What a night. Here’s what went down in the last 12h:

  1. The BOE yesterday unanimously cut rates to 0.1% from 0.25%. Later today, UK Chancellor Sunak is expected to announce a support package to the economy including tax cuts and wages subsidies. GBP up 3 handles against USD and also strong ag EUR.
  2. PBOC left rates unchanged to 4.05%. USDCNH down to 7.08 from 7.13, still above 7. Just to remember YUAN is not a free-floating currency but is pegged to the USD and managed by China. Lately, values above 7.00 have been considered ‘unfair’ competition (for trading purpose)
  3. >10000 Covid cases in US and California issues the ‘stay-at-home’ order. Yesterday, Jobless claims for last week spiked to 282k ag 220k expected. This a big deviation and the worst is absolutely to come. 
  • 4. Just to add another note, here are JP Morgan awful forecasts for the next two quarters. It’s fair to say the full-year forecast for real GDP is ‘just’ -1.8%

FOREX

USD Index spiked up to 103.64, pushing EURUSD down 2.64% to a 3-year lows at1.0655. Every counter suffered, JPY, CHF and GBP included. 

AUD did relatively better as it continues an incredibly high correlation to Oil (yesterday +24%). DXY is now retracing almost two handles to 102.18 but USD shortage does not seem to be easing yet, with FRA-OIS down to 90 bps but still much higher than ‘normal’. TED spread (3m T-bills ag EuroDollar future) at 54bps ag -5 on 04-march. EURUSD chart.

INDICES

The 2nd day in green for global futures. Right now DAX +5.27%, Nikkei + 1.87%, Nasdaq +3.99% after the good performance yesterday. There comes a moment when bad news starts to be priced in. First, let’s make a follow up from yesterday for SP500: the same 30-min chart from yesterday, as expected it clearly recovered the 2385 level and broke the first downtrend. Now trading close to a second one (violet line). Step by step, but volatility has not obviously disappeared yet, even if VIX is down 11% today to 59.60.

I also want to show this chart, based on one of the many ratio ones can create: this is SP500 capitalisation over the US GDP. Anyone can make his own conclusions.

COMMODITIES

Very shortly: CL up 25% to 25.90$ a barrel yesterday, now trading at 26.8$. We spoke yesterday about the US buying 30 mios barrels for the national strategic reserve. 

Trump also said the US will get involved in oil market dispute and Officials are apparently looking at sanctioning Russia.

XAU double tested the 1460 area and spiking again, now at 1512$ the ounce.


By: Marco Turatti

Technical Analyst

TIO Staff
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