Midday Analysis – 25th June 2020

Today’s Market Outlook

In today’s trading sessions, the main central bank event to watch will be the release of the ECB meeting in the late afternoon. In the previous meeting, the ECB has over-delivered on expectations by increasing the PEPP program by 600 billion euros. Because of that, markets will be eyeing the minutes to see whether there was any unanimous decision to extend the program, and whether there were any disagreements among the governing council.  

In the currencies market, the USD rebounded significantly as markets turned into risk-off mode overnight. Market remained stable in Asia despite being on Holidays for the Dragon Boat Festival over three consecutive days (China and Hong Kong). As of today, it seemed like movements in the forex markets are not yet decisive. Major pairs and crosses are back trading within last week’s range (sideways). Job and durable goods data from US today might trigger some volatility. But traders could take more time to gauge the odds and severity of coronavirus second wave before taking some commitments. 

Today’s High Impact Events

The times below are GMT+3

14.30 ECB Monetary Policy Meeting

In relation to the PEPP program, if during the minutes the ECB announces a considerable slip back on the actual amount (meaning under EUR 600B), then that could see some downside in the Euro as it shows that the ‘easy street’ might not be as guaranteed. In contrast, if there was a unanimous agreement, and possibly some members that wanted even more than 600 billion, that could prove to be more positive for the Euro as it shows there is still more scope for additional stimulus going forward. 

15.30 US Initial Jobless Claim

As some experts in mainstream media have mentioned last week, initial claims will be best to measure it against Continued Jobless Claims, in order to get a better or more accurate view of the overall US labour market situation. For example, lower initial claims and a downward trend is a positive for the labour market, but also keep in mind that the trend is expected to slow and continue slowing further in the months ahead as the economy starts to open back up and businesses start to function with more capacity. 

15.30 US Non-defence Capital Goods Orders

With regards to US Durable Goods, the Market is expecting V-shaped bounce of 10.9% in May from the dismal April print of -17.7%. The recent rally in risk assets has to some extent already priced in a lot of the expectations for an economic rebound, which means upcoming data points will be watched for signs that the expectations were correct or if markets were too optimistic. 

15.30 US Gross Domestic Product (GDP) Annualised

The markets are not expecting a lot of fireworks from GDP figures as the current data available maybe quite outdated. However, as always, we need to keep them on the radar in case we see significant and unexpected deviations from current expectations. 

Coronavirus Status Update 

Back to the subject of ‘Second Wave Virus fears’, new cases have not only been running rampant in the US, but we are also seeing new cases in Australia, China and Germany.  

US COVID-19 cases rose by 34,313 (Prev. +26,643) and the death toll +784 (Prev. +410). (Newswires) California COVID-19 cases rose by 7,149 or 3.9% to 190,222 (Prev. +5,019; 7-day average of +2.5%), while Florida COVID-19 cases rose 5.3% (Prev. +3.3%; 7-day average +3.7%) and hospitalization increased by 256 which is the most in a month. 

Furthermore, Houston, Texas, is reportedly on pace to exceed intensive care capacity by this Thursday and Texas Governor Abbott stated that a massive virus outbreak is sweeping the state, while Oklahoma also reported a record one-day spike in coronavirus cases (+482). 

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