2 Min Market Update : 27th May 2020


As of New York Close 26 May 2020,


U.S. Dollar Index, -0.85%, 99.02
USDJPY,  -0.19%, $107.50

EURUSD, +0.72%, $1.0979
GBPUSD, +1.17%, $1.2332

USDCAD, -1.44%, $1.3785
AUDUSD,  +1.53%, $0.6645
NZDUSD,  +1.57%, $0.6197


S&P500, +1.23%, 2,991.77
Dow Jones, +2.17%, 24,995.11
Nasdaq, +0.17%, 9,340.22
Nikkei 225, +2.55%, 21,271.17


Gold Spot, -0.96%, 1,713.03
Brent Oil Spot, +1.92%, 35.61


U.S. Dollar fell across the board on Tuesday as optimism about a potential Covid-19 vaccine and reopening of various economies helped investors shrug off U.S.-China tensions, sapping demand for safe haven assets. U.S.-China tensions have been simmering in the background as Washington repeatedly criticized Beijing’s handling of the Covid-19 outbreak, but investors have largely dismissed them. U.S. Conference Board’s Consumer Confidence Index checked in at 86.6 for May (consensus 88.5) versus a downwardly revised 85.7 (from 86.9) for April. The key takeaway from the report is that attitudes about the short-term outlook increased some, reflecting some budding optimism about reopening efforts.

S&P 500 rallied as much as 2.2% on Tuesday on a familiar reopening trade, but some weakness into the close left the benchmark index up 1.2% for the session. The Dow Jones Industrial Average (+2.2%), Russell 2000 (+2.8%), and S&P MidCap 400 (+3.4%) outperformed, while the Nasdaq Composite increased just 0.2%.

Some attributed today’s late selling to a Bloomberg report that indicated the Trump administration was considering sanctions on Chinese officials, businesses, and financial institutions in response to Beijing’s plans to tighten control over Hong Kong. The news wasn’t exactly “new,” but the negative-sounding headline helped take the S&P 500 below its 200-day moving average (3000) on a closing basis.

Merck (MRK 77.26, +0.89, +1.2%) and Novavax (NVAX 48.17, +2.06, +4.5%) joined the race for a COVID-19 vaccine. Separately, JPMorgan Chase (JPM 95.82, +6.35, +7.1%) CEO Jamie Dimon expressed confidence in his company as well as hope in an economic recovery.

Elsewhere, airline stocks were among today’s biggest gainers, evident by the 11.8% gain in the U.S. Global Jets ETF (JETS 15.31, +1.61, +11.8%).

Hong Kong is set to debate the China National Anthem Bill later today that would criminalise disrespect of China’s national anthem. The anthem bill is set for a second reading later today and is expected to be turned into law next month. It requires China’s “March of the Volunteers” to be taught in schools and sung by organizations and imposes jail terms or fines on those who disrespect it. Expect more volatility in the Asian session.



  • The European Commission will later today unveil a plan to…
  • IMPACT(What will this do for the EU and how will it pan out for the EUR?): The plan is for the Commission to…


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All eyes will turn to the European Commission’s recovery plan later today after EU member states Austria, Sweden, Denmark and the Netherlands stated their opposition to a French-German plan for a 500-billion euros coronavirus recovery fund. The Commission, which garnered no support for its ideas two years ago, also proposed to phase out all the rebates various countries enjoy on their national contributions to the EU budget, halve the amount of customs duties governments keep and to get a bigger share of the Value Added Tax paid to the EU.

The recovery money is to be spent by governments on making the transition to an economy that is climate neutral – emitting no more CO2 than it absorbs – by 2050 and more adapted to the digital age – both EU priorities.

As stated, the fortune of the EUR will be highly linked to the success of a plan being announced.


OVERALL SENTIMENT: Stock markets continued to rip higher as optimism on re-opening continued to cheer the market. USD weakened against the risk currencies such as AUD and NZD as the euphoria caused stop losses to be triggered in risk aversion trades. Gold and Silver started the day strongly but ultimately, also had to retreat as risk assets were bought across the board. However, a note of caution is bellwether tech stock such as Amazon that led the charge up higher from the lows traded weakly yesterday and ended the day down. With Trump promising some action against China should the HK Security Law be passed (and it will be passed), we are in for some interesting times. Should demonstrations against the anthem law in HK get out of hand today, there could be weakness in the Hang Seng Index which will affect risk sentiment.




Baptism of Fire

Current market conditions are confusing for market legends, veteran traders, and novice traders alike. Government stimulus and intervention of markets at an unprecedented scale during a time of a global health crisis and economic slowdown of historic proportions, this time truly, is different. 

For new traders, the current markets might seem extremely unwelcoming and some who want to start their trading journey are deferring to later. However, the current markets will serve as a good learning ground for them early on in their careers so that they can accumulate valuable experience. After all, trading requires a hands-on approach and current markets present many opportunities for practical learning. Thus, the earlier traders face such treacherous markets, the faster they will become adept at managing their risk and size their positions.

2 Min Market Update : 26th May 2020


As of New York Close 25 May 2020,


U.S. Dollar Index, -0.11%, 99.75
USDJPY,  +0.05%, $107.68
EURUSD, -0.02%, $1.0900
GBPUSD, +0.30%, $1.2202
USDCAD, -0.16%, $1.3973
AUDUSD,  +0.21%, $0.6550
NZDUSD,  -0.03%, $0.6107


S&P500, 0.00%, 2,955.45 U.S. Markets were closed on Monday.
Dow Jones, 0.00%, 24,465.16 U.S. Markets were closed on Monday.
Nasdaq, 0.00%, 9,324.59 U.S. Markets were closed on Monday.
Nikkei 225, +1.73%, 20,741.65


Gold Spot, -0.53%, 1,726.88
Brent Oil Spot, +2.25%, 34.94


EUR steadied around the $1.09 level on Monday in a potentially big week for European policymakers as they debate the outlines of a recovery fund aimed at helping member nations. Austria, Netherlands, Denmark, and Sweden want loans from a time-limited fund for nations struggling to recover from the pandemic, rather than the grants proposed by France and Germany last week for the European Union’s coronavirus recovery plan. The Franco-German plan sent the euro rallying above $1.10 last week before the much-expected counter proposal by the four countries pushed it back below $1.09.

Elsewhere, the Dollar erased earlier gains and edged lower on the day though concerns about a growing standoff between the United States and China over civil liberties in Hong Kong kept sentiment subdued. The USD Index, which tends to behave like a safe haven asset in times of market turmoil and political uncertainty, was steady near a one-week high at 99.75.

U.S. Markets were closed on Monday. 

Singapore downgraded its 2020 gross domestic product forecast for the third time as the Covid-19 pandemic continues to batter the economy, the trade ministry said early this morning. The city-state lowered its GDP forecast range to a contraction of 7% to 4% from the prior range of a decline of 1% to 4%.


Countries, where Covid-19 infections are declining, could still face an “immediate second peak” if they let up too soon on measures to halt the outbreak, the World Health Organization said on Monday. WHO said epidemics often come in waves, which means that outbreaks could come back later this year in places where the first wave has subsided. There was also a chance that infection rates could rise again more quickly if measures to halt the first wave were lifted too soon.

IMPACT: Epidemiologists have warned that the virus may hit again in a second wave when fall comes. In a grim reminder, the second wave of the Spanish flu claimed more lives than the first wave. The rapid spread of Spanish flu in the fall of 1918 was at least partially to blame on public health officials unwilling to impose quarantines during wartime, this is very much akin to wanting to save the economy at the expense of doing the right thing. We are not out of the woods yet, until a vaccine is found, risk assets continue to tread on thin ice and the illusion of an economic rebound. In times of uncertainty and incessant money printing, hard assets such as Gold remain the easiest trade.


Australian Prime Minister Scott Morrison will later today outline his government’s plans to revive the sputtering economy but is expected to warn a recovery will take between three to five years. Australia has reported just over 7,100 COVID-19 infections, including 102 deaths. That is well below numbers reported by many other developed countries, an achievement it attributes to tough social distancing rules, which have prevented local hospitals from being swamped but taken a heavy toll on the economy.

Morrison will say in a speech that tax reform, deregulation, and lower energy costs will be central to stimulating economic growth as Canberra begins to unwind it’s more than A$250 billion worth of stimulus.

IMPACT: Australia is one of the few countries that managed the virus outbreak effectively and the government seems cognizant of the fact that this will be a protracted road to recovery, given their expected time horizon of three to five years. Prudence and facing reality are the first steps to recovery because then proper and effective measures can be put in place. Amidst the China-Australia tension, Australia seems to be under good stewardship and should relations improve with its biggest trading partner and the world returns towards normalcy, the AUD might outperform.


Brazil daily Covid-19 deaths were higher than fatalities in the United States for the first time over the last 24 hours, according to the country’s Health Ministry. Brazil registered 807 deaths over the last 24 hours, whereas 620 died in the United States.

Brazil has the second-worst outbreak in the world, with 374,898 cases, behind the U.S. with 1.637 million cases. Total deaths in the U.S. have reached 97,971, compared with Brazil at 23,473.

IMPACT: Brazil is a reminder that we are still in the midst of the first battle as the virus makes its round across the hemispheres. The world should be prudent about the situation and how it manages the opening of economies, as suggested above, a second wave in the later part of the year is highly likely. 



The AUD appears to be oblivious to rising tensions not only between the United States and China but also between Australia and China. The prospect of a rekindled trade war is being eclipsed by expectations that the world’s biggest economies will enjoy a V-shaped recovery in the second half of 2020, supported by some encouraging results from vaccine trials. But there is a real risk that markets are underestimating the level of anger towards China in Washington, a feeling shared across all political spectrums, hence, as things stand, future flare ups are more likely than not. Quarterly figures are due on construction (Wednesday) and capital expenditure (Thursday), which should provide strong clues as to how the economy performed in the first quarter and whether Australia suffered a similar large contraction as that’s been reported in China, Europe and the US.




Stocks ripped higher on a day when the US markets were closed. Seems no news is good news these days. With S&P 500 futures now above recent highs, it is critical to see if the market can hold on to gains made when most of the US participants are out. Interesting to note that the FX market did not really go risk on despite the rally in stock indices around the world. Price action today could be key. If the gains are kept, then we could see a strong push higher in the near future, but if not, then from here to the psychological 3000 level in S&P 500 will be strong resistance levels.





When To Choose What?

Currency trading at this point is a tricky affair because we are required to trade one economy against another. What happens when most economies are all basket cases given the way their governments are managing the crisis? Then we are forced to choose the lesser evil, which is really not the ideal situation for a pairing that will bring about a “trade of least resistance”. Presented with such a situation, we should take a step back and think about the universe of assets, at this point given geopolitical uncertainty, political uncertainty, incessant money printing and risk of a second wave, the assets that will continue to hold value will be USD, JPY, Gold and stocks of large tech companies that sells to customers all around the world (i.e. Amazon, Microsoft).


2 Min Market Update : 25th May 2020


As of New York Close 22 May 2020,


U.S. Dollar Index, +0.50%, 99.86
USDJPY,  0.00%, $107.63
EURUSD, -0.44%, $1.0902
GBPUSD, -0.47%, $1.2166
USDCAD, +0.30%, $1.3996
AUDUSD,  -0.44%, $0.6536
NZDUSD,  -0.12%, $0.6109


S&P500, +0.24%, 2,955.45
Dow Jones, -0.04%, 24,465.16
Nasdaq, +0.43%, 9,324.59
Nikkei 225, -0.80%, 20,388.16


Gold Spot, +0.56%, 1,736.07
Brent Oil Spot, -1.67%, 34.17


Dollar rose against a basket of currencies on Friday, helped by safe haven demand as a move by Beijing to impose a new security law on Hong Kong further strained fast-deteriorating U.S.-China ties. China on Friday unveiled details of its plan to impose a national security law in Hong Kong that could see mainland intelligence agencies set up bases in the global financial hub, raising the prospect of more unrest there after last year’s pro-democracy protests. Reports of the law on Thursday drew ire from Trump, sapping investors’ appetite for riskier assets and driving the EUR, CNH, and commodity currencies (AUD, NZD, CAD) lower on Friday.

The major indices closed near session highs on Friday, preserving their weekly gains in front of the Memorial Day weekend. The S&P 500 increased 0.2%, the Nasdaq Composite increased 0.4%, and the Russell 2000 increased 0.6%. The Dow Jones Industrial Average (-0.04%) finished just below its flat line. U.S. 2yr yield remained unchanged at 0.17% and U.S. 10yr yield fell 2bp to 0.66%.

The tech sector was perked up by shares of NVIDIA (NVDA 361.05, +10.04, +2.9%) after the company reported positive quarterly results and upbeat guidance. Conversely, many of the cyclical sectors closed lower, including energy (-0.7%) and financials (-0.3%). Energy stocks were clipped by the decline in oil prices ($33.25, -0.71, -2.1%).

Friday’s negative news came out of China as reports indicated it was going to implement national security laws on Hong Kong to tighten its control over the region. The Hang Seng Index declined 5.6% on Friday, while shares of Alibaba (BABA 199.70, -12.46, -5.9%) declined 6% despite beating quarterly estimates. Chinese stocks such as Alibaba continue to suffer from fears of having to delist from US stock exchanges after recent US initiatives. 

Separately, NIAID Director Fauci told media outlets that he was “cautiously optimistic” about Moderna’s (MRNA 69.00, +1.95, +2.9%) COVID-19 vaccine candidate and that it was possible to develop a vaccine by the end of the year.



Hundreds of people protested in Hong Kong on Sunday against Beijing’s controversial new plan to directly impose national security laws on the city, where a tight police presence guarded China’s representative office in the financial hub.

In drafting the legislation, which could see the setting up of Chinese government intelligence agencies in the global financial centre, Beijing plans to circumvent Hong Kong’s lawmaking body, the Legislative Council. Authorities in Beijing and Hong Kong have said the proposed laws are necessary and will not harm the city’s autonomy.

IMPACT: A backlash intensified on Saturday as nearly 200 political figures from around the world said in a statement the proposed laws said the proposed laws are a “comprehensive assault on the city’s autonomy, rule of law and fundamental freedoms”. Hong Kong has increasingly become a pawn in deteriorating relations between Washington and Beijing, and observers will be watching for any signs of resignation to defeat among the broader local community or indications that activists are gearing up for a fresh challenge. White House National Security Advisor Robert O’Brien on Sunday said that the U.S. government will likely impose sanctions on China if Beijing implements national security law that would give it greater control over autonomous Hong Kong. 

Expect heightened geopolitical volatility in the next few days as Hong Kong retakes the spotlight and with Washington’s anti-China rhetoric running at full speed, they will make use of the situation to antagonize China further. All these are happening as the National People’s Congress 2020 is taking place, it is likely that strong measures will be floated over the next few days, targeting the nations who are on the anti-China bandwagon. Expect Gold and Silver to trade higher over time as Safe Havens remain bid and the Hang Seng Index to trade lower as tensions increase.  



The United States should stop wasting time in its fight against the Covid-19 and work with China to combat it, rather than spreading lies and attacking the country, the Chinese government’s top diplomat Wang Yi said on Sunday.

Sino-U.S. ties have nosedived since the outbreak of Covid-19, with the administrations of Trump and Xi Jinping repeatedly trading barbs over issues related to the pandemic, especially U.S. accusations of cover-ups and lack of transparency. The two top economies have also clashed over Hong Kong, human rights, trade and U.S. support for Chinese-claimed Taiwan.

IMPACT: China remains prepared to work with the United States in the spirit of cooperation and mutual respect, Wang said, when asked if Sino-U.S. relations would further worsen. “If you want to infringe upon China’s sovereignty and dignity with indiscriminate litigation, and extort the fruits of the hard work of the Chinese people, I am afraid this is a daydream and you’ll only humiliate yourself.”

China is playing the “good cop” amidst the Trump administration’s anti-China musings. We wonder how long this will last until the sleeping Dragon rears its ugly head. Keep a lookout for strong policy stance against the belligerent nations in the coming days as the Chinese Commnist Party congregates. Stay nimble if you have a position in Risk Assets like the AUD and NZD, they will sell-off on any counter-measures or threat thereof.


Spain will reopen its borders to tourists in July and its top soccer division will kick off again in June, the Prime Minister said on Saturday, marking another phase in the easing of one of the world’s strictest lockdowns. Pedro Sanchez’s dual announcements coincided with calls for his resignation over the lockdown’s impact on the economy from the far-right Vox party, which called protests in cities across Spain drawing thousands of horn-blaring cars and motorbikes. Close to a million jobs were lost in March alone when the lockdown began and the Bank of Spain has forecast the economy will contract by up to 12% this year.

“From July, foreign tourism will resume in safe conditions. We will guarantee tourists will not take any risks and will not bring us any risks,” Sanchez told a televised news conference, without giving further details.

IMPACT: Spain’s overnight death toll from the coronavirus rose by 48 on Saturday to a total of 28,678, the seventh straight day that the fatality rate has been less than 100, while the total number of cases rose to 235,290. As Spain, peaks, countries like Russia and Brazil are fighting a raging fire on the virus front. Minor battles seem to be turning in the right direction, but the war is far from over. As we have been advocating, keep an eye on any second waves. 



Virus recovery hopes have gotten a boost after preliminary PMI readings for May rebounded more strongly than expected, underscoring the market optimism. But with economic releases set to quieten down in the coming week, Washington’s increasingly hostile language against China threatens to upset the dubious risk-on theme. Any panic-driven sell-off in risk assets could be accentuated from another anticipated plunge in personal consumption and durable goods orders in the US, which will be the main data highlights of the next seven days.




Geopolitical tensions continue to rise with the Chinese government’s intention to introduce a new security law for Hong Kong met with dissent both locally and in foreign nations. US threatening sanctions on Hong Kong should the proposal be passed is not going to help matters. Expect more volatility on this front in the days ahead.





A Fragile Truce…

With the rhetoric heating up between the US and China on various fronts, the truce is likely to be broken in time to come. A world ravaged by Covid-19 is a lot more fragile than it was when the last trade war broke. As the US Presidential election beckons, it is unlikely that a Trump bent on shifting blame away from his disastrous Covid-19 response will stop antagonising China. The Hong Kong situation will likely worsen in the days ahead as China’s NPC presses ahead with the new HK security law proposal.  Expect more volatility and continued weakness of HK’s stock markets in the days ahead. 

For those who celebrate, Eid Mubarak! For the rest of us, reach out to those who do!


2 Min Market Update : 22nd May 2020


As of New York Close 21 May 2020,


U.S. Dollar Index, +0.30%, 99.42
USDJPY, +0.11%, $107.64

EURUSD, -0.25%, $1.0951
GBPUSD, -0.15%, $1.2222

USDCAD, +0.31%, $1.3945
AUDUSD,  -0.47%, $0.6567
NZDUSD,  -0.37%, $0.6122


S&P500, -0.78%, 2,948.51
Dow Jones, -0.41%, 24,474.12
Nasdaq, -0.97%, 9,284.88
Nikkei 225, -0.21%, 20,552.31


Gold Spot, -1.34%, 1,726.12
Brent Oil Spot, +0.87%, 34.75


FX and stock markets essentially traded listly within the range. Only moves of note were the retracement in Gold and Silver after the recent run up. With all central banks continuing to talk of easier monetary policy, retracements in hard assets should be opportunities to get involved. 

U.S. Initial claims for the week ending May 16 decreased by 249,000 to 2.438 million (consensus 2.400 million), bringing the 9-week total to 38.636 million. Continuing claims for the week ending May 9 surged by 2,525,000 to 25.073 million, which is an all-time high. The key takeaway from the report in the market’s mind is that the pace of increase in initial claims is decelerating; however, the real-world takeaway is that the economic damage runs deep as initial claims and continuing claims keep piling up. Chinese Premier Li Keqiang will be unveiling stimulus measures when the National People’s Congress starts to spur its economy, which has been battered by the Covid-19. The measures are expected to move FX markets, especially chinese trade sensitive currencies like the AUD and NZD. 

In an emergency policy meeting early this morning, the Bank of Japan decided to launch a new lending facility that aims to channel more funds to small and midsize businesses suffering from the economic blow of the coronavirus pandemic. The central bank also extended the deadline for a series of measures it has deployed to combat the virus fallout, including accelerated corporate debt buying, by six months to March 2021. As widely expected, the BOJ kept monetary settings unchanged including its short-term interest rate target of -0.1% and a pledge to guide the 10-year government bond yield around 0%. 

S&P 500 declined 0.8% on Thursday, failing to overcome weak economic data and a fresh increase in U.S.-China tensions. The Dow Jones Industrial Average lost 0.4%, and the Nasdaq Composite lost 1.0%. The small-cap Russell 2000, however, eked out a 0.1% gain. Moderna (MRNA), the pharmaceutical company which announced the ‘positive” results of 1st stage vaccine trials for Covid-19 that sparked a rally earlier this week, continues to see its share price fall further from the highs.

On the U.S.-China front, the White House issued a report criticizing China’s economic and military policies, Trump accused China of a “disinformation and propaganda attack” on the U.S. and Europe, and a bipartisan group of Senators planned to introduce legislation to sanction China over new national security laws in Hong Kong.


The United States has secured almost a third of the first one billion doses planned for AstraZeneca’s experimental Covid-19 vaccine by pledging up to $1.2 billion, as world powers scramble for medicines to get their economies back to work.

The vaccine, previously known as ChAdOx1 nCoV-19 and now as AZD1222, was developed by the University of Oxford and licensed to AstraZeneca. Immunity to an evolving Covid-19 strain is uncertain and so the use of vaccines unclear. The U.S. deal allows a late-stage – Phase III – clinical trial of the vaccine with 30,000 people in the United States.

Cambridge, England-based AstraZeneca said it had concluded agreements for at least 400 million doses of the vaccine and secured manufacturing capacity for 1 billion doses, with first deliveries due to begin in September.

IMPACT: There are currently no approved treatments or vaccines for Covid-19. Governments, drugmakers, and researchers are working on around 100 programmes, and experts are predicting a safe, effective means of preventing the disease could take 12 to 18 months to develop. Vaccines are seen by world leaders as the only real way to restart their stalled economies, and even to get an edge over global competitors. 

Any news of a successful clinical trial will boost global risk sentiment, however as seen with Moderna and Gilead, such news of “potential cures” have become prevalent between pharmaceutical companies without much concrete evidence to show for. Given the economic reality and geopolitical backdrop, any dips in Safe Havens like Gold on the back of risk rallies should be bought into.


China’s action could spark fresh protests in Hong Kong, which enjoys many freedoms not allowed on the mainland after often violent demonstrations of 2019 plunged the city into its deepest turmoil since it returned to Beijing’s rule in 1997.

Trump, who has ratcheted up his anti-China rhetoric as he seeks re-election in November, told reporters at the White House that “nobody knows yet” the details of China’s plan. “If it happens we’ll address that issue very strongly,” Trump said, without elaborating.

IMPACT: Hong Kong media outlets reported that the legislation would ban secession, foreign interference, terrorism and all seditious activities aimed at toppling the central government and any external interference in the financial hub. The legislation, which will face NPC deliberations, could be a turning point for its freest and most international city, potentially triggering a revision of its special status in Washington and likely to spark more unrest.

Given the strong anti-Chinese rhetoric the U.S. is propagating, the Trump administration will be sure to use this as a lever to ratchet tensions and growth sensitive currencies, especially the AUD and NZD, will be affected by any geopolitical strains between western ideals and chinese interests.


Trump escalated his rhetoric against China, suggesting that the country’s leader, Xi Jinping, is behind a “disinformation and propaganda attack on the United States and Europe.” While Trump has often blamed China for failing to prevent the pandemic now ravaging the global economy, he was careful in maintaining that his relationship with Xi is strong. Until now.

“It all comes from the top,” Trump said in a series of tweets on Wednesday night. He added that China was “desperate” to have former Vice President Joe Biden, the presumptive Democratic nominee, win the presidential race.

IMPACT: Trump and other Republicans have been ratcheting up efforts to paint China as the villain, as the U.S. economy plunges into recession and the president’s handling of the crisis jeopardizes the party’s grip on the executive branch. China has denied Trump’s claims that it was trying to damage his chances at re-election in November. 

The relentless attacks will definitely be paid back in kind by the Chinese government. We speculate that China will start to counter these threats after the National People’s Congress (NPC) meeting ends (in about 7 days). Expect a flurry of measures against countries that threaten their interest going forward. Given the potential for escalation, adjust risk accordingly as things can turn south on a whim.


With about 3,000 delegates to the annual gathering of China’s parliament, the National People’s Congress (an expected 7-day event this year) congregates in Beijing today to discuss political and economic policy. On opening day, Premier Li Keqiang typically announces key annual economic targets in a state-of-the-nation style address.

As of this morning, China announced that they are setting a 2020 GDP growth target and pledged to step up spending and financing to support its economy. The defence budget is expected to be unveiled on opening day too, seen as a gauge of the extent China may ratchet up its military capabilities this year.

IMPACT: The NPC normally meets every March to pass major bills, approve the budget, and endorse personnel nominations. Its Standing Committee meets regularly to approve other legislation. Being the second largest economy in the world, the legislation passed by the NPC will understandably have a material impact on the global economy. Given the heightened geopolitical tension and rhetoric against China in recent weeks, the policies will be scrutinized for any retaliatory measures against the US and other nations engaged in China-bashing of late.



The ECB minutes from the April’s policy meeting are due today, with traders waiting more details on why the central bank decided to keep its main tools unchanged in April even as it pledged to inject more liquidity through its newly-introduced pandemic emergency bond purchase program and adjust its composition as much as it is needed.  Hence, any strong comment that reflects a muddy outlook on the EU economy and flags more QE increases in the future could pressure the Euro, whereas a softer language may reduce the risk of additional stimulus actions, raising demand for the currency.




Yet another “quiet day” with most things trading within recent ranges. With headlines coming out of the China’s National People’s Congress meetings, watch out for reaction to the recent China-bashing that is led by the US and its allies. For now, enjoy the lull before the storm.





Respect the Price

If you are trading with leverage, price action should be a critical input to your investment process. There will be times when fundamental factors may all point overwhelmingly in one direction, but prices just do not seem to follow. It is times like this that a disciplined approach to using technical analysis and a rigorous risk management framework will stop you from being crushed by the conviction of your view. 

Currently, many prominent market legends and respected policymakers are all surprised by the strength of the stock markets in an environment of atrociously deteriorating economic conditions. Yet, risk assets continue to trade strongly. This reminds me of the period leading up to the burst of the dotcom bubble in the late 90s, and the credit bubble that led to the 2008 GFC. Eventually, asset prices will have to catch up with economic realities. When momentum starts to weaken, and price starts to go in the right direction, it is not too late to start getting heavily involved.

For now, price action is everything.


2 Min Market Update : 21st May 2020


As of New York Close 20 May 2020,


U.S. Dollar Index, -0.19%, 99.18
USDJPY, -0.10%, $107.60

EURUSD, +0.52%, $1.0980
GBPUSD, -0.13%, $1.2236
USDCAD, -0.29%, $1.3903

AUDUSD,  +0.84%, $0.6592
NZDUSD,  +1.17%, $0.6147


S&P500, +1.67%, 2,971.61
Dow Jones, +1.52%, 24,575.90
Nasdaq, +2.08%, 9,375.78
Nikkei 225, +0.79%, 20,595.15


Gold Spot, +0.15%, 1,747.74
Brent Oil Spot, +4.08%, 34.45


Dollar fell to a more than two-week low against the Euro as the common currency enjoyed a boost from the recently announced proposal for a common fund that could move Europe closer to a fiscal union as it tries to counter the economic hit from the Covid-19 pandemic. The Euro also found strength from survey data on Tuesday that showed German investor sentiment improved much more than expected in May. Pain was the order of the day as AUD and NZD continued to charge higher despite obvious problems for the currencies. China’s unhappiness with Australia and RBNZ’s intent to be extremely dovish are not going away anytime soon. Eventually those factors will take a toll on AUD and NZD respectively.

The Dollar found little support from the release of the minutes of the U.S. Federal Reserve’s most recent policy-setting meeting, which showed that policymakers agreed to use their tools “as appropriate” to support the economy and re-upped a pledge to keep interest rates near zero.

S&P 500 gained 1.7% on Wednesday in a broad-based advance to close at its highest level since March 6. The Nasdaq Composite (+2.1%) and Russell 2000 (+3.0%) increased more than the benchmark index, while the Dow Jones Industrial Average rose 1.5%. U.S. 2yr yield fell 1bp to 0.16% and U.S. 10yr yield fell 2bp to 0.68%.

In Washington, the Senate passed the Holding Foreign Companies Accountable Act, which requires certain foreign companies listed in the U.S. to certify that they are not owned or controlled by a foreign government. Failure to provide appropriate certification could result in de-listing.

The increased scrutiny on Chinese companies pressured shares of Alibaba (BABA 216.79, -0.41, -0.2%) and Baidu (BIDU 108.52, -1.23, -1.1%), while the broader U.S. market was barely bothered by the bill’s potential to worsen U.S.-China tensions. Facebook surged more than 6% Wednesday to a record high of about $230 per share on its announcement a day earlier that it would roll out Facebook and Instagram shops starting Wednesday.


U.S government has notified Congress of a possible sale of advanced torpedoes to Taiwan worth around $180 million, a move likely to further sour already tense ties between Washington and Beijing, which claims Taiwan as Chinese territory.

The proposed sale serves U.S. national, economic, and security interests by supporting Taiwan’s “continuing efforts to modernise its armed forces and to maintain a credible defensive capability”, the agency said.

The announcement came on the same day Taiwan President Tsai Ing-wen was sworn in for her second term in office, saying she strongly rejected China’s sovereignty claims. China responded that “reunification” was inevitable and that it would never tolerate Taiwan’s independence. US Secretary of State Pompeo, being the first US Secretary of State to call the Taiwanese President to congratulate her for her re-election, did not help matters.

IMPACT: The United States, like most countries, has no official diplomatic ties with Taiwan, but is bound by law to provide the democratic island with the means to defend itself. China routinely denounces U.S. arms sales to Taiwan. The U.S. seems to be taking every opportunity to aggravate China, from disrupting Economic Incentives via Trade War and stock listing restrictions, to the WHO fiasco and now selling Taiwan weapons during a sensitive period. Expect retaliation from China and risk assets like the AUD and NZD to turn on a whim as volatility explodes. The path of least resistance remains to be long Gold and Silver amidst an uncertain future.


Mexico’s health ministry on Wednesday registered 2,248 new Covid-19 infections and an additional 424 fatalities, a record one-day death toll since the start of the pandemic.

The new infections brought confirmed Covid-19 cases to 56,594 and 6,090 deaths in total, according to the official tally.

IMPACT: Mexico has had a tumultuous couple of days on the virus front and this is after reopening its economy on Monday, which does not seem like such a good idea after all. With the first wave not under control, a second wave of outbreak in Mexico is inevitable and the same fate awaits many countries who are nonchalant towards this risk. This will weigh on the domestic currency in the case of emerging markets, and on global risk sentiment should developed markets see a second outbreak. Safe Havens such as the JPY, CHF, and Gold should be considered on pullbacks.


Brazil stands ready to dip into its large pool of foreign exchange reserves and continue intervening in the currency market if needed, but any bond market intervention is likely to be far smaller in size, central bank President Roberto Campos Neto said on Wednesday.

Brazil’s real has lost around 30% of its value and is one of the worst-performing currencies against the dollar this year. A combination of record-low interest rates, a sharply deteriorating economy because of the Covid-19 pandemic and political uncertainty have pulled capital out of the country.

IMPACT: Global coronavirus cases surpassed 5 million on Wednesday, with Latin America overtaking the United States and Europe in the past week to report the largest portion of new daily cases globally. Latin America accounted for around a third of the 91,000 cases reported earlier this week. Europe and the United States each accounted for just over 20%. Cases in Brazil are now rising at a daily pace second only to the United States. Further weakness in the already battered BRL is expected, unless Brazil shows it can flatten the curve, any monetary intervention will be faded quickly and the BRL will resume its downward trajectory. 



The Eurozone’s flash PMI readings for the month of May will hit the markets tomorrow, likely showing a reviving business sector as most member states moved forward with their reopening plans. The data are expected to contribute to the bullish atmosphere of the German-Franco deal for a virus relief fund created for the euro this week, exposing the currency to fresh buying pressure. On the same day, the ECB meeting minutes could clarify if there is any willingness for more monetary stimulus.




On a generally quiet day, stocks tried again to break to new highs, but failed. USD weakened against almost all the developed currency except the JPY. Subscribed trades such as short GBP and NZD got squeezed as stops were triggered. With the weak hands out, the strong hands will likely prevail as fundamentals eventually reassert themselves.





Don’t Poke the Sleeping Giant

This should be sound advice for everyone to follow and yet, this is what Australia and Taiwan seem to be intent on doing. Just when the world is going through the biggest economic crisis of our lifetime, and for any respectable economic rebound to take place smoothly, it would seem obvious to all that you should be on good terms with your biggest trading partner. Obvious to us, but not so much to the politicians of these countries as they continually antagonise China with their words and actions. 

US is leading the charge in anti-China rhetoric, but the EU is also trying to get involved by passing legislation to prevent Chinese companies from buying any European companies that have become cheaper during this Covid-19 crisis. Preventing foreign entities from gaining a controlling stake in key companies is not a novel idea but this is specifically targeted at China. 

Eventually China will react and when it does, it will not be pretty for the ones who will need to bear the brunt of the pent-up fury. So far, China has only acted against Australia, and it is likely Australia will continue to be made an example of. The worst is yet to come.


2 Min Market Update : 20th May 2020


As of New York Close 19 May 2020,


U.S. Dollar Index, -0.11%, 99.56
USDJPY, +0.45%, $107.82
EURUSD, +0.11%, $1.0926
GBPUSD, +0.51%, $1.2256
USDCAD, +0.02%, $1.39439
AUDUSD,  +0.25%, $0.6540
NZDUSD,  +0.74%, $0.6086


S&P500, -1.05%, 2,922.94
Dow Jones, -1.59%, 24,206.86
Nasdaq, -0.54%, 9,185.10

Nikkei 225, +1.49%, 20,433.45


Gold Spot, +0.80%, 1,746.24
Brent Oil Spot, -2.16%, 33.10


AUD, NZD and GBP continued with their retracement and JPY crosses in particular ripped higher as shorts that were initiated at bad levels continued to be taken out with stocks trading strong from early on in Asian session. Even though stocks lost some momentum during the NY trading session, the risk currencies continued to trade strongly. The moves are confusing to say the least, but fundamentals remain especially bad for GBP (stuck in Brexit limbo), AUD (rising tension with China) and NZD (extremely dovish RBNZ). The time to reinitiate shorts on this currency should come again when the momentum of the correction wanes. 

In Washington, Fed Chair Powell and Treasury Secretary Mnuchin testified before the Senate Banking Committee regarding the government response to Covid-19. Powell reiterated the Fed’s commitment to using its full range of tools to support the economy, and Mnuchin said he’s prepared to increase risk and lend more money. Dollar fell against the EUR on Tuesday as the common currency added to Monday’s gains on a Franco-German proposal for a fund that would offer grants to European Union regions and sectors hit hardest by the Covid-19 pandemic. Germany and France, whose agreements usually pave the way for broader EU deals, proposed that the European Commission borrow 500 billion euros ($550 billion) on behalf of the whole EU. The Commission is expected to outline its proposal before a European summit scheduled for May 27.

S&P 500 pulled back 1.1% on Tuesday, as stocks succumbed to late-day selling following a negative-sounding vaccine headline. The Dow Jones Industrial Average (-1.6%) and Russell 2000 (-2.0%) declined more than the benchmark index, while the Nasdaq Composite (-0.5%) fared slightly better. U.S. 2yr yield fell 1bp to 0.17% and U.S. 10yr yield fell 3bp to 0.70%.  

For most of the session, the S&P 500 wavered around its flat line, supported by relative strength in the technology stocks. As the S&P 500 traded at session highs (+0.4%) late in the session, Stat News published a report in which vaccine experts cautioned about Moderna’s (MRNA 71.67, -8.33, -10.4%) Covid-19 vaccine candidate due to a lack of critical data provided.

Recall, stocks rallied on Monday after the company said a Phase 1 trial yielded positive results. The negative-sounding headline, then, provided a good excuse for investors to take some profits given the uncertainty that remains. 

Moderna was caught in a web of suspicion in a “bait and switch” pump where insiders built up a position in the stock with insider knowledge of “positive development” and dumping it on spikes, as reports about insider share sales emerged. Moderna’s billionaire founder and CEO Stephane Bancel along with the White House’s new vaccine czar, Moncef Slaoui stands to profit from the action. CNBC reported that the CEO has been selling his stock in the past weeks during the course of the stock price rise. Moncef Slaoui holds more than 150,000 options contracts, worth more than $12 million and resisted pressure to divest them despite the conflict of interest. Sen. Elizabeth Warren, D-Mass., decried Slaoui’s continued holdings in Moderna, calling it a “huge conflict of interest.”

Separately, Facebook (FB 216.88, +3.69, +1.7%) introduced “Facebook Shops” and “Instagram Shop” to help more businesses go online. Spotify (SPOT 175.03, +13.60, +8.4%) shares climbed 8% after the company reached a deal to exclusively host the Joe Rogan Experience podcast.


Trump threatened on Monday to permanently halt funding for the World Health Organization (WHO) if it did not commit to improvements within 30 days, and to reconsider his country’s membership of the agency.

Trump suspended U.S. contributions to the WHO last month, accusing it of promoting Chinese “disinformation” about the Covid-19 outbreak, although WHO officials denied the accusation and China said it was transparent and open.

“They have to clean up their act. They have to do a better job. They have to be much more fair to other countries, including the United States, or we’re not going to be involved with them anymore,” Trump told reporters at the White House. 

IMPACT: The United States contributed more than $400 million to the WHO in 2019, or about 15% of its budget. The United States traditionally provides several hundred million dollars annually in voluntary funding tied to specific WHO programmes like polio eradication, vaccine-preventable disease, HIV and hepatitis, tuberculosis, and maternal and child and health. The United States withdrawing from the WHO is an indirect spite towards China. Geopolitical volatility is being ratcheted in every possible angle and Safe Havens like Gold and Silver will continue to outperform.


The United States said on Tuesday it would this week start delivering 200 medical ventilators to Russia, which has the world’s second-highest number of confirmed Covid-19 cases. Russia reported 9,263 new infections on Tuesday, pushing its nationwide total to 299,941, and 115 more deaths, taking the total death toll to 2,837. Only the United States has reported more Covid-19 cases.

IMPACT: Foreign Minister Sergei Lavrov said the United States planned to deliver the machines in two planes and that Washington would cover all the costs. This is the U.S. chance to build goodwill relations with Russia especially in a time when the relationship between Russia and China is under strain.The pandemic had cast a shadow over relations between China and Russia, partly because of Moscow’s early move to shut border crossings in late January despite Beijing’s opposition.


Mexico registered 2,713 new cases of the Covid-19 on Tuesday, the health ministry said, its biggest daily increase yet in infections, bringing its overall tally to 54,346 cases. Authorities also registered 334 more fatalities, only the second time that the daily death toll has exceeded 300. The country has now tallied 5,666 overall deaths from the virus.

IMPACT: This came a day after Mexico issued guidelines for restarting operations in the automotive, mining, and construction sectors, pushing ahead with reopening the economy despite a growing national toll from the Covid-19 pandemic and concerns about unsafe work sites. Mexico is a microcosm of the potential effect if countries do not have proper measures in place. Should case counts pick up, the Mexican Peso (MXN) will weaken against Safe Havens like the Dollar and Japanese Yen (JPY). 



In Britain, the preliminary PMIs for May will hit the markets on Thursday, ahead of retail sales for April on Friday. The PMIs are expected to rise, but to remain deep within contractionary waters, while retail sales are primed for a record collapse. As for GBP, it is being battered from all sides. The UK economy will reopen very slowly, investors are worried that deficits will result in austerity, the BoE is considering negative rates, and to top everything off, the risk of a no-deal Brexit is back on the radar.

First, markets weren’t impressed by the government’s handling of the health crisis, as the early hesitation to shut down the economy now means a longer period of things staying shut. Second, there are growing fears the exploding government deficit will result in ‘belt-tightening’ austerity once the crisis ends, either via tax increases or by spending cuts or both, sapping demand as the recovery begins.




The rallies continue to be stronger than the sell-offs but S&P500 is trading close to previous recent highs. Caution should be the order of the day as Fed speakers continue to speak of the economy in a much more sombre tone than the politicians. Horrible economic data is pretty much expected and ignored these days, but bankruptcies and layoffs will eventually take a toll on confidence.





Filter out the Noise

You will often be inundated with random noise in a market that seems directionless. Sentiment changes on a dime based on headlines that can hardly be anticipated at times. However, in the midst of all the noise, there will be occasions when a clear trend seems to be emerging. This seems to be the case with Gold and especially, Silver now. 

When the market speaks, take heed, and take action!


2 Min Market Update : 19th May 2020


As of New York Close 18 May 2020,


U.S. Dollar Index, -0.77%, 99.63
USDJPY, +0.33%, $107.39
EURUSD, +0.91%, $1.0914
GBPUSD, +0.77%, $1.2199
USDCAD, -1.20%, $1.3940
AUDUSD,  +1.70%, $0.6524
NZDUSD,  +1.79%, $0.6039


S&P500, +3.15%, 2,953.91
Dow Jones, +3.85%, 24,597.37
Nasdaq, +2.44%, 9,234.83
Nikkei Futures, +2.99%, 20,640.0


Gold Spot, -0.46%, 1,734.93
Brent Oil Spot, +9.55%, 33.83


A jump in oil prices lifted commodity currencies such as the NOK and the CAD against the U.S. Dollar on Monday as optimism about a reopening of economies stifled by the Covid-19 pandemic boosted risk appetite. USD started out strong in Asia with Gold and Silver breaking higher aggressively. However, that soon turned around when stocks started to power higher just prior to NY start. Fundamentals remain intact, and patience is a requirement in this market. On the UK front, GBP made new lows, but managed a reversal (+0.97%) due to USD weakness when markets turned risk on. The problems that plague the GBP remain, this temporary reprieve is likely to be just that. 

Italian government bond yields fell to their lowest level in over a month after France and Germany on Monday proposed a 500 billion euro ($543 billion) recovery fund offering grants to regions hit hardest by the Covid-19 crisis. The proposal moves the EU more in the direction of a transfer union and is likely to please countries like Italy or Spain which have long called for more joint action in response to the crisis. But offering grants rather than loans could be hard to swallow for some of the frugal northern countries of the 27-nation bloc, like the Netherlands, Finland, and Austria.

S&P 500 rallied 3.15% on Monday, as reopening hopes were fueled by a positive vaccine update from Moderna (MRNA 80.00, +13.31, +20.0%). The small-cap Russell 2000 outperformed with a 6.1% gain, followed by the Dow Jones Industrial Average (+3.85%) and Nasdaq Composite (+2.44%). U.S. 2yr yield rose 2bp and U.S. 10yr yield rose 9bp to 0.73%.

Prior to the open, Moderna announced that a Phase 1 study for its COVID-19 vaccine candidate yielded positive interim clinical results. The company was hopeful that a Phase 3 trial could begin earlier than expected in July, and it started scaling up its manufacturing capacity so it can produce as much vaccine as possible if approved.

The news provided an added boost to the market, which was already trading higher following Powell’s “60 Minutes” interview with CBS. Powell assured the market that the Fed is still not out of ammunition and suggested Congress should do more. Powell also said that a full economic recovery could take more than a year and will likely require a vaccine.

The timely vaccine update, then, coupled with the Fed’s support and an increase in nationwide reopening efforts, helped ignite a rally in risk assets, this inadvertently caused safe havens like Gold and Silver to be sold.


New Zealand’s central bank could expand its government bond-buying programme further though it hopes to have more certainty in about three months’ time on whether to go harder or ease back stimulus, a top official said on Tuesday.

On Tuesday, RBNZ Deputy Governor said negative rates were one of many monetary policy options available to the RBNZ. “We will evaluate negative rates alongside other options,” he said. “For now, we think the best thing we should be doing is large scale asset purchases and we’ve expanded that. We could expand it further if needed.”

IMPACT: The RBNZ has been the clearest among developed world central banks, which have yet to implement negative rates, about its intent to use negative rates and accommodative policies to boost its economy should things turn south. This makes the RBNZ (NZD) along with BoE (GBP) the most dovish developed central banks and their currencies a good underlying to sell into any spikes should their stance remain and the effect of the virus remain protracted as we have suggested.


Mexico issued guidelines for restarting operations in the automotive, mining, and construction sectors on Monday, pushing ahead with reopening the economy despite a growing national toll from the Covid-19 pandemic and concerns about unsafe work sites.

With Mexico’s coronavirus death toll having surged past 5,000, and known cases set to surpass 50,000, officials are wrestling with how to restart key industries without triggering greater spread of the virus. The moves to loosen restrictions follow growing pressure from the United States to reopen factories that are vital to supply chains of U.S.-based businesses, especially in the vast automotive sector.

IMPACT: On May 12, Mexico reported a record number of deaths in a single day with 353 fatalities. That grim news was followed on Friday by a reported 2,437 new coronavirus infections, a one-day record rise in cases since the start of the pandemic. Critics, including some within Lopez Obrador’s own ruling MORENA party, worry that restarting factories too soon could exacerbate the spread of the virus before it has been brought under control. A second-wave of infection (highly likely) will put pressure on the Mexican Peso (MXN).


Nasdaq Inc is set to unveil new restrictions on initial public offerings (IPOs), a move that will make it more difficult for some Chinese companies to debut on its stock exchange, people familiar with the matter said on Monday.

While Nasdaq will not cite Chinese companies specifically in the changes, the move is being driven largely by concerns about some of the Chinese IPO hopefuls’ lack of accounting transparency and close ties to powerful insiders, the sources said.

The new rules will require companies from some countries, including China, to raise $25 million in their IPO or, alternatively, at least a quarter of their post-listing market capitalization, the sources said.

IMPACT: At a time of escalating tensions between the United States and China over trade, technology, and the spread of the Covid-19, Nasdaq’s curbs on small Chinese IPOs represent the latest flashpoint in the financial relationship between the world’s two largest economies. Expect more trade and geopolitical volatility going forward, which will keep Safe Haven currencies like the Japanese Yen (JPY) at a premium relative to its counterparts, especially trade sensitive currencies like the Aussie (AUD) and Singapore Dollar (SGD). 



A raft of economic data is due out of the United Kingdom this week, starting with the labour market report on later today and the consumer price index on Wednesday. Following last week’s dire GDP figures, traders should be braced for more depressing readings on the economy, with the March jobs numbers stealing the limelight early in the week. But as if things weren’t critical enough with the Covid-19 pandemic spreading mayhem on the global economy, the UK also has to contend with Brexit, adding to GBP woes.




Stocks powered ahead after pharmaceutical firm Moderna reported “positive” data on early-stage covid-19 vaccine trial. If you run any pharma firm, it makes sense to be chasing a vaccine or treatment, do trials and report any “positive” data you see as it causes massive spikes in your stock price!

Gold started the day shining bright but tumbled for no good reason except to frustrate gold bugs as the market went full risk on. This is a trade for the long haul and not for the faint-hearted!





Higher Volatility Lurks

As geopolitical tensions rise and governments warn about the protracted effect the virus has on the economy, there seems to be a mismatch between expectations of market participants (“v-shaped recovery”) and the real world. The exuberance of incessant money printing is being front-loaded in recent times, but the motivations between both parties (Central Planners and Market Participants) in this can’t be more different. Central Planners are acting out of fear and overcompensating for it with actions, while market participants are buying in “hope”. The stark contrast in intent is troubling, and we suspect central planners have the upper hand in terms of understanding economic reality.

With the fate of Wall Street diverging further away from the dire reality of Main Street, expect volatility in time to come.


2 Min Market Update : 18th May 2020


As of New York Close 15 May 2020,


U.S. Dollar Index, -0.06%, 100.40
USDJPY, -0.21%, $107.04

EURUSD, +0.10%, $1.0816
GBPUSD, -1.00%, $1.2106
USDCAD, +0.43%, $1.4110
AUDUSD,  -0.73%, $0.6415
NZDUSD,  -1.17%, $0.5933


S&P500, +0.39%, 2,863.70
Dow Jones, +0.25%, 23,685.42
Nasdaq, +0.79%, 9,014.56
Nikkei Futures, +1.31%, 20,040.0


Gold Spot, +0.71%, 1,743.00
Brent Oil Spot, +4.75%, 30.88



The USD index was relatively unchanged but the USD itself made strong gains vs GBP, AUD and NZD as these currencies which have been trading weak in the last few sessions continued to sell. Gold and Silver gained 0.7% and 4.8%  respectively against the USD as hard assets continue to perform well in fiat money terms. With increasingly bad economic data, the expectations for money printing grow and that would mean more depreciation of fiat currencies against hard assets. 

U.S. Industrial production declined 11.2% m/m in April (consensus -12.1%), which was the largest monthly drop in the 101-year history of the index. The capacity utilization rate fell from 73.2% to 64.9% (consensus 64.0%), which is 14.9 percentage points below its long-run average and a record-low in a series that dates back to 1967. The University of Michigan’s Index of Consumer Sentiment rose to 73.7 in the preliminary reading for May (consensus 67.4) from 71.8 in April. Dollar has been largely range-bound with its safe-haven appeal keeping it well supported overall. Against a basket of currencies, it was last at 100.380, having drifted 0.7% higher last week. GBP touched a seven-week low at $1.2073 after the chief economist of the Bank of England said it was looking more urgently at options such as negative interest rates and buying riskier assets to prop up the economy.

Early in the U.S. session, economic data showed total retail sales declined a record 16.4% m/m in April (consensus -11.9%) and industrial production declined 11.2% m/m in April (consensus -12.1%). The market wasn’t visibly upset by the data, though, likely due to the prevailing view that it can’t get any worse. Instead, there was a negative reaction to the news that the Trump administration moved to block semiconductor shipments to China’s Huawei Technologies. With relations already strained because of the Covid-19 outbreak, the move renewed worries about potential Chinese retaliation against U.S. companies.

S&P 500 (+0.39%), Dow Jones Industrial Average (+0.25%), and Nasdaq Composite (+0.79%) ended Friday’s session modestly higher, recovering from early declines that followed more weak economic data and increased U.S.-China tensions. The Russell 2000 outperformed with a 1.6% gain after a rough week for the small-cap index. U.S. 2yr rates remained unchanged at 0.16% and U.S. 10yr rates rose 1bp to 0.64%.

Today, Japan’s economy slipped into recession for the first time in 4-1/2 years, GDP data showed this morning, putting the nation on course for its deepest postwar slump as the coronavirus crisis takes a heavy toll on businesses and consumers. GDP contracted an annualised 3.4% (vs expected -4.6%) in the first quarter as private consumption, capital expenditure and exports fell, preliminary official data showed. Analysts expect Japan’s economy to shrink an annualised 22.0% in the current quarter, which would be the biggest decline on record and underscores the collapse in activity that is expected to see the worst global slump since the Great Depression of the 1930s.



The U.S. House of Representatives on Friday narrowly approved a $3 trillion bill crafted by Democrats to provide more aid for battling the Covid-19 and stimulating a faltering economy rocked by the pandemic.

By a vote of 208-199 Democrats won passage of a bill that Republican leaders, who control the Senate, have vowed to block despite some Republican support for provisions aimed at helping state and local governments.

IMPACT: It directs nearly $1 trillion to state, local and tribal governments, including $500 billion in direct, flexible aid for state governments and an additional $357 billion for local governments and counties. And it adds $200 billion in pandemic hazard pay for essential workers and $75 billion for coronavirus testing, contact tracing, and treatment efforts. 

The incessant money printing might create a lot of excesses in the economy and cause inflation as too much capital is chasing lagging productivity in times ahead. Businesses are not light switches that can be turned on and off, some will be taken off the market permanently and fear might keep new entrants away. This inflationary environment is beneficial to hard assets like Gold and Silver (as we have pointed out in last week’s Trade Insights on Silver’s strong technical outlook, it has exploded +7.7% since then till current time of writing ).



In its latest report on financial stability, the Fed said the global pandemic imposed sweeping risks. While policy actions from the Fed and others have helped bolster the economy, and the banking system has withstood the initial downturn, the report warned of major risks if the pandemic proves lengthy or more severe than anticipated.

“The COVID-19 outbreak poses severe risks to businesses of all sizes and millions of households,” the central bank said as it ran down a list of trouble spots that could arise depending on how long the virus persists and keeps the economy on its heels.

IMPACT: Governments are starting to warn about the lingering effects of the virus while a good number of market participants are calling for a “v-shaped” recovery. There is a good chance that we are near the end of the bear-market rally and a second wave of infection in the U.S. will dampen risk sentiment. Safe-Haven currencies like Japanese Yen should trade at a premium in the months ahead.



The Bank of England is looking more urgently at options such as negative interest rates and buying riskier assets to prop up the country’s economy to fight the coronavirus crisis, the BoE’s chief economist was quoted as saying.

The Telegraph newspaper said Andy Haldane refused to rule out the possibility of taking interest rates below zero and buying riskier assets under its bond-buying programme.

IMPACT: Top BoE officials have previously expressed objections to taking rates below zero – as the central banks of the eurozone and Japan have done – because it might hinder the ability of banks in Britain to lend and hurt rather than help the economy. But with the BoE’s benchmark at an all-time low of 0.1% and Britain facing potentially its sharpest economic downturn in decades, talk of cutting rates to below zero has resurfaced. BoE will be the latest developed world central bank to officially discuss the prospects other than the RBNZ. This will be bearish for Sterling, and given the heightened volatility in global markets and geopolitics, GBP/JPY might head much lower.  



The coming week seems relatively quiet. The preliminary PMIs for April in the UK, US, and Eurozone will give us an update on how much businesses have suffered, while the minutes of the latest Fed meeting might reaffirm the central bank’s willingness to do even more, even as Powell hints that Congress should take the lead. Overall though, the most important variables for investors may be how quickly new virus cases increase now that economies are partially re-opening, and whether US-China tensions flare up any further.




Stocks continue to trade well, but strangely risk currencies such as AUD and NZD could not rally. AUD is struggling due to the current trade tension between China and Australia and NZD is still suffering from RBNZ’s latest policy statement that it has asked banks to prepare for negative interest rates in time to come. GBP also trades extremely weak as Brexit negotiations are not making any headway and having no trade deal in the time of economic devastation is not a great place to be. Gold and Silver started to make the move against fiat currencies finally. Expect this move to be long-lasting. 

Concentrate on trades that work. Sell that which is weak and buy that which is strong.




Rise and Shine!

Gold and Silver finally woke up and are truly shining bright. Just like a broken record, we will be singing this tune for some time to come. In a world where the money presses are working overtime all around the world, fiat money will be devalued against hard assets. We spoke of the imminent Silver move late last week just before it exploded. The reasons then remain valid and will continue to drive it higher over time.


2 Min Market Update : 15th May 2020


As of New York Close 14 May 2020,


U.S. Dollar Index, +0.03%, 100.27
USDJPY, +0.30%, $107.36

EURUSD, -0.10%, $1.0806
GBPUSD, +0.02%, $1.2234
USDCAD, -0.48%, $1.4033
AUDUSD,  +0.24%, $0.6471
NZDUSD,  +0.33%, $0.6012


S&P500, +1.15%, 2,852.50
Dow Jones, +1.62%, 23,625.34
Nasdaq, +0.91%, 8,943.72
Nikkei Futures, +0.19%, 20,153.0


Gold Spot, +0.99%, 1,732.93
Brent Oil Spot, +7.04%, 29.48


Dollar rose to a three-week high on Thursday as yet another week of roughly 3 million new jobless claims, evidence of a second wave of Covid-19-related lay-offs, became the norm. The Japanese Yen and Swiss Franc were both weaker against the Dollar and flat versus the Euro. Total jobless claims for the week ending May 9 totaled 2.981 million (consensus 2.475 million) while continuing claims for the week ending May 2 totaled 22.833 million. The elevated figures raised doubts on a timely economic recovery, but the data might have prodded lawmakers to act more quickly for additional fiscal stimulus.

Reports followed that the White House was interested in a bipartisan, fourth Covid-19 relief bill (although not the $3 trillion bill proposed by House Democrats). The possibility for more stimulus, coupled with a view that the recent weakness in the market provided a good entry point, helped ignite a buy-the-dip mindset.

S&P 500 advanced 1.2% on Thursday as stocks staged a comeback led by the beaten-up financial sector. The benchmark index was down as much as 1.9% in early action following a relatively disappointing weekly jobless claims report.

Sentiment might have also been boosted by an IEA report suggesting oil demand has been a little stronger than expected, The Wall Street Journal reporting that Taiwan Semi (TSM 52.10, +1.18, +2.3%) will announce plans to build an advanced chip factory in Arizona, and news that Connecticut overstated its weekly initial claims count by more than 200,000.


Hours after Trump railed against him on Twitter, whistleblower Rick Bright testified to a U.S. House of Representatives panel about readiness for the outbreak. Bright was removed last month as director of the Biomedical Advanced Research and Development Authority, or BARDA, which is responsible for developing drugs to fight the Covid-19.

“What we do must be done carefully with guidance from the best scientific minds. Our window of opportunity is closing. If we fail to improve our response now, based on science, I fear the pandemic will get worse and be prolonged,” Bright said.

IMPACT: Trump, who has been pushing for the U.S. economy to reopen quickly, dismissed Bright as a “disgruntled employee” on Twitter on Thursday morning before the hearing began. It is disturbing to see the Trump administration recklessly handling the virus situation, this is exactly the kind of hubris that will cause a second wave of infection and a protracted economic crisis in time to come. Safe Haven currencies like the Japanese Yen should trade at a premium relative to most counterparts.


Britain’s economy will suffer longer-term damage from the current Covid-19 shutdown but it remains highly uncertain how severe it will be, Bank of England Governor Andrew Bailey said on Thursday. Bailey also said in a webinar organised by the Financial Times that it was unclear whether a 30% drop in Britain’s economic output in the first half of 2020, as outlined as a possibility by the BoE last week, would prove overly pessimistic or an under-estimate of the damage.

IMPACT: Central Bankers around the world are warning of the protracted impact of the virus on the economy, whilst stocks are remaining nonchalant about it and front loading the effect of incessant money printing. As we have suggested, the chickens will eventually come home to roost and several legendary hedge fund managers have, over the past 2 weeks, warned that the end of the bear market rally is nigh.


Trump signaled a further deterioration of his relationship with China over the Covid-19, saying he has no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with the world’s second-largest economy.

In an interview with Fox Business Network broadcast on Thursday, Trump said he was very disappointed with China’s failure to contain the disease and that the pandemic had cast a pall over his January trade deal with Beijing, which he has previously hailed as a major achievement.

“They should have never let this happen,” Trump said. “So I make a great trade deal and now I say this doesn’t feel the same to me. The ink was barely dry and the plague came over. And it doesn’t feel the same to me.”

Trump was asked about a Republican senator’s suggestion that U.S. visas be denied to Chinese students applying to study in fields related to national security, such as quantum computing and artificial intelligence. “There are many things we could do. We could do things. We could cut off the whole relationship,” he replied.

IMPACT: Trump and his Republican backers have accused Beijing of failing to alert the world to the severity and scope of the Covid-19 outbreak and of withholding data about the earliest cases. The pandemic has sparked a sharp global recession and threatened Trump’s November re-election chances. Opponents of Trump have said that while China has much to answer for over the outbreak, he appears to be seeking to deflect attention from criticism over his response to the crisis. As tensions escalate, Safe Haven currencies will continue to trade well and growth currencies such as AUD will suffer. 



Millions of Americans have been applying for unemployment benefits the past two months as the business pressure stemming from the Covid-19 crisis had led to massive layoffs, increasing concerns about how deep consumption, which accounts for two-thirds of the US economy, could crash at some point this year. US retail sales due later today are expected to reinforce those worries, reflecting the steepest monthly decline in spending. However, the data may not necessarily expose the Dollar to a notable sell-off as risk aversion is likely to take hold.




The schizophrenia that has plagued risk sentiment of late remains. Almost inexplicably, weak stocks staged a comeback and ended the day on a strong note. This is despite various Fed speakers (Powell, Evans, Bullard) warning of a protracted downturn and that current data is not showing the true extent of the economic damage. Health experts, on the other hand, are warning of a worsening situation in the Covid-19 outbreak if action is not taken now and that the vaccine will take longer than the market expects (“12-18 months is an aggressive timeframe”).

The only people optimistic are politicians such as Trump and his cronies. We’ve seen this movie before. It does not end well.




All Aboard!

Gold was trading higher as stocks were down on the lows of the day, and as stocks recovered almost 3% from the lows, Gold remained close to the highs of the day. It seems that Gold has finally shook off the weak longs and looks about to take off. 

Silver was even better, it was at the highs of the day when stocks were at the lows, and it went a few percent higher as stocks went to the highs of the day!

We’ve said it once, we’ll say it again. Hard assets should and will benefit in the environment of incessant money printing. 

Enough said. Have a good weekend!


2 Min Market Update : 14th May 2020


As of New York Close 13 May 2020,


U.S. Dollar Index, +0.24%, 100.17
USDJPY, -0.20%, $106.93
EURUSD, -0.24%, $1.0821
GBPUSD, -0.18%, $1.2239

USDCAD, +0.09%, $1.4091
AUDUSD,  -0.26%, $0.6453
NZDUSD,  -1.34%, $0.5996


S&P500, -1.75%, 2,820.00
Dow Jones, -2.17%, 23,247.97
Nasdaq, -1.55%, 8,863.17
Nikkei Futures, -0.86%, 20,115.0


Gold Spot, +0.94%, 1,718.68
Brent Oil Spot, +0.66%, 27.54


Dollar edged higher against a basket of currencies on Wednesday, after Federal Reserve Chair Jerome Powell rejected the idea of using negative interest rates as a stimulative tool, even as he sounded a gloomy note about economic growth. Traders of short-term U.S. interest-rate futures reduced bets the Fed will take the unprecedented step of pushing interest rates below zero. Yet futures contracts maturing in April 2021 and later still signalled expectations for negative rates, according to CME Group’s FedWatch tool.

S&P 500 lost 1.75% on Wednesday in a broad-based decline, as investors accounted for some cautious commentary from Fed Chair Powell. The Dow Jones Industrial Average declined 2.17%, the Nasdaq Composite declined 1.55%, and the Russell 2000 declined 3.3%. U.S. 2yr yield fell 1bp to 0.16% and U.S. 10yr yield fell 5bp to 0.64%.

In his speech prior to the open, Fed Chair Powell said the economic outlook remained highly uncertain and subject to significant downside risks, adding that recovery may take some time to gather momentum. Powell also said the Fed can do more to help the financial system but dismissed the notion of implementing negative interest rates.

Adding to U.S.-China tensions, the FBI confirmed that China-affiliated cyber actors have targeted U.S. organizations conducting Covid-19-related research. Also, a report out of China indicated that Beijing is mulling punitive countermeasures on the U.S. as a result of lawsuits that are seeking Covid-19-related damages.

Separately, valuation concerns were voiced by a couple of influential names. Legendary investor Stanley Druckenmiller said the risk-reward for equity is maybe as bad as he’s seen it in his career. Appaloosa Management’s David Tepper told CNBC that he hasn’t seen the market this overvalued since 1999.



The RBNZ said it would almost double its bond-buying programme to $60 billion to help stimulate the economy as it goes through a Covid-19 driven downturn. The bank’s previous bond-buying, or quantitative easing (QE), limit had been set at $30 billion of Government bonds and $3 billion of local authority paper. As expected, the bank kept its official cash rate unchanged at 0.25 percent. 

The bank’s Monetary Policy Committee said it was prepared to use additional monetary policy tools “if and when needed”, including reducing the OCR further, adding other types of assets to the QE programme, and providing fixed-term loans to banks. It also said that it was advising financial institutions to be prepared for negative rates because although they have no plans to implement it at this time, it is an option at a later date if required. 

IMPACT: The Kiwi fell in the aftermath of RBNZ’s decision as the central bank signaled that they will do whatever it takes to support the economy. It was one of the only central banks that openly considered negative interest rates should the crisis worsen, and that is especially significant because RBNZ used to eschew QE and ultra-easy monetary policies. As geopolitical and trade tensions continue to increase, the NZD and AUD will continue to be pressured.


The European Union pushed on Wednesday for a safe reopening of borders, while insisting on protective measures such as masks on planes, to try and salvage the ravaged tourism sector for the lucrative summer season as Covid-19 infections recede. Though wary of new waves of COVID-19, the EU executive wants to revive what it can do for the June-August season normally worth 150 billion euros ($162.59 billion).

IMPACT: Consistent with our repeated warnings, better to face the lesser evil by being cautious now then to face a tsunami of infections should things go awry in the bid to boost the economy in the near term. Coupled with a fractured EU, the risks go beyond economic but include social and political upheaval if the crisis is not handled well. All these do not bode well for the Euro and more downward pressure is inevitable in the long run.


Powell, in a sober review of where the U.S. economy stands on the cusp of its reopening, warned on Wednesday of an “extended period” of weak growth and stagnant incomes, pledged to use more of the central bank’s power as needed, and issued a call for additional fiscal spending.

Powell made clear, however, that the Fed won’t push interest rates below zero, as traders had been increasingly betting. Negative interest rates, he said, are “not something that we are considering.”

IMPACT: Powell became the latest in a parade of US policymakers to brush off the notion that they might push rates into negative territory after Fed Fund futures began pricing a small chance of sub-zero U.S. rates within the next year. His comments provided some support for the weak Dollar. U.S. data on weekly jobless claims due later today and a survey on U.S. manufacturing due Friday should offer more clues about the economic outlook and drive Fed Funds futures pricing for rates. 



Germany will publish its preliminary GDP growth readings for the first quarter tomorrow. Although the Eurozone’s initial estimates have already revealed a 3.8% contraction for the aforementioned period, markets could still pay some attention to the German numbers as a concerning report out of the largest EU economy could drive Berlin’s skeptical response to the EU’s Covid-19 stimulus policies that are so desperately needed by the most-infected member states.

A worse-than-expected GDP reading out of Germany on Friday could pressure German lawmakers to relax their strict judgment on EU’s policies, keeping some floor under the battered Euro if the country indeed shows some willingness to collaborate in the near future. Otherwise, an upside surprise in the numbers may strengthen Germany’s negotiating position, prolonging its dispute with Brussels.




Stocks started the early Asian hours weak but crept higher throughout the day. The rally at the start of NY session fizzled out as a reality check from Fed Chair Powell put a damper on things. Multi-billion dollar hedge fund Appaloosa’s David Tepper added his voice to the many high profile investors warning of the lofty stock prices, saying current markets are the most overvalued he’s seen since that of 1999. Reality is finally biting. 

Despite Fed Chair Powell pushing back against market pricing of negative Fed Funds rates, Gold ended close to the highs of the day. This positive price action could be a sign that the corrective phase of Gold price is almost over.




Reality Bites

For the longest time, and even now, many financial forecasters and even policymakers spoke of V-shaped recoveries and quick bounce backs in economic growth. As the economic realities set in, these hopeful delusions are being recognised for what they are. Many businesses and even industries will not only find it hard to regain past glories but may even cease to exist altogether. 

People who fear for their livelihoods do not rush out to ramp up their consumption just because there are avenues to consume again. The buoyant stock market may seem to indicate that all is going well again but it will soon prove to be an illusion as reality starts to bite.