Signs are market stabilization as US-China trade talks back on, reports Ashraf Laidi.
Global risk appetite improves across the board after U.S. and Chinese officials announced the resumption of trade talks via telephone, aimed at completing the phase 1 of the US-China trade deal.
The Cboe Volatility Index (VIX) is nearing its lowest level in more than two months, while crude oil attempts retesting its 55-day moving average of $26.00.
The U.S. Treasury’s plan to borrow nearly $3 trillion between April and June to finance the government’s response to the Coronavirus economic fallout, means the Federal deficit will exceed $4 trillion for the year. This may not be an immediate problem as long as the Federal Reserve is ready to buy up U.S. debt. But the fact that the debt jubilee (debt forgiveness) has been making the rounds and rumblings about the US reconsidering paying its debt obligations to foreign investors, with whom it has political/commercial disagreements, may raise a more serious question for a later time.
Meanwhile, in a sign of stabilization, U.S. stock indices have not had a +(-) 3% day in more than weeks, while the VIX is nearing two-month low. SPX eyes 2920 and the Dow Jones Index 24200.
The British pound (GBP) was temporarily boosted by the Bank of England’s decision to vote unanimously at keeping rates unchanged at 0.10% and bond purchases steady a £645 billion ($797 billion). As the cable retests 1.2280s, the euro/pound cross (EURGBP) extends gains towards 0.8830s.
GBP lost its post-BoE gain to break below 1.23, dragging down all GBP crosses. U.S. weekly jobless claims hit nearly 3.2 million last week, down from 3.8 million the prior week and the record 6.9 million seen in late March. Total claims have now reached 33 million over the past seven weeks.
You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf discussed Trends in Yield Differentials at the TradersEXPO New York on March 8.
