Midday Analysis – 12th August 2020

Today’s Market Outlook

In Asia today, the Nikkei closed up 0.41%. Hong Kong HSI is up 0.96%. China Shanghai SSE is down -0.69%. Singapore Strait Times is up 0.47%. Japan 10-year JGB yield is up 0.0116 at 0.045. Overnight, DOW dropped -0.38%. S&P 500 dropped -0.80%. NASDAQ dropped -1.69%. 10-year yield rose 0.084 to 0.658. 

For the currencies market, the NZD plunged broadly today as weighed down by a ‘double-trouble’ scenario of RBNZ QE expansion and the return to a lockdown. The selloff in NZD is somewhat dragging down the AUD and the CAD too. On the contrary, the USD is staging a strong rebound, with help from much steeper than expected correction in Gold price. The strong rebound is 10-year yield also helps the EUR and GBP are so far resilient, with the latter supported by slightly better than expected June GDP figure. 

As for Gold, its’ prices have seen an intense sell-off in the previous days, with gold suffering its most dramatic one-day fall since 2013. The gold price has hurtled from its record high of $2,075, as the U.S. equity markets resumed its rally on the back of more help from Washington. Generally, gold serves as a hedge against uncertainty. When traders invest in riskier assets, they tend to move their focus away from gold. However, during this coronavirus stock market rally, we have some evidence of a positive correlation between gold prices and the U.S. equity markets, meaning both moving towards the same direction.  

Today’s High Impact Events

The times below are GMT+3.

09.00 (Post) – UK GDP 

Today’s GDP quarter-on-quarter was released today, it dropped 20.4% and is slightly better than the 20.7% estimate of the Bank of England. In reality, today’s data point to a very slow type of recovery which, in my view, resembles a ‘Nike swoosh’ type of recovery rather than the most optimistic V-type one. 

Potential instruments to Trade: GBP Crosses.

17.30 – EIA Crude Oil Stocks Change 

Crude Oil Stocks Change in the United States averaged 0.10 BBL/1Million from 1982 until 2020, reaching an all-time high of 19.25 BBL/1Million in April of 2020 and a record low of -15.22 BBL/1Million in January of 1999 – source: U.S. Energy Information Administration. 

Potential instruments to Trade: Oil, USD Crosses.

Coronavirus Status Update 

US COVID -19 cases +40,522 (prev. +48,690) and deaths +565 (prev. +558), while a major newswire tally stated US cases increased by at least 52,751 to a total of 5.16mln on Tuesday and deaths rose by at least 1,413 to a total of 164.6k. California COVID-19 cases 1+2,500 (prev. +7,751), while a major newswires tally stated California cases increased by at least 11,448 on Tuesday and deaths rose by at least 176. Elsewhere, Texas cases +8,913 (prev. +4,455) and deaths +220 (prev. +31) (Newswires). 

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