Marknadsövervakning - 28th May 2020

The pound is very volatile at the moment. After strengthening against the dollar by over 1% on Tuesday, it promptly weakened by just under 1% on Wednesday. There was no specific news for sterling, just a general risk-off market theme and positive news for the euro. In evening trading, it was announced that PM Johnson would travel to meet the EU possibly on June 18th after the supposed last round of official video talks between the UK and EU. The EU is open to the UK extending the transition period for up to two years as long as the UK pays into the EU budget. This is anathema to the UK. On the topic of coronavirus, the Prime Minister is under mounting pressure to sack his special advisor Cummings who breached the lockdown restrictions. The Health Secretary has asked the country to do its ‘civic duty’ and maintain adherence to the government guidance. This has caused a widespread feeling of antipathy towards the government.

European Commission President, Ursula Von Der Leyen, announced a bigger than expected stimulus package for the EU with an interesting twist. The amount proposed is euro 750 billion, rather than the previous euro 500 billion and the funds will be distributed by a mixture of grants and loans. Euro 500 billion in grants and euro 250 billion in loans. This news encouraged EUR/USD to break higher above the important 1.1017 level, but as the US equity markets fell quickly in the afternoon, EUR/USD managed to hold onto its gains.

As news broke that Boeing would be laying off some 6770 employees as well as ‘several thousand’ more in the future, the US equity markets slumped and encouraged a risk-off theme. This saw the dollar regain ground for a time. Fed’s Bullard spoke and said the size of the US fiscal package has been about right. Secretary of State Pompeo reported to Congress that Hong Kong is no longer autonomous. This would see Hong Kong lose favourable trading terms from the US. Today, we have GDP, durable goods and unemployment claims for direction. Analysts expect another 2 million jobs to be lost in the last week.

The CAD and AUD both struggled against the US dollar. End of month client fixing trades are supposed to show strong US dollar sales. Overnight, Australian private capital expenditure only dropped 1.6% in the last quarter rather than the 2.6% expected, and this helped support the AUD.

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