Wednesday has brought back to the markets some risk-off sentiment, with all the major Us indices down more than 2%. At the same time USD has moved higher.

Apparently the contagion in the US is getting worse: Texas Governor Greg Abbott said the state is seeing a “massive outbreak” and hospital systems are under serious strain; Florida cases are up +5.3% on a daily basis while Disney parks in California will reopen later than schedule. The NY marathon has been canceled.

At the same time IMF yesterday slashed its GDP projections for 2020:

The result has been the worst sell-off since 11th of Jun while the USD has finally been catching a serious bid (>100 cents on DXA) and has recovered the 97 handle. It’s been eye-catching the PERFECT inverse relationship between USD and Indices during last weeks: this won’t probably last forever.

SP500 ag BGG USD inverted index

Today, besides the usual important US data, mainly the GDP and Weekly Jobless Claims, we have 2 Emerging Market Central Banks releasing their decision about the respective Interest Rates: Turkish and Mexican one.

CBRT (Turkey) is expected to cut 25bps, bringing the policy rate to 8%; few analysts are expecting -50bps. Further easing is becoming increasingly difficult to justify due to an elevated risk premium, subdued inflows, growing external deficit and the challenging inflation outlook. Nonetheless, recent developments, including the unprecedented increase in base money may mean additional cuts may be warranted.

BANXICO, Mexico’s central bank, is expected to cut key interest rates by 50bps in an effort to alleviate the economic impact from the coronavirus pandemic. Focus will be on the tone of the statement, which is expected to be dovish.


Marco Turatti
Market Analyst


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