Weekly Market Wrap 10-August to 14-August/2020

Marius Paun | London, UK | Senior dealer | Friday 14th August 2020

 

US And China Holding Talks Over Trade Agreement This Weekend

 

Over the last weekend in the US President Donald Trump signed 4 executive orders for economic stimulus. They related specifically to an extra $400 unemployment payment, payrolls tax deferment until the end of the year, student loan interest and rental eviction. Despite the ongoing spat between the Republicans and the Democrats who failed so far to reach an agreement, markets are still expecting a package possibly worth around $1.5 trillion to become law sometime this month.

The week started with the US dollar on a strong foot as the rise in tensions between the US and China in particular actions to ban WeChat and TikTok sparked flows into safe-haven currencies. Beijing is adamant that TikTok ban has nothing to do with national security and said will bring the issue in upcoming trade talks with Washington. In the meantime, China released its inflation figures for July with CPI coming in at 2.7% versus expectations for 2.6%.

Back in the UK, we learnt that Prime Minister Boris Johnson will make a decision by the end of the week whether to reopen the remaining sectors of the economy. Schools would be top priority and are expected to be the last places to close if any local lockdown were to be reinforced.

Elsewhere the UK Chancellor is considering delaying his Autumn budget according to Financial Times. Plans for public spending are to be revealed after the Covid-19 crisis passes. Really? what if it does not pass that soon?

Russia made headlines this week when President Putin announced his country has given the green light to a coronavirus vaccine. Even his daughter had it apparently. German Health Minister expressed his scepticism immediately when it appeared that the Russians have tested their vaccine a lot less than usually required. Classic!!!

Meanwhile, the European Union Trade Commissioner Hogan said that the US and EU should do more in their efforts to negotiate a solution to the ongoing trade disputes.

Gold prices started the week with a rather nasty correction after reaching an all-time record high of $2074.7 last week. They dropped below $2000 in a sharp selloff and found support at $1862. There was already a strong sentiment that the precious metal has moved too much too fast lately and a pullback was overdue. They recovered somewhat to $1950 at the time of writing. The long-term outlook for gold remains firmly bullish but many realised with hype and exuberance come greater risks.

OPEC lowered their forecast for oil crude demand in the current year saying it will fall by 9.06 million barrels versus a drop of 8.95 million barrels in the previous report. On Wednesday, the US Department of Energy has released its weekly oil inventories report showing a drop of 4.5 million barrels versus estimates for a decline of 3.4 million barrels.