GBP Shoots Up While EUR Bleeds Out and US Stocks Rise Further [Video]

US Does Not Have High Confidence In China

Inconsistencies in the reported figures out of China have led to an overall doubt that China is reporting the real extent of what is actually happening. IT seems the diagnosis of the Coronavirus is already quite difficult which is not necessarily helping to bring clarity into the this confusion about the real count which continues to climb either way.

There is a possibility that the virus may cause more and serious trouble to many nations possibly even ⅔ of the world which would be catastrophic for the global economy.

China itself sticks to the story of recovery meanwhile.

US Stock Markets Continue to Climb

For a brief moment US stocks dropped yesterday but recovered towards the end of the day fully again residing at ATH levels once more. Maybe the $48 billion the FED injected yesterday had something to do with it even though FED’s Kashkari thinks anyone who thinks this way is likely a QE conspiracist as he does not see the connection.

On the good side however most US firms that reported earnings have beat the estimates which is another reason for markets to find buyers.

Just keep in mind, in times when estimates are set very low, it is much easier for companies to beat them, so we are seeing beaten estimates for earnings but still we also see declining earnings, that are not being considered by stock traders too much.

We have seen a huge surge of retail trading activity in the US as E-Trade reports and this obviously will play into the relentless dip buying that we continue to see for the time being.

Some smart people taking advantage of the high stock prices, people like Jeff Bezos that cashed in $4+ billion selling some of his stocks and now Elon Musk raising an additional $2 billion for Tesla which is likely to push the price of Tesla even higher as people are getting a handsome discount on the stock and it might be sold out pretty quick.

Europe Still In Trouble EXpecting A Dovish Shift At The ECB

Europe’s economic issues continue to cause trouble with Germany’s GDP coming in at 0% this morning showing growth had completely died down by now. The car sales figures in China are another alarming factor that Germany’s economy is unlikely to bounce back without China and when or if car sale sin China will grow again is a big unknown.

FX

This is why there are reports that the ECB is strongly considering a dovish shift, yes you read right an even more dovish approach to its policy. A report by MNI, quotes an unnamed official, saying “a few weeks ago, before the virus outbreak, I would have said that the policy outlook remained unchanged...but now the picture has changed. We just need to properly weigh up to what degree”. The EUR fell to a 3 year low and the next immediate important support is the 1.08 handle. Watch for the EUR GDP print this morning to get more insight of the European economy as a hole.

The GBP gained well on the surprise resignation of the finance minister that was not willing to fire his advisors to give in to Boris Johnson’s demands who aims for a fiscal stimulus for the UK, which gave the GBP reason to rise strongly and past the 1.30 mark vs the US, but especially the EURGBP is trading at its lowest since 2016 facing a support that has not broken since 2016, a break below the 0.83 opens the door all the way down to the 0.81.

The USD benefited from a slightly stronger CPI reading yesterday, though I would expect that figure to come down again in the coming months given the very low price of oil that need to be factored in the future inflation outlook. Retail sales, Industrial Production and the Michigan Consumer Sentiment Index are dues this afternoon and noteworthy to pay attention for impact on the US Dollar.

Oil and Gold

Oil kept its levels more or less but there is still nothing new to report here, Russia has still not agreed to the OPEC+ cut proposals yet and if anything the economic outlook in China and Europe are looking worse today than yesterday which are no good signs for the oil demand. Especially with the US producing so much oil the price is unlikely to see a big shift upwards for the moment.

Gold remains well positioned to climb further for a multitude of reasons. Looking at the chart the price remains above the 2019 high and fundamentally the slowdown of the global economy is helping gold as well, especially with the unknown extent of the virus impact and in addition the Entire Treasury curve is now below the inflation which looks like a perfect storm as Tavi Costa puts it:

BTC

Bitcoin failed to break the $10.3k to the upside and fell back supported by the $10k handle so far. If the $10k continues to hold the possibility of a continuation in another wave to the upside remains in place. Especially since BTC has recently behaved more and more like a safe haven which puts it a bit in the same situation like gold.