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.