Resurgence in Covid-19 cases
Markets began this week negative after a resurgence in Covid-19 cases in Beijing and some major US states left participants believing that a second wave is now a much more probable and possible outcome. Major bourses started the week lower with the Nikkei 225 down 2% and the ASX down by over 1%. As the risk averse tone spreads into the European session, safe havens are likely to be beneficiaries as the DXY breaks back above 97.00 and all major currencies are met with strength from the Japanese Yen.
Beijing have shut a fruit and vegetable market and deployed lockdown restrictions in a variety of neighbouring areas after a number of individuals from the wholesale markets tested positive for Coronavirus. Chinese Vice Premier Sun has warned that the risk are high for Beijing as Mainland China reported additional cases of up to 79. This news will continue to add tension to markets as second wave fears continue to build.
Reopening plans worldwide
On the other hand, reopening plans worldwide are still set to continue despite the slight surge in cases over the weekend. The UK for instance has now opened all non-essential shops today as PM Johnson encouraged the nation to ‘shop with confidence’. This comes as the death toll in the UK rose by 36 to a total of 41,698. PM Johnson also mentioned that the 2-metre social distancing rules are under review and could be relaxed as further easing plans will be made on the 4th July. US President Trump has stated that he is not keen to lockdown the nation again which suggests that a second wave is more than likely as the population attempts to resume back to normal life. Florida and California reported a record number of additional cases as the entire nation recorded a spike in cases by around 25,000.
UK and EU talks
UK and EU talks will once again be in the spotlight this week as PM Johnson is set to announce that Brexit talks must conclude before Autumn so that businesses will have some form of certainty in relation to the potential impacts of a deal or no deal. Last week, the UK made it clear that they will not be looking for an extension to the transition period as they also plan to impose custom checks with the EU next year. High level talks are set to hold today between PM Johnson and EU Commission President von der Leyen. Though the UK have eluded that they will be willing to compromise on some key matters pertaining to the deal, markets will still be anxious, and sterling is still set to come under pressure as a result.
WTI Crude Oil
WTI Crude Oil’s bull run took a hit last week after prices retreated from the $40 mark. This was triggered by the largely risk averse tone that was seen across markets due to 2nd wave fears and the glum outlook given by the Fed during the midweek FOMC meeting. The outlook for WTI that had been somewhat lifted after higher forecasts by Barclays is likely to remain under pressure as threats to the reopening agenda build.
In the cryptocurrency space
In the cryptocurrency space, BTCUSD broke below $9,000 temporarily though has since found buyers as price trades above $9,100, whilst Ethereum has dropped below $230. The bullish counter trendline will be watched by traders as Ethereum is in a long-term bearish channel which is visible from both the weekly and daily timeframes. Gold broke lower on USD strength and resistance was found around $1,745/troy ounce.
Here is a breakdown of the high impact data releases this week.
Tentative Monetary Policy Statement. Markets to watch: JPY Crosses
07:00 Claimant Count Change. Markets to watch: GBP Crosses
13:30 Retail Sales m/m. Markets to Watch: USD Crosses
15:00 FED Chair Powell Testifies. Market to watch: USD Crosses
13:30 CPI m/m. Market to watch: CAD Crosses
17:00 FED Chair Powell Testifies. Market to watch: USD Crosses
23:45 GDP q/q. Markets to watch NZD Crosses
02:30 Employment Change, Unemployment Rate. Markets to watch: AUD Crosses
08:30 SNB Monetary Policy Assessment and Press Conference. Markets to watch: CHF Crosses
12:00 Asset Purchase Facility, MPC Official Bank Rate Votes, Monetary Policy Summary & Official Bank Rate. Markets to watch: GBP Crosses
13:30 Core Retail Sales m/m. Markets to Watch: CAD Crosses