Weekly Market Wrap 25-29 /May/2020

  Marius Paun | London, UK | Senior dealer | Friday 29th May 2020

The overall picture worsened for the US GDP for the first quarter with the second reading coming in at -5% versus -4.8% previously. Yet Fed member Kaplan said the American economy has bottomed and he anticipates growth in the second quarter. He added the rebound might be quicker this time compared to 2008 financial crisis. Elsewhere the US initial jobless claims rose by another 2.1 million jobs last week, taking the total claims since mid-March over 40.8 million jobs.

National People’s Congress in China approved legislation that toughens security law and many political commentators say it is aimed at protests in Hong Kong that caused pain to the city since last year. There are already rumours of retaliation from the US side with hints of further sanctions against Chinese officials. In response to President Trump’s statement that Hong Kong is losing its rather autonomous status, China reiterated the city is ‘part of its internal affairs and no other country has the right to intervene’.

Despite the renewed tensions between the two nations, the US stock-markets continued to rebound and are on course for the best weekly gains in the last 7.

Back in the UK, the Bank of England governor, Andrew Bailey mentioned about a potential cut rate again but it was worries regarding the EU- UK negotiations that kept the sterling in check, now trading around 1.23 handle against the US Dollar.

Reuters reports that the European Union might shifts its stance on fisheries in negotiations with Britain scheduled for next week. It is considered the first major concession from the bloc on a major stumbling issue of the negotiations. It already fuelled some speculations that both sides are looking for a compromise. We also saw the IFO institute in Germany saying Europe’s largest economy is likely to shrink by 6.6% this year.

Meanwhile the euro enjoyed a strong rally against the US dollar this week gaining over 250 pips from a low of 1.0870 to 1.1122 on fresh hopes the EU recovery fund starts to take shape. The European Union is to propose a deal worth €750 billion where €500 billion is in grants and €250 billion is in loans.

After dropping below $1700 mark midweek, Gold prices have resumed their rally, trading around $1730 going into the weekend. Support was offered by renewed tensions between the US and China which drove investors into safe-haven assets.

US crude prices extended above last weeks’ high of $34.66 initially but could not keep the momentum going, leading to prices dropping back to $33.2 at the time of writing. The weekly US oil inventories showed a large build of 7.9 million barrels versus a drop of 1.9 million barrels predicted.