Trading Analysis — 15th July 2020

Today’s Market Outlook

Asian stocks leaped today as news of a coronavirus vaccine initiated optimism in the markets whilst boosting risk appetite amongst investors. Simultaneously, the euro rose to a four-month high on the prospect of stimulus ahead of a crucial EU summit. Japan’s Nikkei (N225) added 1.5% to reach its highest since June 10 while Australia’s benchmark index was up 1%. Chinese shares gained modestly with the blue-chip CSI300 index (CSI300) ticking up 0.3%. 

One of the surprising asset classes with its’ performances that has been sparked off by a recent breakout, is Silver. An unprecedented amount of fiscal and monetary stimulus this year has fueled the metal’s surge to fresh yearly highs. Additionally, the injection of liquidity into financial markets over the last 6 months has been extreme, with a measure of the money supply (M1 money stock), surging above $5 trillion, off the back of an extraordinary response from the Federal Reserve. 

As for the Oil, OPEC+ JTC sees 107% compliance rate with production cuts in June, according to an OPEC+ external source, while it was separately reported that the JTC held a meeting to prep for the easing of the cuts to 7.7mln BPD according to Energy Intel’s Amena Bakr (Newswires/Twitter). OPEC MOMR stated that crude oil production in June decreased further by 1.89mln BPD to average 22.27mln BPD in compliance with the Conference decisions and above 100% conformity, according to secondary sources. 

As for the currencies market, the USD traded rather cautiously, particularly against risk-sensitive currencies, following news of progress in vaccine development. The EUR on the other hand rose to as high as $1.1423, its strongest since March 10 and not far off its peak so far this year from the $1.1495 level. EUR also has been aided by hopes of the European Union to agree at its summit later this week, on a ‘rescue financing package’ that will limit the economic damage to the bloc from the coronavirus pandemic. 

Today’s High Impact Events

The times below are GMT+3.

14.00 – Canada BOC Interest Rate Decision

Since April of this year, the Central bank of Canada has added almost C$7 billion in federal bonds a week to its balance sheet to sop up the supply, becoming the government’s main financier through the creation of new money. The process, known as quantitative easing, allows policymakers to keep borrowing costs low. 

Potential instruments to Trade: CAD crosses especially EUR/CAD on Daily.

22.45 – New Zealand Consumer Price Index (CPI)

The Reserve Bank (RBNZ) has forecasted a 0.7% fall in the quarter while bank economists’ forecasts are in possibly a slightly less tight range than usual. The BNZ and Westpac are also going for -0.7%, while ANZ has -0.6%, Kiwibank has -0.5% and  ASB is picking -0.4%. 

Potential instruments to Trade: NZD crosses.

Coronavirus Status Update 

US COVID-19 cases rose by 58,858 (Prev. +60,469) and death toll rose by 351 (Prev. +312) (Newswires). New York COVID-19 cases +912 (Prev. +557), hospitalisations at 820 (Prev. 792); death toll 5 (Prev. +10); Positivity rate 1.5% (Prev. 1.08%). Florida COVID-19 cases +3.3% (Prev. +4.7%), deaths +133 to 4,514 which was the highest daily increase since the pandemic commenced (Newswires). 

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