Cues of COVID-19 peaking and European economies reopening their market improved risk sentiment.
Summary: Global equities are enjoying a positive start for the week as the market saw normal trading activity return to market post-Easter celebrations. The first burst of positive impact was from Chinese trade data, which reported better than expected results improving broad-based risk sentiment in the market. Following cues from Asia, European markets also opened positive with major indices posting solid gains in the early trading session.
News that Spain and Italy have begun to relax measures surrounding non-essential businesses despite lockdown remaining in effect as COVID-19 outbreak seems to have peaked in respective countries came as another positive factor. While these two nations prepare for reopening their economies, other major European nations – Germany, France, and the UK are following India’s example and are preparing to extend lockdown duration to the end of this month. Amid different cues from various local markets, major European indices pared some gains and traded mixed in mid-late European market hours.
Rare Metals: Safehaven metals are continuing to enjoy field day as broad-based caution remains firm while easing USD provided an additional boost. Fed’s easter relief package worth multi-trillion dollars has resulted in fund flow changing direction from bonds to metals as preferred safe-haven assets. This has caused the gold price to continue scaling multiyear highs with intra-day high reaching $1,747.66 and well on the path to highest close since 2012.
Crude Oil: Crude oil price continues to trade with dovish bias, as evident from a sharp and steady decline in both WTI and Brent futures in the international market today. OPEC+ supply cutback deal from weekend continues to lose impact as the breakdown by analysts hint at despite historical figures put forth during the meeting, the actual reduction of supply on a daily basis will be very low which along with covid-19 pandemic impacted supply to demand ratio puts oil bulls under considerable pressure.
DXY: US Dollar index, which measures the strength of US Greenback against six major global currencies, continued its decline today with index reading falling into the 98 handle as the impact from Fed’s multi-trillion dollar support bill continues to eat away at USD’s fundamental support factors. For now, broad-based strength as safe-haven assets keeps USD supported to some extent, but the index is likely to decline as former major COVID-19 hot zones show signs of reopening their economy.
On The Lookout: Headlines continue to focus on the European region as Spain and Italy are showing signs that hint at plans to slowly open its economy back from lockdown measures. Signs of virus easing across major global hot zones are positive factors to look forward to for all market participants. OPEC+’s supply cut back measures are under intense scrutiny as analysts break down suggest impact from supply reduction lacks the strength to offset demand to supply ratio in the ongoing glut market.
Despite various arguments over vested constitutional powers that the US President enjoys, President Trump continues to pressure state governors to restart their economies from lockdown measures. On the economic calendar front, the US calendar sees the release of import and export price index and speech from Fed members Bullard and Evans. There is also the release of US API weekly crude oil stockpile data. On earnings calendar front, Wall Street will see financial data from Delta Airlines, First Republic Bank, Johnson and Johnson, JP Morgan, and Wells Fargo.
Trading Perspective: In the forex market, major global currencies will continue to enjoy positive price action riding on USD’s broad-based weakness and cues from major global economies hinting at COVID-19 peaking. US Futures trading in international market recorded positive price action on broad-based improved risk sentiment, which along with cues from Asian and European market suggest, Wall Street is likely to see major indices open on a positive note and recover minor losses incurred in the previous session.
EUR/USD: The pair has managed to scale above the mid-1.09 handle and gain a solid foothold in the region over cues of Spain and Italy reopening the market. Broad-based USD’s weakness also supports Euro, but lack of fundamental strength to make breakout rally keeps it from conquering 1.10 handle. Traders now await US data and speech from Fed members for directional cues.
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