Archives of “April 27, 2020” day

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Japan PM Abe: Wants to start cash handouts as early as possible in May

  
  Analysis
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Comments by Japan prime minister, Shinzo Abe, in parliament

Japan
  • Economy is in an extremely severe state
  • This will continue for some time
  • Japan not seeing an explosive increase in virus cases now
The headline remark relates to the ¥100,000 cash handout to every citizen in the country. When launching these measures, timing and effectiveness are both equally key.
It sounds good to get money to every citizen to mitigate the fallout from the virus impact. But if it takes too long to reach them, the damage becomes more permanent.
In the case of other government measures, the effectiveness matters too. A good example is the US’ PPP funding whereby large and publicly traded companies even swooped in for the money alongside smaller companies and mom-and-pop shops.
So, while the market may respond favourably to these stimulus measures on the announcement, the true “value” depends on the execution. And that will show up in the medium-to-long term fundamentals in each country once this is all over and done with.

BOJ policy statement – eases monetary policy further

  
  Analysis

The shortened Bank of Japan monetary policy meeting for April 2020 has concluded.

  • Maintains policy rate at -0.1%
  • maintains JGB yield target around 0%
  • To increase corporate bond, commercial paper purchases
  • expands loan programme to combat coronavirus
  • pledges to buy unlimited amount of JGBs, removes pledge to buy JGBs so its holdings increase at annual pace of around 80 trln yen
  • to buy up to 20 trln yen of corporate bonds
  • to relax rules for its corporate bond, commercial paper purchases

South Korea national security adviser says Kim Jong Un is alive and well

  
Analysis, Politics

Another update on speculation surrounding North Korean leader Kim Jong Un

Earlier (if you need background)
  • Kim Jong Un might have been injured during missile tests on April 14
Now this, comments from Moon Chung-in, special adviser on national security to South Korea’s President Moon Jae, speaking on Sunday:
  • “Our government position is firm, Kim Jong-un is alive and well.”
On Monday, North Korea’s official Rodong Sinmun newspaper said that Kim had sent a message of thanks to workers on the Wonsan Kalma coastal tourism project. The paper did not carry any picture of Kim.
If Kim has kicked the bucket the talk is he will be replaced at the head of the country by his sister Kim Yo-jong.
kim yo jong

Goldman Sachs says global oil storage capacity to be reached in 3 weeks, then a 20% cut in production

  
  Analysis

GS commodity analysts

  • crude building in storage tanks at record levels
  • global storage capacity to be filled in 3 to 4 weeks
  • once filled, will be nowhere to put any further oil output
  • producers will be forced to shut enough supply to match the demand loss – a cut of around 18 to 20 million barrels a day by mid-May
  • likely to trigger further price volatility – price spikes to the downside until supply equals demand
GS add on the demand bottoming out, likely 4-8 weeks away.
Further ahead, the necessary oil production cuts cannot be quickly reversed, which could well put the global oil market into deficit by  global oil market could be in a deficit by June – with prices to begin then to slowly recover.

Kim Jong Un might have been injured during missile tests on April 14

  
Analysis, Politics

Speculation on the health, and whereabouts, of the North Korean dictator continue.

For back ground if you need it, I posted this over the weekend:
  • Report that China has sent a medical team to North Korea to attend to Kim Jong Un
Korean news group Dong-A Ilbo now positing:
  • North Korean leader Kim Jong Un might have been injured during the tests of short-range cruise missiles on April 14
  • missile tests such as the ones carried out on April 14 could not go ahead without the order of commander-in-chief, which suggests that Kim was well until 7 a.m. when the missiles were fired.
  • “Kim was absent from the reports of the tests while no footage of the missile launch and the training of combat aircrafts was released, which points to a possibility of an unexpected accident that might have been caused by debris or fire”
Donga cite a former high ranking North Korean official who defected. Link if you want more.
Speculation on the health, and whereabouts, of the North Korean dictator continue.

The removal of 2 of the most powerful drivers of FX, what’s ahead?

  
  Analysis

The global response to the coronavirus outbreak has been, while without overt coordination nevertheless coordinated.

  • G10 policy rates
  • and the expectations ahead for those policy rates
have converged towards zero or below (and with QE thrown in)
Rates and rate expectations are two of the huge drivers of FX divergence.
We are going to have look at other drivers ahead for some months to come .
  • Keep an eye out for when monetary policy divergence (on the outlook for rates and then rates themselves) by country, these divergences will be small but there will be heightened sensitively and that’ll impact FX pricing.
Fiscal spending right now is supportive but as the crisis eases back focus will switch to imbalances that are being compounded, countries with bigger deficits will be at risk.
Pretty soon too we will begin to see renewed focus on other factors come back into play, such as Brexit.

Another warning of EUR/USD moving to parity – technical analysis

  
Analysis, Forex

Bank of America note on the euro, says EUR/USD parity is a technical risk:

  • says the pair is coiling into a tight range
  • a bearish continuation pattern,
  • should sell into rallies
  • BoA prefers to sell into 1.09s, stop loss 1.1165/1.12 and downside targeting measured move levels: 1.0433, 1.0330, 1.0230 and possibly 0.9903
  • Sees parity as a risk into the end of June

(BoA note late last week)

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