Currency majors have become stable after a significant rally last week. Financial market participants have started partially fixing positions before the Fed meeting, which will be held tomorrow. As experts forecast, the regulator will keep the key marks of monetary policy unchanged. We recommend paying attention to the comments by representatives of the Central Bank.
According to preliminary data, in the first quarter, Eurozone GDP will decline by 3.6% (q/q) compared to market expectations of 3.8%. Investors expect up-to-date information regarding the conflict between Washington and Beijing.
The “black gold” prices are consolidating. Currently, futures for the WTI crude oil are testing the $37.85 mark per barrel. At 23:30, API weekly crude oil stock will be published.
Market indicators
Yesterday, there was the bullish sentiment in the US stock market: #SPY (+1.21%), #DIA (+1.75%), #QQQ (+0.78%).
The 10-year US government bonds yield has fallen again. At the moment, the indicator is at the level of 0.82-0.83%.
More than a quarter of all clients are currently considering or are already actively engaged in responsible and sustainable investing, reveals one of the world’s largest independent financial advisory and fintech organizations.
deVere Group reports that since the beginning of May, 26% of clients around the world are eyeing exposure to or are now part of the environmental, social and governance (ESG) “megatrend.”
The CEO and founder, Nigel Green notes: “The fundamentals that ESG investing represent and champion have become more highly valued by investors than ever before in the last few months.
“Why? It is the Covid-19 effect, which has shifted the values of our society.
“The global pandemic has brought into laser-like focus how the health of our planet affects human health which, in turn, affects the way we all live and work.
“These shifts in values and new economic realities have meant that companies’ responses to the public health emergency are being carefully scrutinised by investors in terms of their social and governance policies too.
“These include employees’ rights, consumer protections, board diversity, corporate transparency and stakeholder accountability.
“Firms which have responded well and which have strong ESG credentials are being rewarded by investors.
“Indeed, responsible investing funds secured historic levels of capital in the first quarter of 2020, despite the extreme jitters of traditional markets.”
But, says Mr Green, it isn’t all about values and conscience. It’s also about profits.
“ESG funds continue to out-perform the wider market and typically have lower volatility over the long-term. Naturally, investors are being increasingly attracted to the market-beating returns.”
Of the 26% finding, Mr Green says that this figure is only set to grow. “As millennials, who are statistically more likely to seek responsible investment options, become the major beneficiaries of the largest intergenerational transfer of wealth – an estimated $30tn in the next few years – we can expect both retail and institutional investors to continue to pile into ESG.”
Last month, the deVere CEO said alongside technology, ESG investing is the “investment megatrend of the decade.”
He noted: “It’s often said in investing that a ‘trend is a friend.’ A megatrend is likely, therefore, to be your best friend.
“Megatrends – like the advancing technology and the search for purposeful profits through ESG funds – affect how we live every day, therefore they impact global markets and investor outcomes.”
Mr Green concludes: “There’s no doubt that once a ‘quirk’, ESG investing is becoming increasingly mainstream.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
In the first part of this research article, we attempting to highlight how the huge jobs number shocked the market into a big upside price move on Friday, June 5, 2020, and how the underlying data continues to suggest we have quite a bit of work to do before the US economy supports current stock market price levels. In this second part of our research article, we’ll continue to share data and charts that we believe paint a very real picture for skilled technical traders.
The huge upside price rally in the US stock market after the 2.5 million jobs number was posted at 8:30 am pushed the stock market higher by 3.5%+. This is an incredible rally in terms of how primed the stock market was for this type of great news. Yet, as we continue to try to suggest, we are still moderately cautious of this rally in terms of sustainability after the destruction to the US and the global economy as a result of the COVID-19 virus event.
Our researchers believe the current numbers may be slightly skewed because of the extreme contraction event that took place over the past 60+ days. Additionally, many of these numbers are calculated using a modeling system that attempts to normalize outlier data. Currently, with the markets pushing well into a bullish territory and the NASDAQ reaching new all-time highs, we can’t argue that the US stock market appears to want to move higher on any news (good or bad).
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NASDAQ (NQ) E-MINI FUTURES DAILY
This NQ Daily chart highlights the incredible rally we’ve seen in the tech-heavy NASDAQ. After recovering nearly 50% from the March lows, the NQ began to set up an upward sloping wedge formation near the middle of April. This tightening wedge formation has apex’ed recently just as we got the new jobs number today.
In an unbelievable upside price rally, the NQ is now trading at the highest levels EVER. After 38 million jobs lost, the US economy operating at only a fraction of what it was in January, huge consumer displacement factors, and thousands of pending solvency issues – hey, why not push the NASDAQ up to new all-time highs. This makes no sense to us at the moment.
NAS100/GC DAILY RATIO CHART
The reality is that this incredible rally in the stock market may have already become a speculator “bubble” – a euphoric over-reaction to the deep decline related to the COVID-19 virus event. Earnings and future revenues typically drive valuation growth higher. Take a look at this NAS100 to Gold ratio chart to understand what has really happened in the markets over the past 4+ years. The peak in values in October 2018 coincided with the US Fed action to raise interest rates which prompted a massive decline in the US stock markets throughout the end of 2018. Near Christmas, 2018, the markets bottomed and began to rally higher. Notice the peak in 2019 was not higher than the peak in 2018? This suggests the real valuation peak in the market coincided with the peak Fed Funds Rate level in October 2018.
Additionally, the downward price channel that has setup in this ratio chart suggests the wild trending in the markets while Gold has pushed moderately higher has prompted a sideways pennant/flag formation. The previous peak, in early 2020, and the current peak are well above the upper pennant level – this suggests an over-exaggeration of price advancement. This type of ratio activity is very reminiscent of 2005 to 2007 – where the stock market rallied and gold rallied, eventually leading to the breakdown in the stock market in 2008-09 and a much deeper breakdown in this ratio.
US ISM NON-MANUFACTURING BUSINESS ACTIVITY INDEX
The current economic data does not support a US stock market rallying to new all-time highs – unless you attempt to account for investor over-enthusiasm and exuberance. The business activity data over the past few months have shown the deepest decline over the past 20+ years. There has never been a print of this indicator below 30, ever, except April 2020. Even at the height of the 2008-09 housing/credit market crisis or the 911 terrorist attacks, US businesses continued to operate at moderate levels.
The unemployment rates are still far higher than at any time in over 70+ years – everything is fine. Why not push the stock market price levels higher by another 20 to 25% – right? These people will eventually find work somewhere – sometime?? The consumers will eventually re-engage in the economy and push income and revenue levels higher – but not right now.
The ISM Manufacturing Index suggests manufacturers are operating 25 to 45% or below capacity levels from early January/February 2020. This will translate into bottom-line revenue data in the near future and likely result in much lower forward earnings guidance.
Our continued warnings may go unheeded by the masses – and maybe we are wrong. Yet we continue to advise our clients to be very cautious of this upside price rally as we believe the technical factors driving this market are skewed. Speculators and investors are caught up in an elated buying phase when real data suggests more moderate price valuations. We are still very concerned about the risks of a breakdown in the markets related to a sudden shift in trader/speculator thinking.
Very similar to the enthusiasm of 2006 to 2008, traders can sometimes fall into a trap that expectations do not correlate with real data/technicals – and this can be dangerous. If you play these upside moves very cautiously and target the best asset for your investment objectives, you can do very well while this rally pushes higher. Yet, you also have to be very aware of the risks of a breakdown in price related to the tightening economic conditions and price channels.
YM – DOW JONES E-MINI FUTURES 30 MINUTE CHART
This YM 30-minute chart highlights the incredible rally that took place very early in trading on June 5, 2020 – just after the jobs number hit. The traders and speculators want anything that seems positive after months of uncertainty related to the COVID-19 virus event. This bias towards anything positive suggests traders will attempt to push price levels into a feeding frenzy – ignoring all risks and other data. No Fear is an excellent description of what is happening right now in the US stock market – traders have absolutely no fear of any downside risks. We’ve seen this before – and it usually ends badly for some people (remember the DOT COM rally?).
Concluding Thoughts
Our opinion is that traders should stay moderately cautious near these current levels. Even though it appears the markets can do nothing wrong and speculators will likely be telling you “this is the opportunity of a lifetime – just buy anything right now”, our experience is that these types of crazy, euphoric rallies are very dangerous. Price breakdowns come fast and hard in markets like this – they happen quickly.
Cover your open long trades with moderate stop levels. Be picky about what you invest in and target quick gains. Remember the market can act irrationally much longer than many people can stay whole. The shorts are under severe pressure right now, but the data is pointing to a very different outcome in our opinion. We urge you to stay cautious right now – this seems very similar to the exuberance that we saw in 2006-2008 – just before it all fell apart.
As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is an incredible year for traders and investors. Don’t miss all the incredible trends and trade setups.
Subscribers of my Active ETF Swing Trading Newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain, and we closed out another winning trade on Friday.
Chris Vermeulen Chief Market Strategies Founder of Technical Traders Ltd.
The EUR/USD currency pair has become stable. Investors have started partially fixing positions before the Fed meeting. The trading instrument is testing the following key support and resistance levels: 1.1250 and 1.1320, respectively. In the near future, the technical correction of EUR/USD quotes is possible after a significant rally last week. We recommend following current information regarding the conflict between Washington and Beijing. Positions should be opened from key levels.
The Economic News Feed for 2020.06.09:
– Preliminary data on Eurozone GDP at 12:00 (GMT+3:00);
– JOLTS job openings at 17:00 (GMT+3:00).
Indicators do not give accurate signals: the price has fixed between 50 MA and 100 MA.
The MACD histogram has started declining, which indicates the development of the correction movement.
Stochastic Oscillator is in the oversold zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.1250, 1.1195, 1.1155
Resistance levels: 1.1320, 1.1380
If the price fixes above 1.1320, EUR/USD purchases should be considered. The movement is tending to 1.1380-1.1420.
An alternative could be a decrease in the EUR/USD currency pair to 1.1200-1.1180.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.26758
Open: 1.27232
% chg. over the last day: +0.04
Day’s range: 1.26592 – 1.27556
52 wk range: 1.1466 – 1.3516
GBP/USD quotes have become stable after prolonged growth. Currently, the British pound is being traded in a flat. There is no defined trend. Financial market participants have taken a wait-and-see attitude before the Fed meeting. The key range is 1.2635-1.2740. In the near future, a technical correction of the trading instrument is possible. We recommend opening positions from key levels.
The news feed on the UK economy is calm today.
Indicators do not give accurate signals: the price has crossed 50 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is near the oversold zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.2635, 1.2585, 1.2500
Resistance levels: 1.2740, 1.2800
If the price fixes above 1.2740, further growth of GBP/USD quotes is expected. The movement is tending to 1.2800-1.2830.
An alternative could be a decrease in the GBP/USD currency pair to 1.2580-1.2550.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.34098
Open: 1.33753
% chg. over the last day: -0.10
Day’s range: 1.33598 – 1.34565
52 wk range: 1.2949 – 1.4668
The USD/CAD currency pair has been growing. The trading instrument has updated local highs. The loonie is currently consolidating in the range of 1.3400-1.3465. In the near future, the technical correction of USD/CAD quotes is possible after a prolonged fall. We recommend paying attention to the dynamics of “black gold” prices. Positions should be opened from key levels.
Today, the publication of important economic releases from Canada is not expected.
Indicators do not give accurate signals: the price has crossed 50 MA.
The MACD histogram has started growing, which indicates the development of bullish sentiment.
Stochastic Oscillator is in the overbought zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.3400, 1.3360
Resistance levels: 1.3465, 1.3530, 1.3570
If the price fixes above 1.3465, further growth of USD/CAD quotes is expected. The movement is tending to 1.3530-1.3570.
An alternative could be a decrease in the USD/CAD currency pair to 1.3360-1.3320.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 109.589
Open: 108.434
% chg. over the last day: -1.09
Day’s range: 107.793 – 108.543
52 wk range: 101.19 – 112.41
There are aggressive sales on the USD/JPY currency pair. During yesterday’s and today’s trading sessions, the drop in quotes exceeded 170 points. The trading instrument has set new local lows. At the moment, USD/JPY quotes are consolidating in the range of 107.90-108.25. The yen has the potential for further growth against the greenback. Positions should be opened from key levels.
The news feed on Japan’s economy is calm.
Indicators signal the power of sellers: the price has fixed below 100 MA.
The MACD histogram is in the negative zone, indicating the bearish sentiment.
Stochastic Oscillator is in the neutral zone, the %K line has started crossing the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 107.90, 107.60, 107.40
Resistance levels: 108.25, 108.55
If the price fixes below 107.90, a further drop in USD/JPY quotes is expected. The movement is tending to 107.60-107.40.
An alternative could be the growth of the USD/JPY currency pair to 108.50-108.80.
Crude Oil has fallen below the $40/bbl handle and is now trying to pare losses, after Saudi Arabia said it would stop its extra production cuts after this month.
Brent, however, is trying to claw its way further away from the $40/bbl line, having been dragged closer to that psychological level after a six percent drop overnight.
Keeping track of all the twists and turns surrounding OPEC+ has been a tricky task, as investors try and ascertain whether Oil’s presence above $40/bbl remains justified.
Just to recap, on June 6, OPEC+ held a virtual meeting and agreed that its members would lower output by 9.6 million barrels per day in July. Under their previous deal sealed back in April, production levels lowered by 7.7 million barrels per day in July.
On top of the supply cuts agreed to in the April deal, Saudi Arabia and its allies in the Gulf further reduced their output by an extra 1.2 million barrels per day this month. However, on June 8, Saudi Arabia announced that those extra supply cuts will be halted at the end of this month.
In summary, the OPEC+ developments in recent days essentially means that its level of supply cuts will be tapered off beginning July.
Markets initially rejoiced at the thought of lower-for-longer Oil supplies and such prospects sent Oil prices on a rally last week, with Brent futures climbing 11.8 percent in the first trading week of June while WTI futures added 11.4 percent for the same weekly period. However, the announcements over recent days suggest that Oil’s upside appears limited, with Brent futures on Monday halting a run of seven straight days of gains, while WTI futures ended four consecutive daily gains.
Considering Oil’s gains since May, higher prices could invites shale producers to re-enter the fray and increased global supply would exert more downward pressure on Oil prices. Yet even at these relatively elevated levels, Oil prices are still not high enough to finance the fiscal spending plans of many OPEC+ governments.
Such a conundrum suggests that Crude prices are likely to have a harder time pushing significantly past $40/bbl, and any slippage in the supply-demand dynamics should open the door for the unwinding of recent gains, with the immediate support level seen at $36.57 line.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
The new company, Reyna Silver, holds projects in prolific mining districts that have been spun out from MAG Silver.
Reyna Silver Corp. (RSLV:TSX.V) will complete a reverse takeover (RTO) with Century Metals Inc. and begin trading on Monday, June 8, on the TSX Venture Exchange, under the symbol RSLV.
The explorer holds several properties, most notably the flagship Guigui as well as Batopilas, both of which were spun out from MAG Silver, and both are located in major silver districts in northern Mexico. The firm’s large land package encompasses more than 30,000 hectares.
“Reyna has the potential for being the leading silver junior in Mexico.” – Bob Moriarty, 321gold
Dr. Peter Megaw, the co-founder of MAG Silver and a well-known silver exploration geologist, serves as Reyna’s chief exploration advisor. He brings 40 years of experience in Mexican geology to the company, and Guigui was the subject of his doctoral thesis.
Guigui, Reyna Silver’s primary focus, is located in the Santa Eulalia Mining District, just 15 km east of the city of Chihuahua, a major mining center and home of an international airport. Eulalia Mining District is Mexico’s largest known Carbonate Replacement Deposit (CRD) and has seen production totaling 460 million ounces of silver, 2.99 million tonnes of lead and 2.29 million tonnes of zinc.
About 9,500 meters of drilling have been carried out on the property between 2003 and 2015. A nine-hole drilling program conducted by MAG Silver in 2005 revealed an 8.3 meter intercept of 131 g/t silver and a narrow intercept of 523 g/t silver equivalent (109 g/t of silver and 5.6% lead and 4.3% zinc) over 0.40 meters. The company has stated that “these holes significantly prove that the mineralization in the San Antonio Mine area continues to the Guigui property and indicates a much wider hydrothermal system.” Grupo Mexico’s producing San Antonio Mine is located just a few hundred meters away.
The company’s management believes that the source of the district’s mineralization could be located on the Guigui property and plans to trace the continuity of the mineralization from the existing mining camps. Over the last six months, Reyna has been conducting detailed mapping, geophysical re-interpretation and sampling to define drill targets. The company plans to drill up to 10,000 meters at Guigui.
Reyna Silver’s second property is Batopilas, which comprises most of the Batopilas Mining District, one of the few places where pure silver is primarily mined. Historical production in the district from 1632 until 1910 totaled around 300 million ounces of silver at more than 1,500 g/t.
The Batopilas project totals around 1,170 hectares and includes some 30 known mineralized veins. Drilling conducted by MAG Silver in 2005 resulted in assays as high as 2 meters of 2,500 g/t silver and 0.30 cm of 19,000 g/t silver. The company states that it plans to “apply modern geoscience and exploration technology with numerous untested geologic and geophysical targets.”
In addition to Guigui and Batopilas, Reyna Silver holds two projects in neighboring Sonora: El Durazno in the old Mulatos Mining District and Matilde in Sonora’s gold-silver-copper belt. The 25,000-hectare El Durazno is bordered by claims of numerous miners including Agnico Eagle, Evrim, First Majestic, Alamos Gold, Peñoles and Kootenay. Two mineralized zones have already been identified at Matilde.
Reyna Silver’s only property outside of Mexico is the Trudeau Gold Project, located near the city of Rouyn-Noranda in Quebec, in the Noranda Camp.
The company is helmed by an experienced team. In addition to geologist Peter Megaw in the role of chief technical advisor, Doug Kirwin serves as senior technical advisor. Kirwin was executive vice president at Ivanhoe Mines and led the discovery of the Oyu Tolgoi copper-gold deposit in Mongolia. Jorge Ramiro Monroy, founder and managing director of Emerging Markets, a mining focused investment company, serves as CEO, and Peter Jones, former CEO of HudBay Minerals, will sit on the board post RTO.
Reyna Silver raised approximately CA$6.5 million through private placements, issuing nearly 33 million units at CA$0.20. Each unit consists of one share and one half-share purchase warrant exercisable at $0.45 for 24 months. Reyna Silver has approximately 73 million shares and around 18 million warrants outstanding. Board and management hold 21.5%, MAG Silver 19.9% and 20% is held by institutional shareholders, including Sprott Asset Management, Commodity Discovery Fund, Century Global, Terra Capital, Plethora Private Equity and the BIA Gold Fund.
Bob Moriarty of 321gold wrote on June 5, “Reyna has one of the strongest technical teams in mining much less in Mexico with Dr. Megaw and Doug Kirwin. . .The company has 73 million shares outstanding and $6.5 million CAD in the bank. It is exceptionally tightly held with over 60% of the shares held by Mag Silver, management, Sprott and other institutions. With the four-month hold on the recent PP, there are less than 10% of the shares free trading and not in the hands of insiders. . .Reyna has the potential for being the leading silver junior in Mexico. It will be a silver-bug’s delight.”
Videos of Peter Megaw discussing the deposits are available here.
Disclosure: 1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None. 2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: MAG Silver. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Reyna Silver. Please click here for more information. Within the last six months, an affiliate of Streetwise Reports has disseminated information about the private placement of the following companies mentioned in this article: Reyna Silver.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. 4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Reyna Silver, a company mentioned in this article.
Additional disclosure: Bob Moriarty, 321gold: Reyna Silver is an advertiser and I have participated in the latest private placement. Naturally I am biased but I’ve seen their main project and I love them. Do your own due diligence.
Uganda’s central bank cut its benchmark interest rate for the third time in the current easing cycle, and for the second time this year, against a backdrop of declining inflation and another downward revision of its growth forecast this year. The Bank of Uganda (BOU) cut its Central Bank Rate (CBR) by another 100 basis points to 7.0 percent and has now cut it by 200 basis points this year following a cut in April, and by 300 points since it began monetary easing in October last year. “Although Uganda is gradually easing the lockdown measures instituted to contain the spread of the pandemic, the adverse consequences of the global and domestic supply chain disruptions could persist through the remaining part of 2020,” BOU said. The second quarter of this year will see the most severe economic slowdown before a gradual recovery is expected to set in during the third and fourth quarters of this year, BOU said, adding household spending, investment, exports and imports are seen declining this year. BOU revised downward its growth forecast for Uganda to a range of 2.5 to 3.5 percent from April’s forecast of 3.0 to 4.0 percent, with the strength of the recovery depending on how the country opens up for economic activity safely. In February BOU had expected growth this year of 5.5 to 6.0 percent. In 2021 economic growth is seen recovering further with growth of 4 to 5 percent and then between 6 and 6.5 percent in 2022. But the combination of the COVID-19 pandemic, extreme weather, and volatility in global financial markets could weigh on Uganda’s balance of payments, potentially destabilizing the foreign exchange market and dampening economic growth, BOU cautioned. As many other currencies, Uganda saw its shilling tumble in March as global financial markets began to react to the spread of the coronavirus. The shilling fell 6.2 percent to a new record low of 3919.7 to the U.S. dollar on March 25 from Feb. 1. But since then the shilling has risen and was trading at 3,769.3 to the dollar today, down 2.6 percent this year. With economic growth slowing, inflation has remained subdued, with headline inflation easing to 2.8 percent in May from 3.2 percent in April. BOU forecast inflation will remain below its 5.0 percent target in the next 12 months despite a temporary rise in transport costs in months ahead due to the global economic slowdown and low food crop inflation. Risks to inflation from a depreciation of the shilling is seen contained as the pass-through from a depreciation are expected to remain low due to subdued demand, BOU said. Last week the executive board of the International Monetary Fund approved some US$491.5 million under its rapid credit facility to Uganda to help finance the health, social protection and macroeconomic stabilization measures along with meet the country’s “urgent” balance of payments and fiscal needs from the pandemic.
US dollar net short bets declined to $8.18 billion from $8.60 against the major currencies during the one week period, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to June 2 and released on Friday June 5. The change in overall dollar position was mainly due to significant decrease in bullish bets on Japanese yen and euro as the European Commission unveiled a plan to borrow 750 billion euros – including 500 billion euros in grants and 250 billion in loans, aiming to disburse them via the European budget to be repaid between 2028 and 2058. The Pound, Canadian and Australian dollars maintained net short positions against the dollar. The bearish dollar bets declined despite US Labor department report showing over 42 million Americans lost their jobs in the previous ten weeks, while orders for durable goods plunged below-expected 17.2% in April and Federal Reserve’s “Beige Book” showed that economic activity through May 18 fell sharply in most of its 12 districts.
Note: This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.
Kazakhstan’s central bank left is base rate steady for the second time after slashing it at an extraordinary meeting in early April, and said a further easing of monetary conditions was not excluded if uncertainty over key external trends, such as the price of oil, commodity prices and the world economy, continues to ease. The National Bank of Kazakhstan (NBK) maintained its base rate at 9.50 percent after cutting it by 250 basis points at an extraordinary policy meeting on April 3. At the regular policy meeting on April 27 the rate was then kept steady. The rate cut in early April followed an emergency rate hike of 275 points on March 10 to limit inflation from a fall in the value of the tenge so the net change in its rate this year amounts to an increase of 25 points. Although the impact of the COVID-19 pandemic continues to have a negative impact on Kazakhstan’s economy, NBK said oil and financial markets were improving and the consumption of oil was beginning to rise gradually amid signs of an economic recovery in China and the easing of quarantines in some European countries and the U.S. Measures to prevent the spread of the virus in Kazakhstan are also being gradually eased and while there has been a slight recovery in business activity in May from April, demand remains depressed, investment activity is slowing and economic activity is still negatively impacted. NBK estimated Kazakhstan’s gross domestic product would shrink 1.8 percent this year due to the negative impact of lower domestic demand and exports, even with fiscal stimulus. But the central bank also said it expects investment activity to recover as domestic and external demand improves along with higher prices in global commodity markets. Kazakhstan relies on oil for some 75 percent of its exports and the central bank noted the agreement by Opec + to extend the oil production cuts by 9.7 million barrels per day until the end of July 2020. The tenge has been on a roller coaster ride this year, plunging 15 percent against the U.S. dollar from March 1 to April 4 in response to the fall in oil prices and the pandemic. But since the rate cut in early April, the tenge has bounced back and risen 13 percent since its low on April 4 to 397.3 today. The tenge firmed further in the wake of today’s policy decision and is now 4.1 percent below its level at the start of the year. Despite the rise in oil prices since the collapse in mid-April and reduced imports, the central bank expects a significant deterioration in its current account this year due to lower prices and production of oil and metals along with a decrease in global demand for its products due to the global economic slowdown. The central bank said a widening of the current account deficit would result in “significant pressures on the tenge exchange rate.” Inflation in Kazakhstan accelerated in the first few months of this year to 6.8 percent in April but eased to 6.7 percent in May, above NBK’s target range for 2020 and 2021 of 4-6 percent. The main reason for the rise in inflation was due to higher prices for food, which rose an annual 10.7 percent in May, the highest rise since October 2016. Based on an upward revision of its forecast for oil prices this year to $35-$40 per barrel from an earlier forecast of $20-$25, the central bank expects inflation this year of 8.0-8.5 percent, down from the April forecast of 9-11 percent. It added inflationary expectations in Kazakhstan remain relatively stable at 6.0-6.2 percent for this year even if they remain weakly anchored, which could put pressure on prices in the short term.
Continuing decline in UK consumer confidence bearish for GBPUSD
British consumer confidence fell in May: GfK Consumer Confidence index dropped to -36 after falling to -34 in April, when no change was expected. This is bearish for GBPUSD.
