As mortality rates are diminishing in certain European countries, so too are confinement restrictions. Public and political pressure to get things moving again is understandable.
Let us hope that a sensible response by all will keep the “R” rate falling, ease pressure on hospitals and get economies working again.
This week the main events of economic interest are minutes from both the recent Fed and ECB meetings. Apart from the obvious stimuli and endless bloviation, it is difficult to pick anything from these minutes that will rock markets. From a purely observational point of view, I feel that Europe has a slight edge over the US in the recovery race, which is about as predictable as the distribution of painful statistics issued by Johns Hopkins University.
The message from the UK is opaque and confusing. Sunday’s mortality figures offered a ray of hope that the UK is getting to grips with the virus in both hospitals and care homes. We await further clarity about UK government policy on travel and the opening up of certain businesses.
I believe currency markets will come increasingly into focus. Although US President Trump openly supported a strong dollar in an interview with Fox Business News last Thursday, I think it won’t be long before he does a U-turn and starts to highlight the fact that other currencies are too weak against the dollar. China is likely to feel the brunt of Mr. Trump’s hostility as he ramps up his efforts to gain re-election In November.
As always, there are some interesting currency plays to consider; Dollar/everything as we move towards US elections; EURGBP as we re-focus on BREXIT; certain commodity currency plays, for example, CAD, AUD, NZD against each other and the dollar as tentative demand for commodities is re-established; emerging markets as the world recovers including various carry trades; unwinding of safe-haven hedges e.g. XAU, JPY, CHF
Trading is not without its risks as there is obviously a large chance of a global depression. Equally, we should not forget the massive spike in volatility we experienced in March.
Volatility tends to be good for FX market makers and extreme moves can be exacerbated by high-frequency traders. So always trade with caution and expect the unexpected!
Good Luck and Good Trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You Can Too.
