-haven status.
A strong follow-through rally in the US Treasury bond yields turned out to be one of the key factors that exerted some fresh downward pressure on the non-yielding yellow metal. In fact, the yield on the benchmark 10-year US government bond jumped back to 1.2% on Wednesday.
This coupled with a sudden pickup in the US dollar demand added to the intraday selling bias surrounding the dollar-denominated commodity. The greenback benefitted from its status as the global reserve currency and a rush to hoard cash to ride through the coronavirus crisis.
However, growing concerns over the economic fallout from the coronavirus pandemic – despite the recent efforts from major central banks and various government measures to offset recession fears – might lend some support to the commodity.
Hence, it will be prudent to wait for some strong follow-through selling, possibly below the recent swing lows to over one-month lows, around the $1450 region, before positioning for any further near-term depreciating move for the metal.
Gold extended its sharp intraday slide and weakened farther below the key $1500 psychological mark through the early European session...READ MORE
Heavy selling hit the base metals, with copper posting its biggest two day loss since 2015, strategists at ANZ Research apprise.
“Signs of weakening demand are emerging by the day. Inventories on the LME jumped 22% yesterday, pushing the year to date gain to over 50%.”
“Sentiment was also impacted by the weak economic data out of China. Industrial production in Jan-Feb fell 13.5%, while retails sales were down 20.5% for the same period.”
“The fall in prices in getting a response from the supply side, with several top producers announcing cutbacks to output.”
Heavy selling hit the base metals, with copper posting its biggest two day loss since 2015, strategists at ANZ Research apprise...READ MORE
EUR/USD is holding onto its range in a typical "dead cat bounce" move but that may change. Tuesday's four-hour chart is pointing to the downside, as FXStreet’s analyst notes.
“EUR/USD is trading around the 100 Simple Moving Average on the four-hour chart, above the 200 SMA and below the 50 SMA. Momentum is to the downside while the Relative Strength Index is balanced.”
“Support awaits at 1.11, which provided support in early March. It is followed by 1.1050, a stubborn support line from last week.”
“Resistance is at 1.1240, a swing high on Monday which is backed up by the 200 SMA. It is followed by 1.1320 and 1.1360, both stepping tones on the way down.”
EUR/USD is holding onto its range in a typical "dead cat bounce" move but that may change. Tuesday's four-hour chart is pointing to the downside, as FXStreet’s analyst notes...READ MORE
GOLD AND CRUDE OIL TALKING POINTS:
Gold prices were lower again on Wednesday even as the coronavirus’ spread continued to dominate the news cycle. Investors reportedly sold gold holdings to cover cash losses incurred elsewhere, especially in the equity market rout of the past month, as they’ve been seen doing before.
Stock prices rose in parts of the Asia Pacific region, notably in Japan and Australia, as investors hoped for a continuing fiscal response from the world’s governments even as monetary policy looks stretched thanks to years of low intertest rates in many jurisdictions. New Zealand’s government added to these hopes on Tuesday with the announcement of a large package of measures to try and ameliorate some of the virus’ effects.
Still, global equity markets remain close to multi-year lows in most developed economies, adding credence to investors’ broad need for cash which some are clearly satisfying in the gold market.
The coming global session will bring news of US retail sales’ performance and UK employment levels but, as the numbers cover only January and February, they’re likely to have been rendered more historic than usual for the markets by the disease’s subsequent ravages.
Crude oil prices were higher on Tuesday, riding modestly improved risk appetite higher, and perhaps aided a little by last week’s US decision to add considerably to its strategic reserve.
However, the market still appears oversupplied and dominated by the price war between major producers Russia and Saudi Arabia which followed on from their inability to reach agreement on production cuts at this month’s meeting of the Organization of Petroleum Exporting Countries and others.
The coronavirus has clearly put the brakes on all aspects of the global economy which will in turn inevitably mean lower energy demand.
Prices have collapsed this month and have now fallen below their previous trading band, which formed support on the way up to this month’s peaks. Tuesday’s retreat has taken them below $1509.68 which is the final, 78.6% retracement of the rise from November’s lows to this year’s peaks. Monday’s intraday action saw complete retracement with its trial of $1449.16, a level which now forms near-term support.
US crude oil prices have been sliding all year but have spent the past week or so in a broad range between $30 and $35 per barrel. However, the market seems to be headed lower within this band, with a trial of its lower range likely this week.
Gold prices were lower again on Wednesday even as the coronavirus’ spread continued to dominate the news cycle. Investors reportedly sold gold holdings to cover cash losses incurred elsewhere, especially in the equity market rout of the past month, as they’ve been seen doing before...READ MORE