FOREX-The GPB is recording losses

After several consecutive sessions of gains versus other major currencies, the pound is recording losses during the early part of Monday’s session, having traded at $1.2316, almost 0.9% down against the dollar. The weakness of sterling is a result of the United Kingdom having its credit rating downgraded from AA to AA- by Fitch on Friday. This decision is of course related to the massive undertaking in spending the British government has committed to in order to mitigate the damage from the coronavirus fallout. When combined with that other old chestnut of the UK’s post-Brexit relationship with the EU and the country’s fiscal spending spree is likely to keep the Pound under pressure.

EUROPEAN SHARES-The market sentiment remains alive

Friday saw most European benchmarks consolidate following a solid three day rally. The market sentiment remains alive today, thanks to the global support measures taken in almost every region. However, investors around the world may be tempted to take some profits before the weekend. The spread of the virus doesn’t seem to be slowing down and has even accelerated strongly in the US during the last few days. The nation recently overtook China in terms of number of cases, following a surge in New York and the situation is likely to continue to weigh on investors’ risk appetite the longer no peak or curve inversion appears in sight in critical zones such as the US or western Europe. 

Today’s trading is expected to remain volatile but lacking a clear direction. No major data release is due today and many traders are already looking ahead to next week’s developments on Europe’s strategy to contain the impact of the virus after leaders failed to reach a concrete plan yesterday. The Stoxx-600 Index is trading slightly lower with the price weighed down by the banking and mining sectors. The FTSE-MIB Index from Milan as well as the German DAX-30 are among the most resilient markets today with prices still consolidating inside a tight trading range. The DAX-30 Index is still trading above 9,745pts but recently failed to clear the 10,050pts zone. A fall through the lower band of the bullish channel may lead prices down towards the lower support levels at 9,440pts and 9,300pts.

GOLD-Volatility remains high

Gold seems to have found some stability after the liquidity collapse seen earlier this week and the price is reflecting this, with bullion moving between $1,595 and $1,640 while waiting for new directional signals. Volatility remains high but is lower than the levels seen last week. Markets are likely to price in the huge increase in liquidity which is going to be flooded into circulation by central banks to tackle this crisis and could represent a supportive element for the gold price.

On a separate note, we should also mention that logistical problems with physical deliveries will continue as the virus has interrupted the supply chain and this is something that suppliers won't be able to resolve quickly.

FOREX-EUR gained more than 3.5% against the USD

After four days of solid gains, during which the euro gained more than 3.5% against the dollar, the single currency is on the backfoot today and is down slightly against not only the greenback but also versus all other major currencies. Euro weakness can, at least to some degree, be explained by disappointment following yesterday’s EU summit. European leaders failed to reach an agreement on the issuance of the so-called ‘corona bonds,’ which in essence are a pan-European bond where all members of the single currency share the risk. Germany and Holland refused to step in and share the risk with their less well-off partners in the south of the continent. This lack of solidarity between north and south, rich and poor, is undermining the single currency as another eurozone crisis now looms on the horizon, with echoes of 2012. The spread between German and Italian bonds continues to increase, in a development apparently faced with some indifference by Northern European countries.

EUROPEAN SHARES-uncertainty remains the overriding sentiment

Share markets opened lower everywhere in Europe on Thursday as uncertainty remains the overriding sentiment and has pushed investors into taking any profits generated by this week’s recovery attempt. The fact remains that investors from around the world have welcomed the recent historical batch of monetary and fiscal responses to coronavirus and these measures have helped traders gain a clearer view and more certainty about the future of the global economy. However, most investors now fear the human and economic struggle against the deadly virus will continue further into Q2, Q3 and even possibly Q4, which would deepen the impact across all economies and drive some regions into a profound recession cycle. So far, markets in Europe are being driven lower by the mining, energy and the discretionary consumer sectors with companies like Linde and LVMH among the eurozone’s worst performers. Surprisingly, the FTSE-MIB is one of the most resilient indices so far in Europe with the market still trading above 16,560pts following a clearing of its bearish trendline yesterday while the RSI indicator, which is above its 50% zone, is showing a very short-term bullish pressure. 18,260pts remains the first target for the market while a fall below 16,560pts would open the way to new lows around 15,800pts and then 13,780pts.

OIL-The combination of coronavirus and the failed OPEC

Oil attempted to rebound earlier this morning but despite these dramatically volatile times, the price remains drowned by growing expectation of a huge oversupply. The combination of coronavirus and the failed OPEC+ deal is putting the barrel in an extremely dangerous situation. Technically, the first key resistance area has now been moved to $25, on the peak reached yesterday, while $23-$23.20 is an interesting area of support which is stopping further declines. However, any fall below this zone could generate renewed selling momentum. Many automatic stop losses are now placed below this level as investors are still expecting another return to $20-$21 amid the coronavirus crisis further degenerating and with it an even more severe hit to the long term demand for oil.