Virus woes dominate the market, Speech from Fed members in focus amid easing hopes of economic recovery
Summary: The equity market is seeing major indices in key global market regions slowly subside today. While the start of the week saw price momentum pick up pace over recovery hopes, the momentum was short-lived similar to such news and update drove an intra-day rally in recent past. The escalating COVID-19 count on major economies as they re-open their markets is becoming a major cause for concern. While the Asian market enjoyed a relatively bullish market activity today, the European market saw major indices and key risk assets slow down since the start of the session.
The initial decline was led by dovish impact from bank sector stocks but the major driving force was the European Commission’s move to downgrade economic growth forecast for this year and the next which put a permanent halt to any short lives expectations of sharp economic rebound led by market re-opening activity. While ECB Lagarde had said that worst is over in the European market region, the rest of the world and some parts of Europe continue to suffer from the second wave of an outbreak which suggests doves are going to rule the market for the foreseeable future.
Rare Metals: Price of rare metals continue to retain positive bias underpinned by broad market caution. But both gold and silver remain trapped in familiar levels slightly below recent highs. Escalating COVID-19 count and waning hopes of economic recovery are expected to keep rare metals well supported the week ahead.
Crude Oil: The market conditions are not favorable and despite rebalancing which took place last week, fresh developments in a geopolitical scenario and global COVID-19 outbreaks continue to affect demand outlook. However, the crude oil price of both WTI and Brent futures remains well supported at the moment having constantly remained above $40 p/b today.
DXY: The Dollar index still remains trapped in the upper half of 96 handle and doesn’t seem like it will change anytime soon. Record level victim count in the second wave of COVID-19 outbreak underpins USD bulls for now but Greenback lacks enough strength to build a stable rally against key global currencies for now.
On The Lookout: European Commission’s revised GDP forecast came as a major blow as the readings now state that economy will see an 8.7% decline this year, a 1% spike since last readings while the readings for next year has also been downgraded to 6.1% rather than 6.3%. As COVID-19 victim count continues to escalate, Fed Bostic’s comments come as a major blow. The Atlanta Fed President warned in a recent interview that US economic recovery is likely to be stalled on account of a resurgence in COVID-19 cases across the south and west US states. On the release front, the US calendar sees the release of API weekly crude oil stockpile and JOLTS Job Openings data and Canadian Calendar sees Ivey PMI while there is also a speech from Fed Members – Daly, Barkin, and Quarles later in the day.
Trading Perspective: Wall Street futures trading in the international market edged lower as hopes of economic recovery eased while escalating COVID-19 count continued to weigh market sentiment. Following a warning from the European Commission and Fed members which hint at bleak economic recovery outlook, the US market is likely to see muted opening today.
EUR/USD: The pair edged below the 1.1300 handle and oscillates in the upper half of the 1.12 handle as EC’s GDP forecast revision and disappointing German industrial output data weighed Euro bulls. Traders now await US macro data for short term profit opportunities.
GBP/USD: The pair is trading with positive momentum and is attempting to breach the 1.26 handle as EU Barnier is set to meet his UK counterpart Frost for Brexit talks in London today. Hopes for some positive progress and focus on UK fiscal stimulus set to release later today keep GBP underpinned. Traders now await US data for short term profit opportunities.
USD/CAD: The pair is trading with clear positive bias albeit with limited gains as USD is supported by the broad-based cautious tone in the market. While the price tested the 1.36 handle, it failed to stay above-said level as CAD remains firm on account of steady crude oil price action in the market. Traders await the US and Canadian macro data for short term profit opportunities.
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