The US and Asian stock markets resume higher while crude oil trades sideways

Posted on August 24, 2020August 24, 2020 by Exclusive Capital Research Team

Market Brief, Monday, 24th of August, 2020

The major US stock markets surged higher led by the major tech companies with the Nasdaq continuing to break record highs. The S&P broke above recent highs and is currently trading around the 3400 levels with the Nasdaq at new record highs around the 11600 level.

Asian equity markets are trading mostly positive following Friday’s tech surge. There was also news authorization of plasma treatment of COVID-19. The US-China tensions weighed in on the gains due to further comments from President Trump.

President Trump further fuelled the recent narrative on China in which he suggested he doesn’t have to do business with China.

In the FX space, the dollar is trading mostly flat and sideways with the dollar index holding above the 93 levels. The dollar is mainly benefitting from Friday’s PMI readings which were better than expected and weakness in its major counterparts with the EURUSD falling below 1.18 and the GBPUSD beneath 1.31.

In the energy space, WTI and Brent continue trading sideways with no major movement. Light Crude is trading around 42.20 and Brent around 44.30

Dollar strengthens, whereas the US and Asian Equity markets aim lower

Posted on August 20, 2020 by Exclusive Capital Research Team

Market Brief, Thursday, 20th of August, 2020

The major US stock markets traded lower in the aftermath of the FOMC minutes which were less accommodative than expected. The major indices retreated from their previous record highs with the S&P lower by 1.12%, and the Nasdaq lower by 1.45%.

The FOMC minutes were mixed in meeting expectations. While the ongoing framework review was mentioned, there was no mention of the timing of its release. There was also no clear consensus on the form of forwarding guidance with outcome-based guidance prevailing rather than calendar-based which was expected.

Asian equity markets traded lower following weak earnings from Australia and a firmer yen in Japan. ASX and Nikkei were lower by 1% and 1.1% respectively while in China the Shanghai composite traded lower by 1.1%. The Hang-Seng underperformed, trading lower by 2.2% after the US State Department suspended or terminated bilateral agreements with Hong Kong.

Looking at the FX space, the dollar was the outperformer on a less accommodative Fed with the dollar index trading as high as 93.10. The dollars counterparts traded lower against it with the EURUSD and GBPUSD retreating to 1.1830 and 1.31 respectively.

In the energy space, Crude oil was generally muted following a lower than expected draw in Inventories. WTI pulled back from 43 $ per barrel to around 42.50 with Brent trading around $45.

The US stock markets resume higher while the dollar loses further ground

Posted on August 19, 2020August 19, 2020 by Exclusive Capital Research Team

Market Brief, Wednesday, 19th of August, 2020

The major US stock markets continued their rally with the Nasdaq making a new record high in the early trading hours of the session hitting as high as 11,400.

US house speaker Pelosi stated that Democrats would be willing to half their demands on COVID-19 to get a new economic stimulus package agreed as US cases increase to 5.5 million

Asian equity markets traded mixed following weak data from Japan and continued US-China tensions with President Trump stating he postponed talks with China. The ASX and Nikkei gained 0.8% and 0.2% respectively while in China the Shanghai composite traded lower by 0.3%.

The Dollar Index made new 2-year lows to 92.13 ahead of the FOMC minutes later in the day. The EURUSD is currently trading just under the 1.20 level while GBPUSD eased off around 1.3250 after making new 8-month highs at 1.3265

Crude oil is trading sideways as market participants are awaiting today’s inventory reports. WTI crude is currently trading around 42.60 and Brent trading around 45.10.

Markets trading flat ahead of major risk events later this week

Posted on August 18, 2020August 20, 2020 by Exclusive Capital Research Team

Market Brief, Tuesday, 18th of August, 2020

The Nasdaq index made a fresh record high in the early trading hours of the session hitting as high as 11,312 before retreating below the 11,300 level.

Asian equity markets traded mixed following the indecisive trading session on Wall St, with markets participants cautious ahead of risk events later in the week. The ASX gained 0.9% while the Nikkei traded lower by 0.3%.

The Dollar Index made a new retreat to 93 as its major counterparts saw gains with the EURUSD pair trading around the 1.19 level near its 2-year highs and GBPUSD closing in on its recent highs around the 1.32 level.

Crude oil traded relatively flat as market participants are awaiting today’s private stockpile reports. WTI crude is currently trading around 42.70 and Brent trading around 45.20.

Gold recovered near the 2,000 dollars per troy ounce level following last weeks drop from its record high of $2,063 to $1,865 benefitting from safe-haven flows.

Don’t worry about price deflation

Posted on August 17, 2020August 20, 2020 by George Kessarios

Analyst Insights, Monday, 17th of August, 2020

With the Euro rising about 10% vs the Dollar recently, there are those who are raising the deflation flags, saying that any further rise on the Euro will be of concern.

The truth is I never understood the price deflation argument. By this, I mean goods and services costing less year over year. I dare to say that this is the reason why living standards have rose by so much in western countries over the past 100 years.

The truth is that the market does not bother or care about goods and services deflation whenever it happens. What the market fears are asset deflation, which is something different than ordinary price deflation. However, asset deflation at the current time is not an issue. More or less most assets are either up or inflating, and thus debt that is backed by such assets is not a concern for the banking system at this time.

And as long as central bank balance sheets keep rising, asset deflation is not a concern. As for ordinary services and goods deflation as a result of a higher Euro, that was never a concern, to begin with, and if fact will do more good than harm.

The Dollar continues south

Posted on August 14, 2020August 20, 2020 by George Kessarios

Analyst Insights, Friday, 14th of August, 2020

The DXY Index, or as otherwise known as the Dollar Index, continues to slide extending its recent losses. YTD the index is down about 4%, and about 6% over the past year, and about 10% from its recent high.

While I always understood the Dollar shortage argument, nevertheless I was always puzzled how the Euro could fall so low vs the Dollar. The reason is (as I have explained before) the Euro is a current account surplus currency. This means that in the FX market there is always an excess at the margin demand for euros vs dollars.

Anyway, the FED recently announced that it will be extending USD swap lines through to March 31, 2021, that were originally set to expire in September. My question is, does the FED know something we don’t? The reason is, well, no one is lining up for dollar swap liquidity.

As you can see from the chart, after reaching about $450 billion, currently the swap facility has fallen to about $117 billion.

Let me reiterate, the fact that there are no swap takers is bearish for the Dollar, because the Dollar demand scare is not what we thought, or has been dealt with.