COVID-19 victim count and bearish forecast for US macro data point to a dovish activity in Wall Street today.
Summary: Global equities and major indices reversed most of the previous session decline and continued to trade with clear dovish bias today. While the recovery in crude oil price provided a short reprieve for risk assets across the globe, economic cues, global growth outlook, and corporate woes continue to weigh down market bulls in the immediately foreseeable future.
As there doesn’t seem to be any signs of COVID-19’s slowdown anytime soon and death toll count continued to rise while total victim count scaled more than 1 million across the globe risk aversion continues to remain firm across the globe. European market saw major indices and equities open on subdued note and trade with clear dovish bias as more corporate firms warned of a serious impact from ongoing pandemic while a few even declared sharp decline in sales and freeze of dividends hinting at the possibility of a sharp recession in second-quarter earnings for 2020.
Precious Metals: Rare metals continue to trade with clear positive bias as global COVID-19 victim count moved past 1-million. Further, move by major firms hinting at a recession in Q2 of 2020 mirroring losses from Q1 caused demand to surge, pushing the price of gold above $1600 handle.
Crude Oil: Crude oil price continues to trade on a positive note in the international market, albeit losing most of the momentum from the previous session. Reports of OPEC+ members working on a deal for never before seen reduction of crude oil production to around 10% of global supply greatly improved demand to supply outlook providing WTI & Brent futures with fresh fundamental support.
DXY: US Dollar index continues to hold onto positive momentum, albeit recording limited gains as USD remains underpinned by broad-based safe-haven demand. However, pressure from stimulus measures taken by the US government & Federal Reserve and worse than expected jobless claims and payrolls data greatly affect USD’s prospect for gains against major global currencies.
On The Lookout: As the last trading session of the week comes into focus, the global market continues to paint a dismal outlook for the financial services sector. Not just warnings of earnings slide and dividend freeze from corporates, but macro data is also disappointing investors with worse than expected PMI readings in Europe.
In the US market, while there are signs that the US government is taking concrete actions to ensure that the benefit of its economic support bill worth US$ 350 billion reaches its citizens, doubts have already started rising over how much of these relief measure funds will actually reach its citizens and businesses. Businesses like Bank of America and JP Morgan have already declared that they would be limiting applications for government-guaranteed loans, which are set to make their debut in major US banks today.
Also, Federal Reserve’s main street lending facility is facing delays with Fed Rosengren commenting that it won’t be ready for another couple of weeks, painting a worrisome picture for US economic outlook in the immediate future. On the release front, US NFP and Unemployment rate saw worse than expected outcome in late European session hinting at a clear dovish environment for traders during North American market hours today.
Later in the day, the US market will see the release of Markit Services, Manufacturing and Services PMI data and ISM Non-Manufacturing – Employment, Business Activity, and PMI information, which are also expected to see sharp declines compared to previous readings.
Trading Perspective: In the Forex market, firm USD and broad-based risk aversion are likely to keep USD denominated major global currencies trading under considerable dovish pressure. Wall Street is expected to see major indices and key equities open with a gap down move, given the sharp decline of US futures in the international market and worse than expected NFP and unemployment data readings.
EUR/USD: The pair declined below 1.08 handle earlier in the day post, which it has mostly maintained a consolidative price action within 1.0770-1.0797 price range most of the day. Broad-based risk aversion, the decline in EU area PMI data influenced the decline below 1.08 handle while firm USD prevented recovery above said level. While projections for US macro data remain dovish, the broad-based cautious tone is likely to underpin USD bulls keeping price trapped within the above-mentioned price range as the trading session comes to close for the week.
GBP/USD: The pair unlikely EUR/USD has maintained a clear dovish bias across the day and is yet to achieve consolidation near intra-day lows as disappointing UK PMI readings, and broad-based USD strength of safe-haven demand provide a twofold dovish pressure on the British Pound. However, a dovish projection for USD macro data means that USD is unlikely to see a major spike in strength. This suggests that the pair will close for the week later today with a price well above 1.22 handle.
USD/CAD: The pair is trading mostly flat today as both sides fight for control of price action. While USD is underpinned by broad-based risk aversion and safe-haven demand, worse than expected payroll and unemployment rate data from the US prevented USD bulls from gaining the upper hand. Positive crude oil price in international market underpins CAD, but doubts and concerns surrounding proceedings of Saudi-U.S. Peace talks and investor reluctance ahead of official statement from OPEC+ members on ongoing production cut agreement discussing keeps CAD from gaining the upper hand. The pair will continue to hold steady and close for the week well within 1.41 handle.
Please feel free to share your thoughts with us in the comments below.
