Archives of “August 28, 2020” day

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Germany’s Merkel: Things won’t return to normal until we have a coronavirus vaccine

  
  Analysis

Further comments by Merkel

  • Hearing that there are hopeful approaches for developing a vaccine
  • Says Germany is to spend most of EU funds on existing programs
  • Says Germany is to get around €22 billion from recovery fund
Merkel laying down some expectations over how life will be over the next few months at the very least for Germany and/or Europe for the most part.
As smoothly as the economic recovery has been progressing, the fact remains that global travel is something that is unlikely to resume any time before the end of the year.

USD/JPY slips on Abe’s resignation but buyers keep defense of key near-term level

  
  Analysis

USD/JPY falls as the yen gains on Abe’s resignation as prime minister

USD/JPY H1 28-08

Since Powell’s speech yesterday, the pair has pretty much followed the trajectory in bond yields and after a brief nudge lower post-Powell, the pair rose from 105.60 to a high earlier today of 106.95 – just short of testing its 100-day moving average @ 107.00.
But Abe’s resignation has thrown a bit of a curveball into yen trading ahead of the weekend, as the currency strengthened amid a risk-off wave in Japanese markets as the Nikkei tumbled on the news as well.
For USD/JPY, the pair dropped from around 106.70 to a low of 106.11 but buyers are keeping a defense of the 100-hour MA (red line) @ 106.20 for the time being.
That means the near-term bias is still more bullish as buyers are holding on to support at the key level above with further support then seen closer towards the 105.95-00 region, near the 200-hour MA (blue line).
For now, there may be pressure on yen pairs on the back of some uncertainty surrounding the political future of the country and if Abe’s successor will bring about major changes to economic policies i.e. ‘Abenomics’ and the BOJ monetary policy outlook.
The consensus argument is that the relative uncertainty is likely to be short-lived as the Japanese economy is in a rather fragile state following the coronavirus pandemic and no lawmaker – and even the BOJ – will be willing to risk things at the moment.
As such, there is a strong case that the relative strength in the yen may not last and as long as bond yields are elevated as per what we have seen post-Powell, that should underpin yen pairs in the bigger picture.
Back to USD/JPY, I’d be more convinced of a further drop if we do see the 200-hour MA @ 105.95 breached over the next few sessions. Otherwise, the relative softness in the dollar so far is also suggestive that the downside in the pair may not extend too much.

Nikkei 225 closes lower by 1.41% at 22,882.65

  
Analysis, Global Indices

The Nikkei slides in the final hour as Abe plans to resign

Nikkei 28-08

Japanese stocks were faring better on the day, rising alongside its peers in the region, before reports came in that Abe is to resign as prime minister. That sent Japanese markets into a risk-off spin, though the reaction outside of Japan is rather muted.

The Nikkei tumbled by as much as 2.5% at one stage but has trimmed losses since.
Elsewhere, the Hang Seng is up 1.4% and the Shanghai Composite is up 1.1%. Meanwhile, US futures are up by 0.4% as we look towards European morning trade.
In the currencies space, the dollar is on the back foot across the board as it extends losses post-Powell. The yen was also weaker initially as yields were rising but the Abe news helped the currency to turn losses into gains against the dollar.

Japan prime minister Shinzo Abe reportedly plans to resign due to health reasons

  
  Analysis

NHK reports on the matter

The yen has strengthened on the headline here with USD/JPY falling from 106.70 to a session low of 106.21 as the Nikkei takes a tumble, falling by over 1% now.

NHK reports that Abe is planning to resign due to health reasons and wants to avoid disruptions to the government due to his illness. This goes against prior reports that he is expected to carry on with his incumbent position until next year.

Economic data coming up in the European session

  
  Analysis

A little messy ahead of the weekend

Depending on how you want to look at it, there are a few key takeaways from Fed chair Powell’s speech yesterday. The most important one is that he mainly reaffirmed that low rates are here to stay for longer as the Fed moves to ‘average’ inflation targeting.

But is that story really anything new? The market had some sense that the Fed isn’t going to raise rates over the next five years potentially and this cements those expectations.
The bigger story might have been that they want to gain a further edge in the “race to the bottom”, offering quite a lot of vagueness about policy views in general.
In some sense, the Fed basically said that it will interpret the economic and market situation so long as it fits their policy needs at any given point in time.

(more…)

The EU has warned Boris Johnson he has less than two weeks to save post-Brexit trade and security talks

  
Analysis, Politics

The UK Times with the worrying news, citing senior European Union sources.

  • The UK PM has been warned he has less than two weeks to save post-Brexit trade and security talks
  • Michel Barnier and David Frost, the UK’s chief negotiator, will hold emergency talks next week in an effort to save the negotiations, The Times understands.
  • Mr Barnier, the EU’s chief negotiator, told the government last week that negotiations will not move forward until Mr Frost explains what Britain’s future policy will be on industrial subsidies.
  • In an angry response, the prime minister’s negotiator hit back, telling the French former European commissioner that Britain would not draw up such a key economic policy on a “timetable dictated to” by the EU.
Times may be gated.
The UK voted to leave what, more than 4 years ago? And Frost is whining about the timetable being dictated. What, no one could have seen this coming … ?
The UK Times with the worrying news, citing senior European Union sources. 

EU paid 336m EUR downpayment to AstraZeneca to secure at doses of potential COVID-19 vaccine

  
  Analysis

An overnight piece ICYMI on the UK coronavirus vaccine developer AstraZeneca

European Commission statement that AstraZeneca agreed to sell 300 million doses for 750 million euros was made earlier in June.
EU has also secured an option to buy 100 million additional doses of the vaccine under development
AstraZeneca has already reached a deal with the US for 300m shots for $1.2 billion
and of up to 30m doses to the UK for 65.5m GBP
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