Archives of “June 2020” month

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Wuhan study says there may be no herd immunity against the coronavirus

  
  Analysis
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Scary stuff

Scary stuff
The nightmare scenario for coronavirus is that there is no vaccine and no natural immunity. We’re months away from finding out anything on a vaccine but a report today on immunity is worrisome.
Chinese and Texas researchers tested 23,000 Wuhan healthcare workers for antibodies of the disease that would help them fight off a new infection. Only 4% had them when they estimated that at least 25% could have contracted the disease.
“People are unlikely to produce long-lasting protective antibodies against this virus,” the researchers concluded in a non-peer-reviewed paper posted on preprint website medRxiv.org on Tuesday.
The study showed the people with more-obvious and stronger symptoms tended to have antibodies. That suggests people who fought it off with mild symptoms may not have developed antibodies.

European major indices are ending the session with declines across the board

  
Analysis, Global Indices

German DAX, -0.7%. France’s CAC, -0.8%. UK’s FTSE, -0.6%

The major European indices are ending the session with declines across the board. The provisional closes are showing:
  • German DAX, -0.7%
  • France’s CAC, -0.8%
  • UK’s FTSE 100, -0.6%
  • Spain’s Ibex, -2.6%
  • Italy’s FTSE MIB, -0.4%

In the European debt market, the benchmark 10 year yields are ending the session mostly lower. The exception is the UK 10 year which is currently up 3.4 basis points.

German DAX, -0.7%. France's CAC, -0.8%. UK's FTSE, -0.6%_

BOE leaves bank rate unchanged at 0.10%, expands QE program by £100 billion

  
  Analysis

BOE announces its latest monetary policy decision – 18 June 2020

  • Prior 0.10%
  • Bank rate votes 0-0-9 vs 0-0-9 expected
  • Asset purchase program total £745 billion (increase of £100 billion)
  • MPC voted 8-1 in favour to increase QE program target
  • BOE chief economist Andy Haldane dissented
  • Expects total stock of asset purchases to be hit around the turn of the year
  • Agreed to increase target to meet inflation goal in the medium-term
  • Stands ready to increase the pace of purchases if required
  • MPC to keep asset purchase program under review
  • Economy, particularly labour market, will take some time to recover
  • Outlook for UK and global economies is unusually uncertain
  • Expects inflation to fall further below target in the coming months
  • Difficult to make inference on recovery path after Q2
  • Full statement
The pound got a shot in the arm from the decision here as the BOE meets expectations and delivers on their pledge to support the economy further until at least the end of this year, with another £100 billion added to its QE purchases.
The timing suggests that they may scale back a little from the current pace of purchases (before this, the target was scheduled to be met in July). So, that slight taper may be what is being interpreted as a little more hawkish in some sense perhaps.
Cable was trading around 1.2490 prior to the decision but is up to 1.2540 currently. EUR/GBP is also nudged lower to 0.8970 but is holding at its 100-hour moving average.

SNB leaves policy rate unchanged at -0.75%

  
  Analysis
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SNB announces its latest monetary policy decision – 18 June 2020

  • Prior -0.75%
  • Sight deposit interest rate unchanged at -0.75%
  • Remains willing to intervene more strongly in the FX market
  • Will remain active in the FX market as necessary
  • Swiss franc remains highly valued
  • Sees inflation this year at -0.7%, 2021 at -0.2%, 2022 at +0.2%
  • Anticipates that there will only be a partial recovery for the time being
  • Estimates that overall GDP is likely to contract by 6% this year
  • Full statement
Pretty much as good a non-event as can get as the SNB keeps policy unchanged and maintained that they will keep intervening strongly to limit the appreciation of the Swiss franc – as they have been doing over the past few months already.
They revised lower their inflation outlook, which reaffirms the notion that monetary policy is going to stay accommodative as it is now for the next few years at the very least.

Is risk for the GBP tilted to the upside?

  
Analysis, Forex

A case for GBP bulls

A case for GBP bulls 

I was reading a piece on Bloomberg’s markets live blog saying that Brexit 2020 may well be a flop. The point it made was that Brexit in 2016 was a shock. We know that hardly anyone saw it coming and when it happened the GBP fell sharply lower.However, this time, markets have had years of pricing in the UK’s new role in the world.

A more ‘in the background’ role for the UK?

Europe has been pulling together its fiscal and monetary policy to try and support the whole eurozone. However, the UK and its assets have seen global repricing as the UK is re-assessed as a medium sized nation with uncertain trade arrangements. Rightly or wrongly, investors have been downgrading the UK’s prospects. Also, don’t forget that a number of companies are still planning on removing their Headquarters from London.

Is risk tilted to the upside for the GBP

So, even if the EU and the UK don’t arrange a deal this year is a no-deal Brexit virtually priced in? Although the GBP could be expected to fall lower on a no-deal Brexit is the GBP pretty much well placed for upside from current levels? The risk of further downside is still in play as long as a ‘no-deal’ is still a possibility. However, for traders taking a longer term approach with a 2-3 year timeframe then the outlook looks firmer for the GBP the longer the outlook.

GBP upside?

US president Trump says that John Bolton’s book is made up of lies, fake stories

  
  Analysis

We are slowly starting to get into the election phase

A tweet by Trump on Bolton’s book:

“Wacko John Bolton’s “exceedingly tedious”(New York Times) book is made up of lies & fake stories. Said all good about me, in print, until the day I fired him. A disgruntled boring fool who only wanted to go to war. Never had a clue, was ostracized & happily dumped. What a dope!”

For some context, Bolton in his book is shedding light that Trump is putting his re-election campaign over the need to do what’s best for the country and its citizens. The leaks yesterday did cause some reaction in risk trades at the time.
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