Lockdown to begin easing all over the world – Market Analysis – May 12

Lockdown to begin easing all over the world – Market Analysis – May 12

No major news swaying global equities

Market sentiment has been dominated today by news related to the evolution of the Coronavirus pandemic.

The USA

Anthony Fauci, member of the expert committee for the disease in the North American government, has warned during a Senate appearance that a prompt reopening could cause adverse effects not only in the health field but also in the economic sector.

Fauci, who initially was not going to attend the Senate hearings, was clearly against the measures promoted by President Trump. He has detailed a bleaker scenario than the government had been presenting lately.

Added to this are the statements of some members of the Federal Reserve in a more pessimistic tone that anticipate big falls in production and domestic demand and possible bankruptcies if the situation continues, all this despite the enormous monetary deployment that they have already carried out.


In the absence of relevant economic news, this has been the main element that has acted as a market driver, with the only exception of the CPI figure, with a negative core CPI for April -0.4, which represents a further sample of the economic slowdown that is caused by the pandemic.

Europe

Given this, the stock markets have reacted negatively, losing the gains they had experienced at the opening. Germany30 closed with almost 1% loss and the North American stock markets in negative territory as well, but with very slight losses.

The US Dollar was behaving irregularly, falling against the Euro and the Japanese Yen, and rising against the Sterling Pound and the Australian Dollar.


USD/JPY fell from the last highs reached in the risk-off scenario, and, although the pair remains in a long-term downtrend, it is still far from the previous lows at 106.00, levels that need to be drilled to confirm the continuity of the trend.


AUD/USD has had the typical roller-coaster movement with a sudden and unexpected surge during the Australian session from the lows at 0.6427, reached after China banned the imports of Australian meat.

This move is considered retaliation for requests from the Australian government investigating the origins of the Coronavirus. The pair has returned to the same level of the previous day's start but continues to show symptoms of vulnerability, especially if tensions with China flare-up, not only from Australia but also from the United States.


The Pound has also been affected by the evolution of the pandemic. The data on the disease is worrying, and, as in the United States, the Prime Minister insists on a return to normality. This is weighing on investor sentiment at times.

The statements made yesterday by the Bank of England governor Baileys that they are willing to implement more expansive monetary policies if necessary, even without ruling out negative interest rates, also put some pressure on the British currency.

GBP/USD has reached the lows of the last week at 1.2264, levels that, if drilled in a daily close, would open the way to new losses with ambitious targets defined by the reversal pattern that can be seen in the chart.

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