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DXY is extending the weekly leg lower after recently breaking below the 100.00 mark.
Interim support emerged at weekly lows in the 99.00 zone (Wednesday). If sellers clear this level then a potential move to the monthly low at 98.57 should come to the fore in the very near-term.
A deeper pullback is expected to put the key 200-day SMA at 98.47 to the test.
DXY is extending the weekly leg lower after recently breaking below the 100.00 mark.Interim support emerged at weekly lows in the...READ MORE
GOLD PRICE - XAU/USD TECHNICAL ANALYSIS
On Friday, Gold rebounded from $1,751- its highest level in seven and a half years. Afterward, the price closed the weekly candlestick in the green with a 2.3% gain.
Alongside that, the Relative Strength Index (RSI) rose to 63 indicating that bulls were in charge.
Based on analysis of the daily chart, on May 14 Gold broke above the upper line of the symmetrical triangle discussed in our last update eyeing a test of $1.796. This week, the rally has stopped at $1,765 then retreated and remained in the current trading zone $1,685- $1.752 reflecting a weaker bullish momentum.
That said, a close above the high end of the aforementioned zone signals a possible bullish comeback and may cause a rally towards $1,796. A further close above that level could extend this rally towards $1,859. Although, the weekly resistance levels underlined on the chart (zoomed in) should be considered.
Otherwise, more hesitation from bulls could lead some of them to exit the market reversing the direction towards the low end of the zone. A further close below that level may send Gold even lower towards $1,635. In that scenario, the weekly support area and level underscored on the chart should be kept in focus.
On Friday, Gold rebounded from $1,751- its highest level in seven and a half years. Afterward, the price closed the weekly candlestick in the green with a 2.3% gain. Alongside that, the Relative Strength Index (RSI) rose to 63 indicating that bulls were in charge...READ MORE
Commercial crude oil inventories in the United States decreased by 5 million barrels in the week ending May 15th, the Energy Information Administration (EIA) announced on Wednesday. This reading came in lower than the market expectation for an increase of 1.1 million barrels.
The barrel of West Texas Intermediate (WTI) pulled away from the multi-month highs it set at $33.72 earlier in the day and was last up 4.4% at $33.25.
"US crude oil refinery inputs averaged 12.9 million barrels per day during the week ending May 15, 2020 which was 0.5 million barrels per day more than the previous week’s average."
"Total products supplied over the last four-week period averaged 16.1 million barrels a day, down by 19.0% from the same period last year."
"Over the past four weeks, motor gasoline product supplied averaged 6.7 million barrels a day, down by 29.1% from the same period last year."
Gold is likely to see safe-haven buying amid weak economic data, according to strategists at ANZ Bank.Gold is likely to see safe-haven buying amid weak economic data, according to strategists at ANZ Bank.
“Precious metals gained after Fed Chair Powell’s bearish comments. The head of the central bank warned the Senate committee that the current downturn is significantly worse than any recession since World War II and that long-term unemployment could damage the economy.”
“Powell reiterated his commitment to use a full range of tools to support the economy, including leaving interest rates near zero until the economy is back on track. This saw safe-haven buying remain strong, with gold prices pushing back towards $1,750/oz.”
Gold is likely to see safe-haven buying amid weak economic data, according to strategists at ANZ Bank.Gold is likely to see safe-haven buying amid weak economic data, according to strategists at ANZ Bank...READ MORE
Here is what you need to know on Wednesday, May 20:
Markets have stabilized and the risk-on mood has resumed, pushing the dollar and yen lower after the breather, a result of cooling down regarding vaccine and Federal stimulus hopes. Inflation figures, central bank talk, and speculation about the economic recovery are eyed.
Vaccine doubts: After the initial enthusiasm, scientists wanted to see more details about Moderna's initial success in developing immunization for COVID-19, and without evidence, investors follow experts with skepticism.
Fed fatigue?: Jerome Powell, Chairman of the Federal Reserve, and Steven Mnuchin, the Treasury, gave a lengthy online testimony before a Senate committee, yet did not create any headlines. Powell continued nudging elected officials to provide more stimulus and White House Economic Adviser Kevin Hassett said it is under consideration.
Sino-American rhetoric has been elevated, yet out not at center stage. Hu Xijin, the editor of Global Times, continued lashing against President Donald Trump. The administration continues working on plans for re-shoring supply chains.
UK: Chancellor of the Exchequer Rishi Sunak painted a gloomy picture of the British recession "the likes of which we have not seen" in a parliamentary session. GBP/USD seems unfazed, His comments came after the Claimant Count Change leaped above 800,000, far worse than expected. Inflation figures are set to show a substantial slide in April.
Andrew Bailey, Governor of the Bank of England, will face MPs later in the day. David Frost, the UK's Chief Negotiator, accused the EU of offering a "low-quality deal." His counterpart Michel Barnier also criticized Britain.
Eurozone: EUR/USD has been consolidating its gains, driven in part by the Franco-German agreement to boost the EU budget by €500 billion using bond issuance by the bloc. Phillip Lane, Chief Economist at the European Central Bank, said that his institution may adjust bond-buying.
The Canadain dollar is on the rise amid the better market mood and oil prices remain on the rise. Private inventory data has shown a surprising draw, supporting crude prices. Inflation figures for April are due out in Canada.
AUD/USD is holding up around 0.6550, just below the fresh highs, shrugging off preliminary retail sales figures for April that showed a plunge of 17.9%.
NZD/USD has resumed its upswing, in line with the market mood, and despite the Reserve Bank of New Zealand's openness to set negative rates, albeit under specific conditions.
Emerging markets: Brazil is the world's new COVID-19 hotspot, with the nation's curve continuing to surge. A super-cyclon is approaching eastern India and Bangladesh. India's coronavirus cases have passed the 100,000 mark.
Gold prices have stabilized around $1,750, after hitting new 7.5 highs and returning back to the range. The precious metal's correlation with stock markets has been mixed.
Cryptocurrencies are marginally lower, with Bitcoin trading around $9,700.
Markets have stabilized and the risk-on mood has resumed, pushing the dollar and yen lower after the breather, a result of cooling down regarding vaccine and Federal stimulus hopes. Inflation figures, central bank talk, and speculation about the economic recovery are eyed...READ MORE
The Federal Reserve is looking at extending borrowing to states with relatively low populations, FOMC Chairman Powell told the Senate Banking Committee during his testimony. Powell further added that they are continuing to look at ways to accommodate additional borrowers.
Meanwhile, Treasury Secretary Mnuchin explained that they want to get a better idea of which credit facilities need more capital before allocating all of it.
"The treasury is absolutely willing to take a risk in credit programs," Mnuchin added. "In the best-case scenario, markets open up and credit facilities are not needed."
The US Dollar Index paid little to no mind to these comments and was last seen losing 0.16% on the day at 99.46.
The Federal Reserve is looking at extending borrowing to states with relatively low populations, FOMC Chairman Powell told the Senate Banking Committee during his testimony...READ MORE
Markets are rallying amid several upbeat developments, and this has resulted in a sell-off of the safe-haven US dollar, an analyst at FXStreet, reports.
“Massachusetts-based Moderna announced that its initial vaccine trial has shown that subjects have developed antibodies for COVID-19. While the experiment is of limited scale the encouraging results have sent stocks rallying. The next phase is due in July.”
“Markets are encouraged by the message due out by Jerome Powell, Chairman of the Fed. In his prepared remarks, Powell pledged to keep rates low until the US returns to full employment and his tone was more optimistic than in an interview over the weekend.”
“Germany and France agreed to boost EU fiscal support by €500 billion, coming from new debt raised by the European Commission and distributed as grants. The accord still awaits approval yet the news also contributed to a better mood and pushed the greenback lower.”
Markets are rallying amid several upbeat developments, and this has resulted in a sell-off of the safe-haven US dollar, an analyst at FXStreet, reports...READ MORE
Gold has suffered a setback after surging to the highest in 7.5 years. Can it recover? There are a few hurdles on the way up.
The Technical Confluences Indicator is showing that XAU/USD first needs to surpass $1,737, which is the convergence of the Fibonacci 23.6% one-week, the Simple Moving Average 5-1h, and the Bollinger Band 15min-Middle.
It is followed by $1,742, which is the meeting point of the Bollinger Band one-day Upper and the Fibonacci 38.2% one-day.
Further up, the strongest resistance is at $1,747, where the SMA 10-4h and the previous monthly high converge.
Strong support awaits at $1,728, which is the confluence of the Fibonacci 38.2% one-week and the previous daily low.
Gold has suffered a setback after surging to the highest in 7.5 years. Can it recover? There are a few hurdles on the way up...READ MORE
European stock-market regulators have shelved their short-selling bans after two months, citing the less-turbulent conditions.
The Austrian, Belgian, Greek, French, Italian and Spanish securities regulators have jointly decided to end their short-selling bans that had been in place since the middle of March. Other countries including Germany and the U.K. didn’t impose bans.
France’s stock-market regulator, the Autorité des Marchés Financiers, and Italy’s Commissione Nazionale per le Società e la Borsa said they had viewed “progressive normalization” in markets.
“Markets have partly reduced their losses, trading volumes and volatility have returned to levels that are still high compared to mid-February, however this reflects market participants’ uncertainties in the current context,” said the statement from the AMF. The regulators said they would stay in close contact with one another.
Last week a number of trade groups had protested the bans.
“Market data on securities subject to the restrictions in place in Austria, Belgium, France, Greece, Italy and Spain are available and show that those securities are not collectively performing better than those in comparable jurisdictions that are not subject to restrictions; shares are more volatile than they were prior to the bans; and markets exhibit wider spreads since restrictions were put in place,” said the letter from the Alternative Investment Management Association, Managed Funds Association, FIA European Principal Traders Association and World Federation of Exchanges.
Volume traded in restricted shares made up 30% of the total volume traded in Europe. After the bans, this value dropped to 23%, the trade groups said.
Strategists at Barclays said the move to lift the ban shouldn’t reintroduce volatility. They looked at the short-selling bans during the global financial crisis and found that European stocks rallied after their removal. “It thus seems that as long as fundamentals improve, short selling should not be an impediment to further recovery in equity markets,” the strategists said.
The Stoxx Europe 600 SXXP, 2.03% rallied on Monday, with similarly strong gains both for markets that removed the bans, such as the France CAC 40 PX1, 2.23%, and ones that never imposed them, such as the German DAX DAX, 2.84%
European stock-market regulators have shelved their short-selling bans after two months, citing the less-turbulent conditions...READ MORE
The market mood has been positive, diminishing demand from the safe-haven dollar, yet this may change due to rising Sino-American tensions and concerns about the US economy, FXStreet’s analyst reports.
“Sino-American tensions remain elevated on several fronts. The US continues accusing China of failing to keep coronavirus under control as Peter Navarro, a senior White House adviser, said that the world's largest economy deliberately sent infected people to sow the seeds of the disease in other countries.”
“Hu Xijin, the editor of the Global Times, advocated that his country should arm itself with additional nuclear weapons amid American aggression.”
“In an interview to 60 Minutes, Jerome Powell said that it could take up to late 2021 for the economy to recover, and in any case – he does not foresee a full recovery without a vaccine. Powell warned that the unemployment rate could hit 25%.”
“Europe's largest economies are gradually opening up. However, there are still doubts about the ECB's ability to help. The German constitutional court's ruling that the part of the ECB's bond-buying scheme is illegal may limit further action and governments' willingness to spend.”
The market mood has been positive, diminishing demand from the safe-haven dollar, yet this may change due to rising Sino-American tensions and concerns about the US economy, FXStreet’s analyst reports...READ MORE
Here is what you need to know on Monday, May 18:
The market mood remains optimistic despite a stark warning from Jerome Powell, Chairman of the Federal Reserve, who warned that a full recovery may have to wait for a vaccine. Stocks and oil are on the rise and the US dollar is on the back foot.
Moreover, he said that it may take until late next year to recover and stressed that "we really do not know" and added that asset prices may decline. His 60 Minutes interview came after the US reported a sharp decline of 16.4% in retail sales in April, worse than expected. However, consumer confidence bounced in May.
Sino-American relations: Peter Navarro, a senior White House adviser, and China hawk claimed that the world's second-largest economy sent infected people to spread the disease. American limits on Huawei are also in the mix. Hu Xijin, the nationalistic editor of the Global Times, tweeted that China needs to beef up its nuclear capacities amid threats from the US.
Gold is trading around $1,760, levels last seen in late 2012, and consolidating its gains. The precious metal is benefiting from central bank bond-buying schemes and falling yields.
Japan has officially entered a recession with a drop of 0.9% in Gross Domestic Product in the first quarter, better than expected, yet on top of a downward revision to the fourth quarter of 2019. USD/J?JPY is stable above 107.
EUR/USD is clinging to its range around 1.08 as large European countries continue gradually lifting restrictions. Over the weekend, Spain and Italy reported the lowest number of deaths since March. Germany also reported a substantial fall and stated that the Reproduction rate is just under 1. Phillip Lane, Chief Economist at the European Central Bank, reiterated that his institution is ready to add further stimulus.
UK: A Bloomberg survey suggests that the Bank of England will likely increase its bond-buying program by around £100 billion in its upcoming meeting. Andy Haldane, Chief Economist at the BOE, did not rule out negative interest rates and other tools. GBP/USD has been consolidating its losses around 1.21.
Fraught Brexit negotiations sent sterling lower on Friday. Both the EU's Michel Barnier and the UK's David Frost acknowledged issues on the "level-playing field" topic.
Vaccine efforts: Oxford University has advanced with its trials for immunization against the disease. GSK a large pharma firm has vowed to manufacture potential vaccines on a large scale and prioritize the UK in deliveries.
WTI Oil has been extending its recovery, trading above $30. The increase in demand – albeit from a low point – and a drop in supply from the US and Saudi Arabia have pushed prices higher. The rollover of contracts may trigger choppy trading.
Cryptocurrencies have been on the rise with Bitcoin edging closer to the $10,000 mark. Ethereum and Ripple are also on the rise.
The market mood remains optimistic despite a stark warning from Jerome Powell, Chairman of the Federal Reserve, who warned that a full recovery may have to wait for a vaccine. Stocks and oil are on the rise and the US dollar is on the back foot...READ MORE
No such thing as a dull week
It’s been another interesting week in financial markets. One of economic reopening, second waves, stark warnings, recession and much more. The week ahead is going to be no less eventful as investors come to grips with the reality of the situation we’re all facing while factoring in the seemingly endless supply of monetary support.
Add to all of this this the renewed tensions between the world’s two largest economies. Given that a trade war between the two was once viewed as being a major risk to the global economy, it’s extremely unwelcome now. But then, China is attracting a lot of attention about its handling of the coronavirus in the early stages of its detection and Donald Trump is facing an election in six months (in case anyone forgot). We could see a cold war scenario of increased hostilities with neither side wanting to pursue anything more for the remainder of the year.
Last, but certainly not least, we have oil. Last month’s plunge to minus $40 on the May contract is not expected to see a repeat performance. A lot has changed since then. But with the June expiry on Tuesday, who knows what chaos could ensue. Prices are inflated after an impressive rebound in recent weeks, maybe even vulnerable. The start of next week will be very interesting indeed.
The US economy’s staggered reopening is expecting to show incremental improvements in economic data this week. US business activity is expected to bounce from record lows as some states start to reopen. Housing data is expected to be persistently bad, while weekly initial jobless claims is expected to continue to decline alongside continuing claims.
The primary driver for global equities remains improving economic data as global economic activity picks up and whether renewed outbreaks will disrupt the reopening of economies. Investors will closely follow the daily COVID-19 updates to see if children continue to see spikes in new cases and if any new hotspots emerge.
It is also important to keep a close eye with the US-China relationship. President Donald Trump seems determined to keep the hard talk going against China. Trump’s threats to cut off ties with China are almost laughable as that would create an unwelcome shock to a very weak US economy. China will not back down to Trump’s threats and will quickly announce countermeasures if he follows through with any of them. A complete meltdown of US-Chinese relations is not expected, but intensifying tensions will only add to a risk-off trading environment.
Partisan politics are expected to eventually end as much of the country still struggles from the shuttered economy. Nancy Pelosi’s $3 trillion-dollar package is needed, but Republicans will require many changes. The progressives are also unhappy with the bill, but it’s hard to imagine that some stimulus won’t pass in the near future. Both sides of the aisle will likely try to avoid further economic disaster and risky assets should see some support come the passing of another bill.
The first week of lockdown easing has brought confusion, debate and worrying images of packed tubes. It’s also been accompanied by news that the worst monthly economic contraction on record (data going back to 1997) and 2% as a whole in the first quarter. When you consider that the lockdown only started a week before the end of the quarter, you can imagine what the Q2 data will look like.
Next week Andrew Bailey will be joined by three of his colleagues from the MPC to answer questions from the Treasury Select Committee on the economic impact of the coronavirus, as the country passes the peak of the first phase. I don’t expect there’ll be any surprises, just harsh truths, something investors seem willing to ignore.
Germany is officially in recession after its fourth quarter was revised lower to -0.1%. Naturally it received the good old “who cares” in the markets. Mild technical recessions are something to aim for when you’re in the midst of a severe recession with a hugely uncertain outlook. The euro area as a whole just avoided a similar fate but, again, who cares.
On a more promising note, the number of cases and deaths continues to decline which is promising. With lockdown measures easing, this will be key over the next few weeks to further easing and economies returning to something resembling normal.
Efforts to stop the collapse in the Lira by restricting foreign transactions and preventing short-selling appear to be working, with the currency recovering from its record lows against the dollar this week. None of this changes the fact that investors are very concerned about the Turkish economy and its ability to deal with the coronavirus.
The CBRT is expected to continue cutting interest rates next week though – 50 basis point consensus – despite the currency weakness and potential inflation that lies ahead. Markets have been forgiving in the past but may not feel in such a generous mood now. Of course, the restrictions will likely affect that in the short-term but won’t last forever.
The South African Reserve Bank is expected to cut interest rates by 50 basis points next week, although forecasts do vary. The economy was in disarray already and severe lockdown measures haven’t helped. The country has already lost its final investment grade rating so S&P’s review next Friday shouldn’t be of too much interest. Pressure may grow on Ramaphosa in the coming weeks to ease restrictions, with some already questioning whether the economic damage is greater than that of the coronavirus itself.
The economic recovery is expected to continue in China with the PBOC this week signalling more powerful and broad reaching stimulus measures are on the way to support growth and employment. We expect the Loan Prime Rates to see further cuts. Two dark clouds on the horizon are secondary COVID-19 outbreaks occurring in secondary cities near North Korea and Russia. The trade situation with the US is in danger of deteriorating. US administration members from the President down, labelling COVID-19 the “Chinese plague” and threatening new sanctions if China does not meet its trade agreement obligations. The Presidential election is going to be fought on who is toughest on China.
India’s government has loosened up lockdown rules and financial markets will carefully watch to see how bad the next wave of cases will be. The financial system is facing renewed pressure after the closure of Templeton Funds there last month. That has sparked a continuing flow of funds out of the non-bank financial sector and threatens to deepen the freeze in credit to SME’s. The government’s new budget threatens to crowd out private borrowers with their deficit financing,
Australia employment fell by 574K in April. ABS said the real figure is actually much higher.However lockdowns are being eased across the country which should see a sharp rebound. AUD has fallen this week on global economic fears. High beta to China and world trade leaves Australia markets vulnerable to downward pressure. No data of significance next week.
Japan has extended the nationwide state of emergency to the end of May with 34 prefectures reopening next week – not Tokyo or Osaka. 2nd extra budget being formulated. BoJ says willing to increase easing if needed. USD/JPY continues to range. Risk aversion return could see USD/JPY fall sharply.
Oil prices are heading higher once again as WTI closes in on $30 a barrel, almost $70 above the level it plummeted to almost a month ago. I mean, that’s staggering even when you forget about the negative prices. There’s clearly a different feel to the oil market heading into this contract expiry, with production cuts having been enforced globally, either through deals or unilaterally.
But will it be enough to avert another panic selling moment? The odds have certainly reduced and there’s no sign of caution among traders but there’s plenty of time yet. There’s a fine line between confidence and complacency and we can only hope that line hasn’t been crossed or early next week it could quickly unravel.
In lockdown, it can be easy to lose track of what day it is but take one look at a gold chart and that Friday feeling is shining through. Consolidation over the last month has made this running daily commentary quite painful at times. You’d swear we’re living in relatively mundane times.
Finally it seems gold is catching up with reality, maybe even – dare I say it – acting like a safe haven (ish)? The breakout came during some weakness in risk markets and while they have bounced back, I wonder whether the gold move is being sustained more by technical factors than the fundamental that triggered the move in the first place. Whatever the reason, a break of $1,750 could kick it into a higher gear.
Bitcoin enthusiasts are some of the most bullish people you’ll come across. No matter what is happening, it’s bullish for bitcoin. With central banks around the world throwing everything they have at the crisis, I can imagine there’s a lot of very, very bullish forecasts right now. We’ve seen three runs at $10,000 and the failure doesn’t appear to be shaking them at all. The excitement is palpable. If this breaks, it could be a very bullish catalyst.
It’s been another interesting week in financial markets. One of economic reopening, second waves, stark warnings, recession and much more. The week ahead is going to be no less eventful as investors come to grips with the reality of the situation we’re all facing while factoring in the seemingly endless supply of monetary support...READ MORE
Economists at ABN Amro have significantly downgraded the UK GDP forecast as most of the lockdown-related weakness is expected to come in Q2.
“For 2020, we expect the economy to contract by -8.5% (previously: -4.9%), with 2021 revised up on base effects, to 5.2% (previously: 2.3%).”
“Given this very weak GDP outlook, we continue to expect the BoE to increase its QE asset purchases target by at least GBP100bn at the next MPC meeting on 18 June, with the risk that it moves to the unlimited asset purchase model that has been adopted by the Fed.”
Economists at ABN Amro have significantly downgraded the UK GDP forecast as most of the lockdown-related weakness is expected to come in Q2...READ MORE
Economist at UB Group reviewed the recent decision by the RBNZ to leave rates unchanged and expand its QE programme.
“The Reserve Bank of New Zealand (RBNZ) held its Official Cash Rate (OCR) steady at a record-low of 0.25%. However, the Large Scale Asset Purchase (LSAP) programme has been expanded to a potential NZD60bn, from its previous limit of NZD33bn. The LSAP programme includes NZ Government Bonds, Local Government Funding Agency Bonds and, now, NZ Government Inflation-Indexed Bonds.”
“In its accompanying press release, the RBNZ stated that “the Monetary Policy Committee is prepared to use additional monetary policy tools if and when needed, including reducing the OCR further, adding other types of assets to the LSAP programme, and providing fixed term loans to banks.”
“According to minutes of the meeting, policymakers discussed the option of a negative OCR in future, although at present financial institutions are not yet operationally ready. Consequently, the Committee reaffirmed its forward guidance that the OCR will remain at 0.25% until early 2021.”
“That said, even with the need for further monetary policy easing, we think that negative interest rates will come with considerable baggage and we do not expect the RBNZ to take the OCR into negative territory, at least not any time soon. Instead, we think the RBNZ will continue to use volume announcements (eg. the programme is currently NZD60bn in size) as it fine-tunes its policy stance. However, another option would be to adjust their QE programme to a type of “yield curve control” (or YCC), as used in Australia.”
“The Reserve Bank of New Zealand (RBNZ) held its Official Cash Rate (OCR) steady at a record-low of 0.25%. However, the Large Scale Asset Purchase (LSAP) programme has been expanded to a potential...READ MORE
Here is what you need to know on Thursday, May 14:
The market mood has soured after Jerome Powell, Chairman of the Federal Reserve, rejected calls for negative interest rates. Ongoing Sino-American tensions, gloomy forecasts, and also disappointing Australian jobs figures are weighing on the mood.
Powell painted a gloomy picture of the economy and vowed to add additional policy measures to prevent long-term damage to the economy, also calling the government to do more.
However, he rejected the idea of setting negative rates and said that also his colleagues' position is unchanged. That sent stocks down and the dollar up.
Bond markets' pricing has been flirting with the sub-zero borrowing costs and President Donald Trump also wanted this "gift." While the president called Powell the "Most Improving Player" he also criticized the chairman for not setting negative rates.
Trump also kept up the pressure on China by saying that coronavirus's impact is 100 times stronger than the trade deal with the world's second-largest economy. Global COVID-19 cases have topped 4.3 million and deaths are nearing 300,000. US mortalities are above 84,000 according to Johns Hopkins.
Anthony Fauci, the White House's leading doctor on coronavirus, repeated his warnings that reopening the economy too quickly could trigger flare-ups. Trump said these comments are unacceptable and that the expert is playing "both sides of the equation." Firing Fauci could add another drag on the economy.
US economy: Goldman Sachs has updated its forecasts, warning that the unemployment rate could leap to 25%. Treasury Secretary Steven Mnuchin expressed optimism that with safely opening the economy, a rebound is on the cards. Weekly jobless claims for the week ending May 8 are expected to show an increase of 2.5 million claims, fewer than the previous week yet still staggering numbers.
GBP/USD has been one of the biggest losers amid an ongoing UK lockdown and as the nation is getting ready for a long recession. Chancellor of the Exchequer Rishi Sunak extended the furlough scheme and Andrew Bailey, Governor of the Bank of England, opened the door to further bond-buying. Moreover, Bailey did not rule out directly funding the government. He will speak again later on Thursday.
EUR/USD has dropped in range but has yet to test the lows. Italy approved a new €55 billion stimulus budget and bond markets seem to accept it, despite tensions between the German constitutional court and the European Central Bank, which is supporting the government.
Australia reported a loss of 594,300 jobs in April, worse than expected. While the Unemployment Rate rose to only 6.2%, participation fell sharply to 63.5%. The Aussie and the kiwi both dropped in response.
Oil prices have remained stable after inventory data showed a surprising drawdown and amid speculation that other countries will follow Saudi Arabia with additional, voluntary cuts. Demand from China is on the rise.
Cryptocurrencies are edging higher with Bitcoin trading around $9,300, several days after the halving event.
The market mood has soured after Jerome Powell, Chairman of the Federal Reserve, rejected calls for negative interest rates. Ongoing Sino-American tensions, gloomy forecasts, and also disappointing Australian jobs figures are weighing on the mood...READ MORE
Commercial crude oil inventories in the United States decreased by 0.7 million barrels in the week ending May 8th, the Energy Information Administration (EIA) announced on Wednesday. This reading came in lower than the market expectation for an increase of 4.1 million barrels.
Crude oil prices shot higher on this data and the barrel of West Texas Intermediate was last seen up 3% on the day at $26.65.
"US crude oil refinery inputs averaged 12.4 million barrels per day during the week ending May 8, 2020, which was 0.6 million barrels per day less than the previous week’s average."
"Total products supplied over the last four-week period averaged 15.5 million barrels a day, down by 22.8% from the same period last year."
"Over the past four weeks, motor gasoline product supplied averaged 6.3 million barrels a day, down by 33.0% from the same period last year."
Commercial crude oil inventories in the United States decreased by 0.7 million barrels in the week ending May 8th, the Energy Information Administration (EIA) announced on Wednesday...READ MORE
Jerome Powell, Chairman of the Federal Reserve System, on Wednesday said the coronavirus crisis raises long term concerns.
"Additional policy measures may be needed to avoid lasting damage to the economy," Powell added while delivering his prepared remarks at an event organized by the Peterson Institue for International Economics.
The US Dollar Index edged lower on Powell's remarks and was last seen down 0.38% on the day at 99.63.
"Recovery may take time to gather momentum."
"Coronavirus shock appears to be the largest on record."
"Fed survey shows 40% of households with less than $40,000 income have lost a job."
"US fiscal response has been the fastest, largest for any postwar downturn."
"Fed has also acted with unprecedented speed, force."
"Policy response has provided a measure of relief, stability."
"Fed will continue to use tools to their fullest until the crisis has passed, recovery well underway."
"Fed loans will help many borrowers get through the crisis, but time can turn liquidity problems into solvency problems."
"Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage."
Jerome Powell, Chairman of the Federal Reserve System, on Wednesday said the coronavirus crisis raises long term concerns...READ MORE
EUR PRICE, NEWS AND ANALYSIS:
EUR/USD IN DANGER OF BREAKING LOWER
A host of market worries could potentially benefit the safe-haven US Dollar near-term, leaving EUR/USD at risk of breaking below trendline support that has been in place for almost two months. Since then, the pair has traded around the 1.09 mark but a break below 1.08 would likely lead to further losses.
Federal Reserve Chair Jay Powell is due to talk at 1300 GMT on current economic conditions and his speech could prove a catalyst for the drop in EUR/USD following US President Donald Trump’s call for negative US interest rates. Powell seems likely to push back on that idea but negative rates remain a possibility, with market pricing suggesting they could come as early as the start of next year.
In addition, the safe-haven USD will likely benefit from an escalation of US-China trade tensions and growing fears of a second wave of coronavirus infections. The White House’s top US infectious disease expert, Dr. Anthony Fauci, warned Congress Tuesday that some states are prematurely reopening businesses, risking additional outbreaks of coronavirus, particularly among the most vulnerable populations.
A host of market worries could potentially benefit the safe-haven US Dollar near-term, leaving EUR/USD at risk of breaking below trendline support that has been in place for almost two months. Since then, the pair has traded around the...READ MORE
While the global oil market remains in a dire situation, it’s starting to look like the nightmare scenario envisioned for the past month might just be averted.
The industry feared a flood of unwanted crude would overwhelm the world’s storage tanks as fuel demand was shattered by the coronavirus. Once that “storage wall” was hit, producers would be forced into a chaotic wave of potentially damaging shut-ins at oil wells.
In recent days, however, the alarm is starting to subside.
After the brutal price crash, producers have cut output on a historic scale, including unprecedented reductions by the OPEC+ alliance. Now demand is starting to creep higher as governments ease lockdowns, letting drivers back on the roads.
Though a substantial surplus remains -- prompting Saudi Arabia to announce additional output cuts on Monday -- the threat of a storage blow-out has receded.
“It looks like price signals” have ”worked their magic and the market has managed to re-balance and avert the worst,” said Antoine Halff, chief analyst at energy data provider Kayrros SAS.
In some critical locations, such as India and South Korea, storage has already been strained to its limits. Space at the U.S. crude hub in Cushing, Oklahoma, became so scare that crude prices briefly dropped below zero last month for the first time on record.
Elsewhere, oil tankers are being used as makeshift, floating warehouses to absorb the overflow on a scale never seen before. When the glut was at its zenith last month, everything from pipelines to rail cars were being pressed into service as a receptacle.
The rampant accumulation of oil inventories around the world is slowing down, and may be about to drop for the first time since January, Kayrros estimates. Stockpiles increased by 4 million barrels a day in the week to May 3, compared with a peak surge of 10 million a day in April. China, which drove the massive build-up, has already swung to a “steep draw.”
International oil prices have rebounded by about 50% in the past two weeks, and now trade near $30 a barrel in London, as demand and supply tighten up. Perhaps more importantly, the difference in prices of oil for delivery in the months ahead is reducing, suggesting the frantic scramble for storage has slackened off.
The discount on front-month Brent versus the contract six months out has narrowed by about 40% in the past two weeks to around $4.50 a barrel, according to data from the ICE Futures Europe exchange. As the spread -- or “contango” -- needs to cover the cost of storage, its contraction implies those costs are diminishing.
“The fears about an overflowing oil market and exhausted storage are beginning to calm,” said Norbert Ruecker, head of economics at Julius Baer Group Ltd. in Zurich.
It’s a view shared by many in what’s called the physical market, where actual cargoes of crude are bought and sold that are then refined into fuels like gasoline and diesel.
The focus has shifted from the fear of hitting tank tops to gradual increases in demand as some businesses restart and motorists are permitted a little more freedom, according to several traders, who asked not to be identified as commercial discussions are private.
Goldman Sachs Group, which warned in late April that global storage capacity would be maxed out within weeks, now says the worst of this cycle is effectively over. Moves by companies such as Chevron Corp. and ConocoPhillips to pare output shows the point of saturation has already arrived.
“They just couldn’t find somebody to take that oil, so you’ve essentially hit it,” said Jeff Currie, the bank’s head of commodities research. “Definitely we hit it on a local basis in different parts of the world.”
Much of the glut has been tackled by the Organization of Petroleum Exporting Countries and its allies, who agreed to curb production by just under 10 million barrels a day, or about 10% of global supply from May 1.
The kingdom’s decision Monday to deepen cuts, while reflecting the scale of the oversupply that still needs to be dealt with, is another reason to believe that it can nonetheless be contained.
“We are not anymore in an environment where any bucket will be used to store crude oil,” said Olivier Jakob, managing director at consultants Petromatrix GmbH.
While the global oil market remains in a dire situation, it’s starting to look like the nightmare scenario envisioned for the past month might just be averted.The industry feared a flood of unwanted crude would overwhelm the world’s...READ MORE
The Federal Reserve's programs had a clear "announcement effect" on financial markets, noted St. Louis Federal Reserve President James Bullard on Tuesday. Commenting on the reopening of the economy, Bullard argued that they can't continue with economic shutdowns for too long.
"Shutdown policy could last perhaps 120 days without the rising risk of bankruptcies, broader financial problems," Bullard further explained. "The Fed has a good solution for foreign markets in a combination of swaps for some central banks, repo-style facility for others."
Bullard also said that the third quarter could see a record annualized pace of economic growth after a record contraction in the second quarter.
The US Dollar Index edged higher in the last minutes and was last seen down 0.55% on the day at 99.68.
The Federal Reserve's programs had a clear "announcement effect" on financial markets, noted St. Louis Federal Reserve President James Bullard on Tuesday. Commenting on the reopening of the economy, Bullard argued...READ MORE
Gold prices (XAU/USD) extend the rebound from the Asian low of $1693.76, as the risk-off sentiment seeps into Europe amid fears over the second wave of the coronavirus outbreak and escalating Australian-China trade tensions.
The yellow metal manages to sustain the bounce above the 1700 level, as the US dollar loses ground across the board amid a steep sell-off in the US Treasury yields, with markets repositioning ahead of the critical US CPI release.
The ongoing chatter over the negative interest rate also likely weighs on the US rates. The US dollar index (DXY) drops to fresh daily lows of 100.12, down 0.11% on the day. The DXY rallied to 100.44 in early Asia after China retaliated to Australia’s call for COVID inquiry by banning the imports from four Aussie abattoirs.
Further, optimism around the US-China Phase One trade deal also seems to the renewed weakness seen around the buck, in turn, benefiting the USD-denominated Gold. China’s Foreign Ministry reiterated that the US and China should implement the trade deal. The Chinese Finance Ministry issued a second list of tariff waivers for some US goods earlier today.
The traditional safe-haven, gold, will continue to derive support from growing fears over the second wave of coronavirus, with China and South Korea having reported new infections. Looking ahead, the US deflationary pressures will likely call for more stimulus from the US Federal Reserve (Fed) and boost gold’s attractiveness.
Gold: Technical levels to watch
At the press time, gold trades at 1703.20, up 0.30% on the day. The bulls now target the 21-DMA at 1706.44. The next resistance is aligned at 1710 (round number). On the flip side, the daily low will offer the immediate support, below which Monday’s low of 1690.05 could be tested.
Gold prices (XAU/USD) extend the rebound from the Asian low of $1693.76, as the risk-off sentiment seeps into Europe amid fears over the second wave of the coronavirus outbreak and escalating Australian-China trade tensions...READ MORE
Gold struggled to capitalize on its early uptick, albeit has managed to hold with modest daily gains just above the $1700 mark.
Following the previous session's pullback from two-week tops, the precious metal regained some positive traction on the first day of a new trading week amid worries over the second wave of coronavirus infections.
However, a combination of negative factors – including a pickup in the US dollar demand and the prevalent risk-on mood – held investors from placing any aggressive bets and kept a lid on any further gains for the metal.
As investors looked past Friday's disastrous US NFP report, a goodish pickup in the US Treasury bond yields revived the greenback demand and was seen as a key factor that undermined demand for the dollar-denominated commodity.
This comes on the back of the latest optimism about the re-opening of economies in some part of the world. Adding to this, easing US-China tensions further boosted investors' confidence and dented the precious metal's safe-haven status.
Meanwhile, the downside is likely to remain cushioned amid speculations that the Fed might be forced to push interest rates below zero, which should continue to attract some dip-buying around the non-yielding yellow metal.
From a technical perspective, the commodity on Friday faced rejection near a multi-week-old descending trend-line. This makes it prudent to wait for a convincing break through the mentioned barrier before placing fresh bullish bets.
In the absence of any major market-moving economic releases, the broader market risk sentiment and the USD price dynamics will continue to play a key role in influencing the commodity's momentum/produce some short-term trading opportunities.
Technical levels to watch
Any meaningful slide below the $1700 mark is likely to find decent support and remain limited near the $1685 horizontal support, which if broken might prompt some aggressive technical selling. On the flip side, immediate resistance is pegged near the $1715 region, above which the commodity is likely to aim back towards testing the $1722-24 supply zone.
Gold struggled to capitalize on its early uptick, albeit has managed to hold with modest daily gains just above the $1700 mark.Following the previous session's pullback from...READ MORE
US DOLLAR, EUR/USD, GBP/USD, COT REPORT –ANALYSIS
In the week to May 5th, investors had continued to pullback their bearish bets on the US Dollar for a second consecutive week. As such, USD net shorts were cut by $1.13bln against G10 currencies, in which the majority of the short-covering had stemmed from EUR, JPY and GBP.
Market participants have added to their bearish bets in the Pound following a $414mln increase in net shorts. The outlook for the Pound is becoming increasingly bearish as the UK still has to deal with the issue of Brexit. This week will see another round of trade talks, in which little progress would raise concerns over the ability to reach a comprehensive trade agreement without an extension to the transition. Expect net short to continue picking up as political risks rise.
Elsewhere, investors are the most bullish on the Swiss Franc since December 2016 as net longs rise by $286mln to $1bln. Of note, SNB President Jordan stated over the weekend that the central bank has intensified its FX intervention as the coronavirus impact exerted enormous upward pressure on CHF.
Investors are growing increasingly bearish on the Euro as outright shorts continue to pick-up. Last week, the Euro was dealt a blow following the German Constitutional Courts ruling on ECB QE, in turn, with a potential legal battle on the way, this presents a new headwind for the Euro.
In the week to May 5th, investors had continued to pullback their bearish bets on the US Dollar for a second consecutive week. As such, USD net shorts were...READ MORE
Here is what you need to know on Monday, May 11:
The week has kicked off where it ended, with cautious optimism in stocks, a marginally weaker dollar and only oil prices are on the back foot. Bad news seems to be priced in.
Coronavirus: Total confirmed cases have surpassed four million cases, with figures falling in Europe but flare-ups reported in South Korea and a new cluster in Wuhan, China. US infections remain elevated outside the New York area.
America lost over 20 million jobs in April, within expectations, and the Unemployment Rate hit 14.7% as of mid-April, with employment losses reaching even the healthcare sector. The labor situation may get worse. The devastating figures were shrugged off by markets. Fresh consumer figures for April stand out later in the week.
President Donald Trump reiterated his urge to return to normal while the disease has reached the White House with several cases reported among staff. Vice President Mike Pence is working out of the White House.
Europe: France, Spain, and other countries are taking additional steps to ease the lockdowns as COVID-19 statistics improve across the continent. German's Reproductive rate (R) has topped 1 and caused some worried.
The European Commission is threatening to sue Germany over the country's constitutional court ruling that parts of the European Central Bank's bond-buying scheme is illegal. ECB President Christine Lagarde committed to doing whatever is necessary. EUR/USD is stable around 1.0850.
UK: Prime Minister Boris Johnson announced a minor easing of the lockdown with further steps to conditionally come in June and July. His message was criticized by various groups and more clarity may come later in the day. Brexit talks resume as the EU accuses Britain of slow-walking topics that matter to Brussels while urging progress on others. GBP/USD has stabilized.
The Australian and New Zealand dollars are edging up amid the upbeat mood while the Canadian dollar is little changed as crude prices tick down.
Cryptocurrencies: Bitcoin fell sharply over the weekend, nearing $8,000 before stabilizing above $8,500. Traders are awaiting the all-important "halving" event which will see new BTC produced at 50% of the previous rate.
The week has kicked off where it ended, with cautious optimism in stocks, a marginally weaker dollar and only oil prices are on the back foot. Bad news seems to be priced in...READ MORE
It seems financial markets continue to ignore the terrible economic data and focus on hopes that the economy will see a rapid turnaround. With over 85% of companies in the S&P 500 done with earnings season, Wall Street will remain fixated with efforts to reopen the economy and the spread of the virus. If additional COVID-19 spikes in the country are worse than the first wave, it will be hard for governors to keep moving forward with their reopening plans.
New York City appears to be finally ahead of the virus and optimism is growing that we could be seeing light at the end of the tunnel. Governor Cuomo will not loosen restrictions early, but if the daily number of hospitalizations, rate of new infections, and COVID-10 related deaths continue to decline, he could reopen parts of upstate on May 15th, and hopefully New York City later in the summer.
The bond market seems to be trying to tell us something after the 2-year yield Treasury yield fell to a record low on Friday. Risky assets have had a great week, with US stocks steadily climbing higher, while commodity currencies finished much stronger, but if the bond market is right, the risky asset rally might be ending soon.
The week ahead will have a tremendous amount of focus with the Chinese recovery, as critical April economic data will show how fast their economy is bouncing back. China’s pickup in economic activity will be the template many will use for outlining what will happen in Europe and the US. The easing of lockdown conditions globally along with the risk of a spike of new COVID-19 cases will also be critical for the next couple of months. All eyes will be on Fed Chair Powell on Wednesday morning as investors look for some clarity as to how much more stimulus can financial markets expect.
Financial markets remain primarily focused on the spread of COVID-19 and as US states reopen economies and ease coronavirus lockdowns. The economic data devastation is mostly priced in and risk appetite seems like it will remain healthy as long the Fed and US government continue to signal more monetary and fiscal stimulus is in the pipeline.
US-Chinese relations are also providing some uncertainty for the global economic rebound story. Tensions between the world’s two largest economies could derail much of the reopening optimism that has eased demand for safe-havens. President Trump appears focused with the November election and will likely keep up the verbal pressure on China but fail to deliver any harsh action that will threaten the second half economic recovery.
The Presidential election is less than six months away and former VP Joe Biden needs to pick who will be his running mate. Biden has promised his VP selection would be a woman, but it should not be ruled out that he might have to cave on the idea and go with Governor Cuomo. The New York Governor handling of the handling of coronavirus has made him a favorite among many on the East Coast, but his likeability is questionable for the Midwest. Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.
Boris Johnson is expected to announce on Sunday that the lockdown will remain in place for another three weeks but restrictions will be eased a little, the first step towards the new normal.
The Bank of England opted against easing monetary policy on Thursday, despite moving the announcement to earlier in the day, which led to speculation that more easing was coming. The BoE stands ready to do more and will meet multiple times before June, when the additional bond purchases announced in March are completed.
Europe continues to see restrictions being gradually lifted in various countries and all eyes will be on the experience here in the coming weeks to see what can be expected elsewhere. But the data is heading in the right direction and governments are acting with strong caution which will give people hope that further restrictions won’t be needed in the future.
The currency slumped to its lowest level ever against the US dollar as concerns grew about the Turkish economy in the face of the coronavirus crisis. The economy was already in a bad way and the latest developments forced the banking regulator to restrict access to lira transactions, an attempt to prevent short speculation in the currency. Not only did this shore up the currency, it exacerbated the declines. Challenging times ahead for the country.
The economic recovery is expected to continue in China, and a wrath of data is supposed to confirm it. China’s big economic releases this week should show improvements to industrial production, retail sales and property investment, while the PBOC maintains monetary easing and support with credit expansion.
India’s government has loosened up lockdown rules and financial markets will carefully watch to see how bad the next wave of cases will be. India will see some inflation in April, but it is expected to be short-lived. The RBI remains committed to easing and should not be switching stances anytime soon.
Australia is expected to have lost over a half-a-million jobs in April. The coronavirus pandemic has crippled the Australian economy, but hopes are growing that they will reopen by July.
Japan has extended the nationwide state of emergency to the end of May, but will reassess the situation on May 14th. Japan seems poised to lift some measures in some areas that are showing no new cases. PPI data from Japan will likely confirm the deflationary pressures that have persisted this year.
Oil prices have staged quite the rebound as more countries signal further curtailment of crude production and as crude demand begins to comeback after several states and countries begin to reopen. Oil prices seem to finally be settling on a range after a constructive two weeks of steady gains. Energy markets are becoming confident the market will return to balance this summer and that we won’t have a repeat of last month’s contract expiry volatility.
Gold remains stuck in a range as dismal economic data continues to get shrugged off on reopening hopes. Gold is waiting to see if the next round of stimulus will be significant and that will depend on how the next few weeks go in both Europe and the US.
The consolidation phase still remains with $1,660 providing the floor and $1,750 the ceiling.
Bitcoin must thank Paul Tudor Jones. Bitcoin’s bullish momentum was supposed to be attributed to a halving event that is finally upon us but growing institutional interest could support significantly higher prices from here. Bitcoin is likely to see a ‘buy the rumor, sell the news’ reaction following the upcoming halving event. Bitcoin could see a major pullback, but growing interest should provide major support as long financial markets do not see any major risk aversion selling days.
It seems financial markets continue to ignore the terrible economic data and focus on hopes that the economy will see a rapid turnaround. With over 85% of companies in the S&P 500 done with earnings season, Wall Street will remain fixated with efforts to reopen...READ MORE
The XAU/USD pair is fluctuating in a relatively tight range on Friday and struggles to make a decisive move in either direction. As of writing, the pair was down 0.08% on the day at $1,715. Despite today's uninspiring performance, the troy ounce of the precious metal is looking to register modest weekly gains.
Heightened optimism about the US economy having left the worst behind already boosts the risk sentiment on Friday and weighs on safe-haven gold. At the moment, Wall Street's three main indexes are gaining between 1.2% and 1.6%.
Meanwhile, the highly-anticipated Nonfarm Payrolls (NFP) report showed that the Unemployment Rate in the US jumped to 14.7% in April with more than 20 million Americans losing their jobs. However, investors paid little to no mind to the historically bad NFP reading. Commenting on the data, "with many states now beginning to gradually re-open their economies, we could see some signs labour market healing as early as May," said Royal Bank of Canada analysts.
With the initial reaction, the greenback gathered strength against its rivals and the US Dollar Index (DXY) edged higher toward the 100 handle. Nevertheless, week-end flows and the risk-on atmosphere caused the USD to lose interest and helped XAU/USD limit its losses. At the moment, the DXY is down 0.17% on the day at 99.67.
The XAU/USD pair is fluctuating in a relatively tight range on Friday and struggles to make a decisive move in either direction. As of writing, the pair was down 0.08% on the day ...READ MORE
Investors should proceed with extreme caution when purchasing oil-linked ETPs.
“For anyone not willing and able to take delivery, negative prices did not create an attractive, arbitrage opportunity.”
“Investors should know the benchmark (WTI, Brent, or other type of oil), the term structure (front-month, longer-dated, or some combination), and the process used to roll contracts as they approach expiration.”
“Although volatility is currently impacting oil markets, investors should be aware that other commodity markets could also be at risk for Covid-19 disruptions.”
Investors should proceed with extreme caution when purchasing oil-linked ETPs...READ MORE
The worst jobs report is even uglier, according to FXStreet’s analyst . The US dollar could advance.
“The worst Nonfarm Payrolls report in history – 20.5 jobs lost and an unemployment rate of 14.7% – is shocking but investors were already bracing for disaster.”
“The participation rate had already tumbled from 63.4% to 62.7% in March and has now extended its fall to 60.2%. That means that the calculation of the unemployment rate is skewed to the upside.”
“Better estimates include the U-6 or ‘real unemployment rate’ – which had already leaped to 8.7% in March and is now 22.8% – and the broadest measure, the employment to population ratio, which stood at 60% in March and is now only 51.3%.”
“Stocks may suffer from deteriorating prospects for the US and global economies while the safe-haven US dollar has room to rise – when the US coughs, the world catches a severe sickness.”
“The worst Nonfarm Payrolls report in history – 20.5 jobs lost and an unemployment rate of 14.7% – is shocking but investors were already bracing for disaster.”“The participation rate...READ MORE
Analysts at Standard Chartered point out the coronavirus-enforced lockdown is set to cause the steepest downturn in Australian GDP growth in decades. They forecast a -5.1% 2020 growth y/y, down from the previous -0.8% estimation.
“We lower our 2020 growth forecast for Australia to -5.1% y/y (-0.8% y/y previously). This would be the worst contraction since at least 1960, when the current GDP series was first published. We expect Q2 to be the worst hit, on account of the lockdown measures in place since 21 March to facilitate social distancing; we expect GDP to contract over 12% y/y in Q2. We also lower our 2020 inflation forecast to 0.7% y/y (from 1.8% y/y) to account for slower activity and lower global crude oil prices.”
“Domestic consumption is likely to contract substantially due to the shutdown measures. While social distancing measures have ‘flattened the curve’ and contained the spread of coronavirus, domestic activity has taken a sharp hit.”
“Substantial fiscal and monetary support is likely to buffer the slowdown, but not prevent Australia’s first recession since 1991. Significant job losses on declining activity are likely to further weigh on sentiment and consumption. Government spending aimed at enabling businesses to retain workers should prevent a rapid rise in unemployment; nevertheless, we expect the unemployment rate to peak at c.11%.”
Analysts at Standard Chartered point out the coronavirus-enforced lockdown is set to cause the steepest downturn in Australian GDP growth in decades. They forecast a -5.1% 2020 growth y/y, down from the previous -0.8% estimation...READ MORE
Gold prices have struck a fresh high for the month, withing the ebbs and flows of the markets. Gold and the US dollar are taking it in shifts to carry the safe-haven flows with COVID-19 at the heart of the risk-off themes. Today, it is gold's turn to shine, rallying from a low of $1,681.49 to a high of $1,719.91 while the US dollar falls behind, losing the 100 handle in the DXY to print a low of 99.91.
Despite both European and US benchmarks in the green, VIX in the red, gold has managed to take off, potentially with a lot of pent up demand. The trade war themes have resurfaced this week and cautionary money flows emanate from the fact that nations are experimenting with their workforces by attempting to open up their economies in the face of further COVID-19
It's now all about yields
However, the most compelling factor in markets today is how far yields have fallen. The 10-year US treasury yield is down by as much as 10%, falling from 0.717 to a low of 0.622. The correlation with gold is tight. The move follows yesterday's US Treasury refunding announcements and a surge in supply.
However, analysts at TD Securities explained, "our rates strategists expect the Fed to buy at least $3T of Treasuries by the end of 2021, but argue that their pain threshold to alter the maturity of purchases is elevated, which suggests the curve can steepen before they would step in. This concerns gold and precious metals inasmuch as rising yields offer an alternative safe-haven to the yellow metal — thereby putting pressure on prices."
This poses another risk to gold's short-term outlook, along with the potential for real rates to rise in the near-term, while the Fed would be unwilling to cut rates below zero to further suppress real rates, thereby weighing on gold. That being said, we expect that when the dust settles, capital will seek to shelter itself from a prolonged period of negative real rates following the pandemic.
Gold prices have struck a fresh high for the month, withing the ebbs and flows of the markets. Gold and the US dollar are taking it in shifts to carry the safe-haven flows with COVID-19 at the heart of the risk-off themes...READ MORE
Previewing Friday's jobs report, Minneapolis Fed President Neel Kashkari argued that the true unemployment rate is around 23-24% but the Nonfarm Payrolls report is likely to show a smaller number because many people are not looking for work.
"We can avoid a depression scenario but we're in for a long gradual recovery," Kashkari added and noted that he is very concerned about more cases flaring up if the economy opens too quickly. "The recovery will be gradual on a business-by-business basis until we have a COVID-19 vaccine or therapy."
These comments don't seem to be having a significant impact on market sentiment. As of writing, the S&P 500 futures were up 1.35% on a daily basis.
Previewing Friday's jobs report, Minneapolis Fed President Neel Kashkari argued that the true unemployment rate is around 23-24% but the Nonfarm Payrolls report is likely to show a smaller number because many people are not looking for work...READ MORE
DXY has managed to reclaim the critical triple-digit barrier on Wednesday, consolidating the weekly recovery from Monday’s lows near 98.50.
If the recovery picks up further pace, then the focus of attention will shift to the Fibo retracement (of the 2017-2018 drop) at 100.49, ahead of the April’s top just below 101.00 the figure.
Further out, the 200-day SMA in the 98.30/35 band is expected to hold the downside in the short-term horizon.
DXY has managed to reclaim the critical triple-digit barrier on Wednesday, consolidating the weekly recovery from Monday’s lows near 98.50...READ MORE
Open interest in crude oil futures markets reversed two consecutive pullbacks and went up by around 18.7K contracts on Tuesday in light of flash readings from CME Group. Volume, too, increased by nearly 270K contracts following two drop in a row.
WTI now targets the $30.00 mark/bbl
Prices of the barrel of WTI extended the rebound on Tuesday amidst rising open interest and volume, allowing the continuation of the uptrend with the next key target now at the $30.00 mark in the short-term horizon.
Open interest in crude oil futures markets reversed two consecutive pullbacks and went up by around 18.7K contracts on Tuesday in light of flash readings from ...READ MORE
Here is what you need to know on Wednesday, May 6:
The market mood is mixed with the dollar and yen consolidating their gains while oil is on the back foot and stocks remain cautiously optimistic. US President Donald Trump continued stoking tensions with China, and ADP's Non-Farm Payrolls are eyed.
The White House remains on the offensive against China, stating the coronavirus probably escaped from a lab in Wuhan, a controversial claim. The trade deal between the world's largest economies is at stake.
The president wants to disband the coronavirus task force, focusing on reopening the economy. He commented that he wants a return to normal even if people will suffer. Over 70,000 died from the disease in the US with several states seeing an improvement and gradually returning to normal.
The ISM Non-Manufacturing Purchasing Managers' Index plunged to 41.8 points in April, yet better than expected. The employment component crashed to 30, indicating a substantial loss of jobs. ADP, America's largest payroll provider, releases its labor figures on Wednesday, with over 20 million job losses expected. It serves as a hint toward Friday's Non-Farm Payrolls.
The euro is trying to find its feet after the German constitutional court deemed part of the European Central Bank's QE as illegal. The EU's top court overrides individual countries' powers and the ECB released a defiant response, vowing to do whatever is needed. Nevertheless, the common currency remains under pressure, trading below 1.0850.
Final Eurozone Services PMIs for April will likely be in the teens, representing a deep recession. The initial read for the bloc stood at 11.7 points. The EU publishes new economic forecasts later on Wednesday and they will likely be dire. Eurozone countries are gradually removing restrictions with the Spanish parliament debating extending the state of emergency and Germany considering devolving power to states.
The UK's death toll from COVID-19 is nearing 30,000, surpassing Italy despite substantially flattening the curve. Prime Minister Boris Johnson is deliberating what limits to lift amid polls showing most Brits remain wary. The British Chamber of Commerce says most businesses can return to normal within days. GBP/USD has been trading in the 1.24 handle.
New Zeland's jobs figures for the first quarter beat expectations with the Unemployment Rate stands at 4.2%. The kiwi is on the rise. The Aussie is also gaining ground as final Retail Sales figures for March were upgraded to a jump of 8.5%.
Oil prices are edging lower after staging an impressive recovery. Oil inventories are due out later in the day. Producers in Texas refrained from coordinating output cuts.
Cryptocurrencies have been consolidating previous gains, with Bitcoin trading around $9,000.
The market mood is mixed with the dollar and yen consolidating their gains while oil is on the back foot and stocks remain cautiously optimistic. US President Donald Trump continued stoking tensions with China, and ADP's Non-Farm Payrolls are eyed...READ MORE
Another Wild Week Ahead
It’s sometimes easy to forget just how unusual these markets are that we’re witnessing on a daily basis. They’re contending with economies around the world that only two months ago were in the best shape they’ve been in for years, a global pandemic that’s wreaked havoc across the globe, unprecedented fiscal and monetary stimulus and an enormous amount of uncertainty to cap it off, leading many companies to not even bother offering guidance as they simply don’t know.
When you weigh all of that up, it’s hardly surprising the levels of volatility we’re seeing on a daily basis. Last year we thought a trade war between the US and China and no-deal Brexit could destabilize the global economy. Now we could be headed for both on top of everything else (granted, we’re far from that situation at the moment, but still).
This week was eventful. Next week, all we have to contend with is the US jobs report (and jobless claims figures with April’s total above 30, yes thirty, million), Bank of England and Reserve Bank of Australia decisions and another busy earnings week. Oh, and the oil crisis. Almost forgot about that one. No big deal.
The coronavirus pandemic has now killed more than 64,000 Americans and 234,000 people worldwide. Wall Street is paying close attention to the slow reopening of the economy across 20 states. Economic activity will need to see a successful reopening of the economy before investors feel confident that we are on the other side of the virus. The risks at opening now for some states is that a new wave of new cases could happen. Not every state is adhering to the guidelines set for reopening, so investors will closely watch to see if any spikes occur with new cases over the next couple of weeks.
The Fed has been very active in delivering stimulus and now they need to unveil the details to the rest of the emergency programs. A more calculated approach seems to be working for the Fed, case in point with the details with the Main Street Lending Program. The Fed will remain accommodative for the foreseeable future and will be quick to intensify their efforts if the recovery is threatened.
The Presidential election is six months away and former VP Joe Biden needs to pick who will be his running mate. Biden has promised his VP selection would be a woman, but it should not be ruled out that he might have to cave on the idea and go with Governor Cuomo. The New York Governor handling of the handling of coronavirus has made him a favorite among many on the East Coast, but his likeability is questionable for the Midwest. Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.
Boris Johnson announced on Thursday that the country is finally past the peak of coronavirus which, in theory, means it can start preparing for lockdown measures to be lifted. This won’t be done quickly or without certain conditions being met, the five tests laid out by the PM. But it does provide hope that some businesses can reopen their doors and people return to work.
The Bank of England meets next week and has already eased monetary policy considerably in line with others around the globe. No significant measures are currently expected, although as we’ve seen, central banks are continually tweaking programs to respond to the evolving needs of their countries.
NB The BoE has changed the time of the release to 7am next Thursday from the usual midday. While there haven’t been expectations of a change, the last time they announced measures on budget day, they also released this at 7am. More speculation likely over the coming days.
It’s been some week for the eurozone’s third largest economy. Fitch downgraded its credit rating to one level above junk, leaving it teetering on the edge with all three major credit rate agencies. It entered technical recession after contracting 4.7% in the first quarter, having shrunk 0.3% in Q4. And its government forecast the country will shrink by 8% this year, with some thinking that’s optimistic, likely putting further pressure on its ratings and debt later this year.
The flip side is that new coronavirus numbers continue to decline, as do the number of deaths, which will allow for a gradual reopening of the economy. This may not save it later this year but the ECB stands ready to support those fallen angels among it, being debt that’s fallen into junk territory as a result of the crisis. It’s already agreed to accept these bonds as collateral in its credit facilities, rumours suggest they’ll eventually apply the same logic to bond buying should Italian debt become junk.
Spain is preparing to ease lockdown measures, starting with four islands from Monday, following a full month of declining cases and deaths. Spain’s measures have been among the most stringent and the process will likely be done very slowly. The country contracted by 5.2% in the first quarter and will fall into recession in the current one. The Bank of Spain expects a full year contraction of 9.2% and unemployment to peak at 19% this year.
On the day when Italy and France officially fell into recession, with sharp contractions in the first quarter, the ECB expanded its easing programs in an attempt to further alleviate pressure on the region in these tough times. The central bank reduced interest rates on its TLTRO III program and introduced new non-targeted pendemic emergency LTROs (PELTROs) in a bid to further support liquidity conditions.
There was no increase in the PEPP or the addition of “fallen angels” in the purchases yet but that must just be a matter of time. It could be a few months before the latter becomes compulsory so there was no urgency today, with Italy holding onto its investment grade earlier this week.
The economic data this week from China has been encouraging for the rest of the world as it emerges from lockdown. What is less encouraging is what’s coming from the White House with Donald Trump insistent on ensuring that the finger of blame for the coronavirus toll in the US is not pointed his way. Trump has threatened tariffs on China once again and the trade deal which took so long to thrash out may already be at risk. The coronavirus has already likely meant that the terms are not being met and Trump may feel the need to make China a key feature of his re-election campaign. Expect more hostility in the weeks and months ahead.
RBA meeting on Tuesday, no change in interest rates expected. Traders are likely to look for more insight on bond buying, with the central bank expected to continue to taper having achieved its goal of managing the yield curve through this extraordinary time. It wanted to keep the 3 year rate around 0.25% which it has successfully managed to do.
BoJ removed the ¥80 trillion ceiling on annual purchases at its meeting earlier this week, making the announcement a day earlier than planned, and joined the QEinfinity club. The central bank no longer expects to hit its inflation target in the next three years and pledged to do more when needed.
Oil prices have staged an impressive rebound this week after a rocky start, as the USO – America’s largest oil ETF – opted to avoid another May contract scenario and shed its June holdings. This represented around 20% of its $3.6 billion portfolio so traders were naturally keen to get out the way and compress prices to very generous levels, if you’re a buyer. The price rebounded shortly after but still trades below $20.
The production cuts are finally kicking in with Saudi Arabia reportedly implementing agreed reductions ahead of schedule, the OPEC+ deal officially underway as of today, Norway announcing a reduction of 250,000 barrels per day and ConocoPhillips culling 265,000 this month, rising to 460,000 next. Others will likely follow, at which point we may see downside pressures ease on oil prices and near contracts. Prices are still extremely low though and the next two weeks will likely see extreme volatility return.
It’s been a strange week again for gold. It remains broadly aligned with risk assets but not necessarily reliably so at this point and even its relationship with the dollar has become a little sketchy. It seems after a period of turbo-charged volatility, the yellow metal has settled into a consolidation phase, with $1,660 providing the floor and $1,750 the ceiling. Quite a broad range, granted, but given the environment, something has to give. Either the world’s going to become a more predictable and relaxed environment, or this can’t last.
The bitcoin halving event is nearing and it seems the extra publicity the crypto space is getting as a result is having the usual effect. Bitcoin dragged its feet through $7,500 resistance but once $8,000 fell it took off. The cryptocurrency fell short of $10,000 psychological resistance to trade just below $9,000 at the time of writing. The halving itself isn’t a bullish event – something that seems to have broad agreement which is strange to see, normally everything is bullish for some reason – but publicity often is so the coming weeks may generate interest and support cryptos. Whether it can be sustained after that I’m very sceptical.
It’s sometimes easy to forget just how unusual these markets are that we’re witnessing on a daily basis. They’re contending with economies around the world that only two months ago were in the best shape they’ve been in for years, a global pandemic ...READ MORE
EUR/USD has jumped above 1.10, trading at the highest levels in a month. The US dollar is retreating across the board after the ISM Manufacturing Purchasing Managers' release. While the headline beat expectations with 41.5 points, the employment and new orders components fell below 30, a bearish sign.
On Thursday, the European Central Bank left rates and the Quantitative Easing programs unchanged but introduced a new lending scheme. The initial reaction was negative but Italian bonds stabilized afterward. The US Federal Reserve enhanced two lending programs this week – for municipal bonds and Main Street. The Fed also committed to buying bonds at "the amount needed" – putting pressure on the dollar.
It is essential to note that a significant chart of the upward move in EUR/USD can be attributed to end-of-month flows late on Thursday.
Here is the four-hour EUR/USD. It is trading at levels last seen in late March. The Relative Strength Index is flirting with 70, indicating overbought conditions. The next levels to watch are 1.1040 and 1.1090. Support awaits at 1.0970 and 1.0890.
-- more to come
EUR/USD has jumped above 1.10, trading at the highest levels in a month. The US dollar is retreating across the board after the ISM Manufacturing Purchasing Managers' release. While the headline ...READ MORE
The economic activity in Canada's manufacturing sector contracted at a strong pace in April with the IHS Markit's Manufacturing PMI slumping to 33 from 46.1 in March. This reading missed the market expectation of 41.5 by a wide margin.
Developing story...READ MORE
Commenting on the Federal Reserve's monetary policy outlook, Dallas Fed President Robert Kaplan said that interest rates will stay for long and added that the Fed will need to do more to bridge this period.
"Oil producers will shut wells globally, including in the US with industry contracting this year."
"It will take until second half of 2021 or into 2022 to work off excess oil inventory."
"In near term, disinflation is more likely than inflation."
The market reaction was largely muted to these comments with the US Dollar Index remains stuck in the lower half of its daily range near 99.
Commenting on the Federal Reserve's monetary policy outlook, Dallas Fed President Robert Kaplan said that interest rates will stay for long and added that the Fed will need to do more to bridge this period...READ MORE
The entire edifice of support for the economy rests on confidence in the currency, as analysts at Natixis note.
“Maintaining confidence in the currency is essential for central banks to be able to use quantitative easing, under which economic agents hold more money, since they do not want to hold all the government bonds that are issued.”
“If there is a loss of confidence in the currency, the prices of assets that compete with the public currency must rise: gold and cryptocurrencies.”
“In the recent period, the price of gold has risen, but cryptocurrency prices have not.”
The entire edifice of support for the economy rests on confidence in the currency, as analysts at Natixis note...READ MORE
Fed funds rate unchanged at 0.25% as anticipated while the statement is devoid of projections on the length of the crisis or the Fed’s emergency measures, FXStreet’s analyst Joseph Trevisani informs.
“The Fed kept the base rate unchanged at 0.25% while revised economic and rate projections were not released with the statement as had been expected.”
“There was no estimate in the statement about how long the Fed may maintain its emergency programs. There was also no mention of the specific domestic and international measures the bank has taken in the past two months.”
“The economic contraction, job losses and the Fed's emergency stance will likely keep the dollar's risk status intact at least until the pandemic recedes and the US recovery is credibly underway.”
Fed funds rate unchanged at 0.25% as anticipated while the statement is devoid of projections on the length of the crisis or the Fed’s emergency measures, FXStreet’s analyst Joseph Trevisani informs...READ MORE
Here is what you need to know on Thursday, April 30:
April is ending with a bang with markets digesting comments from US President Donald Trump and the Federal Reserve's decision. Events are coming thick and fast with top eurozone data, the European Central Bank's decision, and weekly jobless claims.
The safe-haven US dollar has been recovering after Trump harshly criticized China for its implementation of the trade deal and for handling coronavirus. He added that Beijing will do anything to prevent him from being reelected. These fresh tensions between the world's largest economies have soured the previously upbeat sentiment. Chinese Purchasing Managers' Indexes for April reflected stability, reflecting minor growth, yet evidence independent research suggests most factories are probably far from full capacity.
The Fed reiterated its commitment to supporting the economy and vowed to keep interest rates low and buy bonds "at the amount needed." The unequivocal pledge boosted stocks and weighed on the dollar. Jerome Powell, Chairman of the Federal Reserve, said he is ready to more if needed and called the government to do more.
Coronavirus cure?: Gilead's Remdesivir medicine proved successful in shortening the recovery of COVID-19 patients. Dr. Anthony Fauci, the head of the NIH, detailed the success in the White House, and his stamp of approval also boosted sentiment. The study has yet to be scrutinized by medics and academics, once the full details are out. The Trump administration is reportedly working to accelerate production of a vaccine – operation "Warp Time" – once one becomes available
Bitcoin has been extending its gains, breaking above $9,000 in quick succession to previously surging above $8,000 on Thursday. Ethereum and XRP had previously topped $200 and $0.20 respectively, in sharp moves.
European coronavirus cases continue trending lower, especially in Italy and Spain. A big bulk of eurozone figures are due. Economists expect the Gross Domestic Product to have dropped by 3.5% in the first quarter and the Consumer Price Index to haven fallen to nearly 0% in April. French GDP disappointed with a fall of 5.8%.
The figures are released ahead of the all-important ECB decision. Will the Frankfurt-based institution enlarge its emergency bond-buying program? It currently stands at €750 billion but the funds are deployed at a rapid pace. Christine Lagarde, President of the European Central Bank, previously urged governments to do more, including controversial coronabonds.
UK deaths have surpassed 26,000 after the government included mortalities outside hospitals. The government is set to leave lockdown measures unchanged, citing Germany's experience with seeing its infection rate rise after easing restrictions. GBP/USD has failed to take advantage of the dollar's weakness as the shuttering continues.
US jobless claims are forecast to increase by around 3.5 million, thus falling for the fourth consecutive week, yet still reflecting some 30 million job losses since mid-March. Personal Spending likely plunged in March. On Thursday, the US reported an annualized plunge of 4.8% in GDP, with personal consumption plummeting by 7.6%. The second quarter will likely be worse.
Oil: Norway has announced it would reduce oil output in the second half of the year, adding an extra oomph to recovering crude prices. WTI has surpassed $17 and Brent is above $24. The Canadian dollar has been benefiting from oil's upward move and now faces a domestic test with GDP figures for February, predating the crisis.
Overall, action is set to continue at full speed.
April is ending with a bang with markets digesting comments from US President Donald Trump and the Federal Reserve's decision. Events are coming thick and fast with top eurozone data, the European Central Bank's decision, and weekly jobless claims...READ MORE
XAU/USD is consolidating the advance started in mid-March as the metal stays above the 100/200 SMAs on the four-hour chart. XAU/USD keeps a strong bullish momentum as buyers are still looking for a break above the 1740.00 level on a daily closing basis which should open the gates toward the 1740 and 1780/1800 resistance zone. Conversely, support should emerge near 1700/1690 price level for the medium-term and further down lies the 1660 level. Freshly released the US GDP came in worse-than-anticipated contracting 4.8% in the first quarter of this year.
XAU/USD is consolidating the advance started in mid-March as the metal stays above the 100/200 SMAs on the four-hour chart. XAU/USD keeps a strong bullish momentum as buyers are still looking for a...READ MORE
WTI futures June contract is consolidating losses below the 15.55/18.80 resistance zone. As the overall bias remains to the downside, the black gold is expected to remain capped below the above-mentioned price zone. Sellers could come back for a break below the 13.16 support followed by 9.87 on the way down.
WTI futures June contract is consolidating losses below the 15.55/18.80 resistance zone. As the overall bias remains to the downside, the black gold is expected to remain...READ MORE
Five factors are boosting S&P 500 to a remarkable rally from the lows, but all may prove ephemeral, and stocks may turn back down, according to FXStreet’s analyst
“The Fed has thrown the kitchen sink, buying debt of ‘fallen angels,’ junk bonds, and also expanded its purchase of municipal debt. It may have reached its limits, and without a further supply of Fed funds, shares may turn south.”
“Without imminent new stimulus in the face of a worsening economic situation, investors may shy away. The government may always directly buy stocks, but that remains a remote option.”
“Fear from coronavirus carnage may have been exaggerated, but also greed in light of fiscal and monetary stimulus may have gone too far. Markets tend to overreact in both directions. As the dust settles and the depth of the damage is realized, the pendulum may swing lower.”
“The momentum may reverse sooner than later, and stronger stocks may be carried down the majority of weaker ones.”
“A second shelter-in-place order is far worse than extending existing limits to movement as it may deal a blow to consumer and business confidence.”
“The Fed has thrown the kitchen sink, buying debt of ‘fallen angels,’ junk bonds, and also expanded its purchase of municipal debt. It may have reached its limits, and without a further supply of Fed funds, shares may turn south.”...READ MORE
Despite the general risk-on mood, WTI remains very weak after the bounce from historic lows to 18.00 a barrel (WTI futures June contract). As sellers remain in full control, a break below 9.87 can yield further weakness towards the 7.31 support level in the medium term. Bullish attempts are likely to be short-lived with resistances likely to emerge near 13.16, 15.55 and 18.80 levels.
Despite the general risk-on mood, WTI remains very weak after the bounce from historic lows to 18.00 a barrel (WTI futures June contract). As sellers remain in full control...READ MORE
Gold struggled to capitalize on its goodish intraday bounce from four-day lows and was last seen trading in the neutral territory, around the $1710 region.
The US dollar failed to sustain its early positive move, instead met with some aggressive supply and turned out to be one of the key factors that helped revive demand for the dollar-denominated commodity.
This coupled with a mildly weaker tone surrounding the US Treasury bond yields extended some additional support to the non-yielding yellow metal, albeit a strong rally in the equity markets capped the upside.
The global risk sentiment remained well supported by the latest optimism over the easing of coronavirus-related restrictions globally and a push to accelerate the gradual re-opening of the economies.
The risk-on flow seemed to be the only factor holding investors from placing any aggressive bullish bets and kept a lid on any runaway rally for the safe-haven precious metal, at least for the time being.
Hence, it will be prudent to wait for some strong follow-through buying before traders start positioning for any further near-term appreciating move for the commodity, possibly towards the $1736-38 heavy supply zone.
In the meantime, market participants will look forward to the release of the Conference Board's US Consumer Confidence Index, which might influence the USD price dynamics and provide some trading impetus.
Gold struggled to capitalize on its goodish intraday bounce from four-day lows and was last seen trading in the neutral territory, around the $1710 region...READ MORE
The New Zealand dollar (NZD) is being offered in Asia, possibly due to speculation that the Reserve Bank New Zealand (RBNZ) may have to cut rates into the negative territory in November.
The NZD/USD pair is now trading at session lows near 0.60, representing a 0.70% drop on the day, having declined from 0.6048 to 0.6030 during the early Asian trading hours.
The RBNZ said in March that it would keep the official cash rate at 0.25% for at least 12 months. However, the outlook has deteriorated since then and the central bank would feel compelled to do more for the economy, both Westpac chief economist, Dominick Stephens, and Triple T Consulting founder and managing director, Sean Keane, said early Tuesday, according to Interest.co.nz.
Westpac's Stephens thinks the RBNZ would begin preparing markets for negative rates from August and would deliver a 75-point cut to -0.5% in November. It's worth noting that the central bank is already running a $33 billion quantitative easing (QE) program, which too, could be expanded.
The dovish RBNZ expectations could continue to overshadow the progress on the coronavirus front and keep the NZD under pressure.
New Zealand's Prime Minister Jacinda Ardern said on Monday that the coronavirus was "currently" eliminated. “The country moved to level 3 at 11.59 PM on Monday, easing some of the restrictions of the level-4 living of the past four-and-a-half weeks - including another 400,000 Kiwis returning to work and the lifting of fast-food restrictions,” said the New Zealand Herald.
The New Zealand dollar (NZD) is being offered in Asia, possibly due to speculation that the Reserve Bank New Zealand (RBNZ) may have to cut rates into the negative territory in November...READ MORE
Citing sources familiar with the matter, Reuters reports that the European Commission is likely to temporarily ease rules on leverage ratio calculation to help banks lend more in a pandemic.
The sources added that the Commission will propose allowing banks to opt into relief from bad loan provisioning rule.
Citing sources familiar with the matter, Reuters reports that the European Commission is likely to temporarily ease rules on leverage ratio calculation to help banks lend more in a pandemic.READ MORE
Economist at UOB Group ruled out the likelihood that the Federal Reserve could reduce rates below zero at this week’s event.
“The Fed has demonstrated it will do whatever it takes to restore financial market stability, smooth out US dollar funding conditions and safe-guard the economy.”
“So more measures (including unscheduled ones) can be expected. That said, we do not think the Fed will want to push rates beyond zero, into negative territory.”
The Fed has demonstrated it will do whatever it takes to restore financial market stability, smooth out US dollar funding conditions and safe-guard the economy...READ MORE
US DOLLAR BEARS SLOWING DOWN, GBP/USD FLIPS TO NET SHORT- COT REPORT
In the week to April 21st, CFTC data highlights that speculators had been somewhat hesitant, given that positioning changes had been relatively muted. That said, investors had net sold the US Dollar by $168mln against G10 currencies (6th consecutive week of dollar selling), however, selling momentum appears to have moderated. While economies look to re-open, the soft macro backdrop remains (particularly over Europe), which in turn keeps the greenback with an upside bias. It is only when the global economy begins to recover can we expect to see a potential pullback in the US Dollar.
Non-commercials are net short on the Pound for the first time since December. Last week’s Brexit talks provided little signs of encouragement for GBP, with EU’s Barnier stating that progress had been disappointing. This provides us with a reminder that Brexit induced volatility will be back on the rise in the run-up to transition extension deadline (June 30th). As such, with markets yet to notably re-price Brexit risks, there is a potential for an increase in speculative bearish positioning, leaving the Pound vulnerable.
Across commodity currencies, bearish positioning had eased, largely led by short covering. CAD investors had seemingly ignored the technical selling in oil, which saw prices go negative for the first time on record.
Investors remain constructive on both the Japanese Yen and Swiss Franc. In recent weeks, dips in the Japanese Yen have been well supported. This had been apparent last week when source reports that the BoJ were to announce unlimited QE saw initial JPY weakness quickly faded. Upside in the Swiss Franc however, considers to face a significant hurdle against the Euro.
Elsewhere, positioning changes in the Euro were unchanged. Short covering had been the key reason behind the increase in net Euro longs over the past two months, however, as European sovereign risks re-emerge, there is a potential for outright Euro shorts to pick up once again and thus leave the Euro exposed to a sizeable drop.
In the week to April 21st, CFTC data highlights that speculators had been somewhat hesitant, given that positioning changes had been relatively muted. That said, investors had net sold the US Dollar by...READ MORE