Risk Aversion On Persistent Second Wave Fears, BoE Up Next
Fiona Cincotta June 18, 2020 6:48 AM
Fears of a second wave of covid-19 derailing the fragile economic recovery is dragging stocks lower. BoE in focus as central bank expected to increase asset purchase programme by £100 billion.
Fears of a second wave of coronavirus persisted overnight dragging on risk sentiment, pulling Asian markets lower and setting European bourses up for a lower start on the open.The number of cases in some US states are rising to record levels, which is unnerving investors. Texas, saw its largest daily increase in infections since the start of the coronavirus pandemic. However, it is worth keeping in mind that this is timing. Whilst states such as New York have passed the peak and are now reopening, some US states are experiencing the first wave of daily rises, just later. However, the chances of this spreading are still very real.
The BoE Is not expected to cut interest rates from the current 0.1% when it meets today. It is broadly expected to increase its Asset Purchase Programme by £100 billion. There is a good chance that some policy makers will be more dovish and push for a bigger increase.
Since the pandemic started the central bank has slashed rates from 0.75% to the 300 year low of 0.1%. It has also added £200 billion to its quantitative easing programme, taking the total to £645 billion.
US initial jobless claims a frustrating slow come down
Jobless claims are expected to increase by 1.3 million, down from the previous week’s 1.5 million. Whilst this will be the lowest increase in 3 months, it is still 6 x the pre-coronavirus February figure. Continuing claims are also expected to show a drop to 199.8 million, down from 20.9 million as starts slowly reopening and Americans are gradually rehired. The pace is frustratingly slow and suggests that another knockout month of retail sales is looking unlikely. A weak reading could feed risk aversion boosting USD and weighing on equities.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.