Weekly Market Wrap 17-August to 21-August/2020

Marius Paun | London, UK | Senior dealer | Friday 21st August 2020

 

The FOMC Minutes Showed Less Confidence In The Near-Term Outlook

 

The US dollar continued to weaken, driven by the incoming election risk, lack of further stimulus and equity markets valuations higher than elsewhere. At the same time, S&P 500 has joined Nasdaq in reaching an all-time high supported by positive economic data.

Retail Sales came in better than expected increasing 1.2% month on month. The US housing sector was also in good shape. The Housing Market Index came in at 78 against last months’ 72. On Tuesday, the Housing Starts report showed a jump of 22.6% last month.

Minutes from July FOMC meeting were released earlier in the week. Highlights include observations that uncertainty surrounding economic outlook remains high. Fed members also predicted a weaker recovery due to a rise in coronavirus cases.

Over the weekend, China has granted a patent to its first domestically developed Covid-19 vaccine, according to Global Times. We also learned that the trade talks with the US, originally scheduled over the weekend, have been delayed and there isn’t a new set date for the meeting. In the meantime, the US commerce secretary Wilbur Ross admitted China has been buying large amounts of agricultural products.

Elsewhere, Financial Times reported that Brexit talks are set to hit an impasse again over British truckers’ EU access. Apparently, Brussels warned that UK demands on haulage are too close to single market rights. That did not stop the pound sterling from reaching a high for 2020 against the greenback at 1.3266 on Wednesday.

Eurozone current account balance came in at 20.7 billion euro versus 8 billion euro previously. The European Central bank added that imports/exports in second quarter continue to improve but are still below pre-virus levels compared to the same time last year.

Gold prices were marginally higher for the week trading just below $1940 at the time of writing. They went up initially, even breaking above the $2000 mark, but could not sustain that rally and consequently fell back below that psychologically important hurdle. However as long as the US dollar remains on the back foot and the stimulus package is still on the cards, many analysts say the bigger picture still favours the buyers.

OPEC had its meeting this week and a draft statement indicated that the pace of oil market recovery appears to be slower than anticipated. The main culprit was the risk of a second wave of Covid-19. The US crude prices were on course to close lower for the week trading around $41.5 on Friday afternoon. Th Department of Energy posted its weekly inventories report showing a drop of 1.6 million barrels versus expectations for a drop of 2.9 million barrels.