Market Wrap (Weekly Basis)
Gold relentlessly surged to its highest level at $1818 since September of 2011. Global investors were bulking their position on safe-haven assets, such as government bond and value preserving metals. Large fund is adjusting their portfolio with respect to COVID-19 condition, and the recent spiking number of confirmed cases is reviving fear of lockdowns. The heavy bearish pressure on major equity indices, except for Nasdaq index, is redirecting cash flow to the yellow metal. Gradual recovering US economy and consumer confidence could be hampered, which is the least scenario that the Fed wanted to see. Despite Treasury Secretary Steve Mnuchin promised a new wave of pandemic stimulus package will be delivered by the end of July, the effectiveness could be diminishing in the face of lockdowns. Nonetheless, if Fed decides to step up to another monetary stimulus, Gold will be riding another wave of boost due to improvement of liquidity that the Fed injected to US economy.
Zooming into a closer picture, Gold is undergoing a correction near $1800. The commodity is currently placed near the edge of an ascending trendline, if price could find firm acceptance above $1800, further upside gain looks to be promising. If not, it would spend some time consolidating within $1780 – $1800 range.
Having witnessed an abrupt end to the Brexit negotiations during the last week, EU diplomats are to meet their British counterparts in London for the second of the six-week talks. Market seemed to ignore the lack of progress from all these Brexit talks. On Wednesday, British Chancellor Rishi Sunak announced his plan to combat the economic pessimism. The fiscal stimulus is worth up to 30 billion pounds and emphasize on helping companies retaining furloughed workers. He also introduced a 5% cut to sales tax in the hospitality sector to help alleviate the pain from stagnated tourism.
Even the safe-haven greenback was gaining strength from renewed pandemic fear, Sterling was surprisingly resilient against the US dollar, capitalized 1.18% within this week.
ECB is set to leave its monetary policy unchanged in its July meeting, the central bank has injected 600 billion euros into its economy through the Pandemic Emergency Purchase Program (PEPP) up until June. Member of the monetary authority wanted to assess the effectiveness of its stimulus aid before taking another move to spur the united economy, while Christine Lagarde said ‘we have done so much that we have quite a bit of time to assess incoming data carefully.’ EU leaders will be meeting face-to-face on July 17-18 to discuss the ambitious 750 billion euros fiscal plan, which they had previously failed to compromise on.
EURUSD closed the week 0.44% higher near 1.13 handle this week; however, EURUSD had dipped on Thursday after performing well and reaching 1.13708 over the last few days of this week.