Archives of “May 2020” month

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The Australian dollar is sending a negative signal

  
Analysis, Forex

Sharp drop in North American trade

The Australia dollar completed the coronavirus comeback yesterday as it completely recouped the March-April decline to trade back to where it was in mid-February.
What next?
Today the mood is AUD/USD isn’t so rosy, the pair has fallen 80 pips in the past couple hours after making a margin new high but failing to extend. Part of that is broad US dollar strength but the weakness is accelerating and that’s a negative signal for the risk trade.
There’s still some rope left in yesterday’s rally but we have crossed the 61.8% retracement of that move.
Sharp drop in North American trade

Gold extends decline in third day of losses

  
Analysis, Gold / Silver
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Gold falls to the low of the day

Gold falls to the low of the day
Gold sank through $1700 and continued down to a session low of $1694 in a $16 decline. It’s the third day of selling this week and is being helped along by a strong dollar today.
The drop wipes out the mid-may rally and puts gold back in the middle of the April range.
The better risk tone and big moves in stocks are sparking flows out of gold and into risk assets.
Technically, this looks like a false break or at the very least a retest of the old range.
If central banks are the drivers of this rally, you have to worry about a scenario like the Bank of Israel early this week, where they upgraded growth forecasts and hinted at a time on the sidelines. I can easily see the Fed following the same playbook and that would undermine the short-term case for gold. It’s the same thing on the fiscal side where the better mood will slow the appetite for spending.

ECB’s de Guindos: Euro area economy to shrink between 8% and 12% in 2020

  
  Analysis
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That just reaffirms the message from Lagarde earlier

Guindos

The forecast he is mentioning is between the ECB’s ‘medium’ and ‘severe’ scenarios, which Lagarde already made a similar mention to earlier here.

In any case, this sets up expectations ahead of their June meeting that all of this will be factored into the staff projections and that more stimulus may accompany it – as they rule out their ‘mild’ scenario from before.
Just be reminded that PEPP should meet its target some time around September or October, so the ECB should communicate an increase in the size sooner rather than later.
Despite the additional easing in nature, the reassurance should keep market participants satisfied that they are willing to do more to ensure financial conditions stay as they are. Remember, “close the spreads”.

Nikkei 225 closes higher by 0.70% at 21,419.23

  
  Analysis
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Japanese stocks get a boost from more stimulus talk

Nikkei 27-05
The government is reportedly going to be pouring another ¥100 trillion at least in a new round of stimulus package, and that is helping to give the Nikkei a bit of a lift today.
The mood elsewhere in the region is more mixed with the Hang Seng down by 1.0% and the Shanghai Composite down by 0.2%, with the former dragged lower amid the clash between protesters and the police in Hong Kong.
US futures are keeping higher by about 0.6% though, but after the setback yesterday, major currencies are keeping on their toes in response to start European trading.
The dollar is a little firmer across the board, but nothing too overwhelming for now. AUD/USD is down 0.2% to 0.6640 while EUR/USD is also lower by 0.2% to 1.0960.

South Korea sees fresh spike in coronavirus cases amid outbreak in e-commerce warehouse

  
  Analysis
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South Korea reported 40 new cases in the past day, the highest total in 49 days

Korea

This comes after e-commerce firm, Coupang, reported an outbreak at its logistics center located in Buncheon with at least 36 cases linked to the fresh cluster at the moment.

The firm did already say that it has moved to test 3,600 people at its facility after the reported incident. Once again, tracking and tracing is going to be the utmost importance here.
The fear is that it could lead to a widespread community transmission that may result in secondary wave of infections in the country.
If you need reminding, South Korea also had an incident at the start of the month where one infected person who visited nightclubs led to a resurgence in the number of virus cases. As of yesterday, the nightclub-linked cases has increased to 257 persons.

IEA: The coronavirus crisis is causing the biggest fall in global energy investment in history

  
Analysis, Crude

IEA says global energy investment is to plunge by 20% in 2020

In money terms, that is equivalent to roughly $400 billion. Prior to the crisis, IEA had estimated global energy investment to grow by 2% this year. The agency also notes that governments and the overall industry is set to lose well over $1 trillion in revenue as a result.

Oil
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