Wall Street to Open Lower Spurred by IMF Forecast, COVID-19 Woes

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

global equities

Wall Street to Open Lower Spurred by IMF Forecast, Virus Woes

June 25, 2020
COVID-19
Wall Street to open lower

Travels & Luxury goods sector stocks take a hit as the EU considers banning US arrivals, and IMF predicts a deeper recession weighing down market mood. 

Summary:  Global equities see mixed activity with a high level of dovish bias as COVID-19 cues, and growth forecasts foreshadow a strong economic decline.

While the Asian market saw a relatively mixed performance, European markets saw all major risk assets and key indices nose dive on virus cues and travel sector woes. Renewing count of fresh COVID-19 victims is causing fears of another global countrywide lockdown which along with news in Europe stating that the government is considering a ban of US arrivals caused the travel sector shares a major contributor to European market activity to decline considerably. This indirectly had some level of impact on luxury goods shares as well as creating an overall defensive environment in the European market today. 

Rare Metals: Rare metals are seeing sharp gains in price action today with both silver and gold seeing leaps and bounds in gains. As short term impact from the previous session evaporated, concerns stemming from escalating COVID-19 count caused demand for safe-haven metals to skyrocket. This helped push price of gold to fresh 8-year highs as price reaches a high of $1794 in the futures market. 

Crude Oil: Crude oil price took a sharp tumble with price in the futures market seeing decline below $40 mark. Both Brent and WTI spot and futures price is suffering as concerns of possible second worldwide COVID-19 breakout and news of an increase in US API weekly inventory data and production activity caused glut outlook to spike while demand outlook remains rocky. 

DXY: The US Dollar Index has managed to recover some of the losses from the early week. While the first two sessions of the week saw USD weaken in the global market, escalating concerns of the COVID-19 outbreak in the US and other countries caused the value of Greenback to strengthen on safe-haven demand. Talks of further stimulus measures from the US government keeps USD from seeing further gains for now. 

On The Lookout: The market mood in the USA seems to be sour at the moment as new cases of virus victims keep popping up while the government struggles hard to control the outbreak. This has caused fears of yet another lockdown coming to reality just as previous lockdown measures were relaxed. With unemployment count still remaining high, IMF’s latest revised forecast which predicts a deeper global recession in the near term due to ongoing COVID-19 pandemic has caused all risk sentiment and short term cues from trade relief to evaporate from the market.

Focus now shifts to the US government’s actions as Treasury Secretary Steven Mnuchin commented that Trump administration is seriously considering a new stimulus package. He added that the tax deadline has also been extended from April to the end of July in an attempt to shore up as much positive risk appetite as possible. On release front today, the US calendar remains silent aside from EIA weekly crude oil stockpile data and speech from FOMC Bullard. 

Trading Perspective: Wall Street is set to see major indices and key equities open lower as renewed COVID-19 outbreak woes weigh down risk sentiment. US futures trading in the international market was also lower on dovish sentiment led by COVID-19 woes and IMF Forecast. 

EUR/USD: The pair is trading with dovish bias as the EURO was weighed down by multiple factors aside from rebound in USD. While firm USD added some level of pressure, news of COVID-19 outbreak in Germany and the US looking at tariffs on EU goods over airline issues provided a major blow. Concerns of the large COVID-19 outbreak in the US capped USD’s momentum helping limit decline below 1.125 handles for now. Traders now await fresh cues and data from the USA for short term profit opportunities. 

GBP/USD: The pair is trading with clear dovish bias as price nosedived below 1.245 handles given pressure from Brexit woes. While the lack of progress in Brexit talks is a topic of concern, traders fear the UK’s hasty action to re-open the economy may cause a renewed outbreak in the country weighing down GBP considerably. Traders now await fresh cues and data from the USA for short term profit opportunities.

USD/CAD: The pair has recovered its loss from recent decline and price is steady above 1.36 handle as USD rebounds on safe-haven demand while CAD suffered from US stockpile data and oil manufacturing activity reports. However, news of the US government considering additional stimulus packages helped limit USD’s gains for now. Meanwhile, traders await fresh cues and data from the USA for short term profit opportunities.

Please feel free to share your thoughts with us in the comments below. 

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