Weekly Market Wrap 08-12 /June/2020

Marius Paun | London, UK | Senior dealer | Friday 12th June 2020

The US Fed Does Not Even ‘Think About Thinking To Raise Rates’

We had the FOMC meeting on Wednesday where Chair Jerome Powell said they will keep interest rates near zero through to 2022. He added that ‘we’re not even thinking about raising rates. We’re strongly committed to using out tools to do whatever we can for as long as it takes’. An ongoing weaker US dollar added support to the stock markets dropping 6.6% against a basket of currencies from a three year high in late March, the sharpest drop in about 2 years according to Reuters.

Meanwhile the White House said that President Trump is in favour of another coronavirus relief package, likely to also be supported by both parties, especially with elections coming later in the year. Secretary Mnuchin was in agreement and he added that keeping the economy open is a must even if coronavirus casualties rise again.

The big news is Nasdaq 100 reaching fresh all-time highs and surpassing the 10,000 mark for the first time ever. We had a significant selloff on Thursday as fears of a second wave resurfaced but at the time of writing on Friday the rebound was again underway. It has been reported that hospitalisations in Texas have reached the highest since the beginning of the outbreak!!!

China’s trade surplus jumped to nearly $63 billion versus $41.4 expected largely on low crude prices which reduced imports and an increase of exports in medical devices of over 88%. On the subject of inflation, the CPI May was 2.4% vs 2.7% predicted. It indicated the recovery is not yet strong enough to spur inflation pressure.

Back in the UK, the GDP numbers for April showed a drop of 20.4% month on month versus -18.7% expected with trade balance sliding £7.5 billion vs £11 billion anticipated.

In Europe, Germany’s trade balance for April narrowed considerably coming in at 3.2 billion euros versus expectations for 11.6 billion euros. At the same time the revised figures for Eurozone’s GDP for first quarter were -3.6% vs -3.8% anticipated. On the Brexit front, EU chief negotiator Michel Barnier admitted that the EU-UK relationship won’t be the same as the EU’s with Canada or Japan saying the proximity make it harder to agree on certain aspects. Both UK and EU leaders are scheduled to have a high-level call on June 15th.

Gold broke back above $1700 mark this week trading around $1740 on Friday afternoon supported by a weak greenback and ongoing rumours of an additional stimulus package.

On the US crude front, OPEC+ agreed to a 1 month production cut extension. Since so much debate about sticking to the quotas, the agreement included an addition which requires that any country that doesn’t meet its full quota must make it up through September. Regarding the weekly oil inventories, the DOE data showed a build of 5.7 million barrels vs forecast for a drop of 1.8 million barrels.