Friday European session market review – Correction Phase
Last night, Fed Chairman Powell pointed out in an interview that the market confidence and economic activities will quickly recover if the epidemic is under control. He said that, the United States may fall into a recession, but it is noticed that this recession is different from the past and the US economy has no problems at all.
Regarding criticism that the Federal Reserve cannot buy bonds indefinitely, Powell said it would be no problem as ” not going to run out of ammunition”.
Powell’s speech not only boosted market sentiment, stimulated the stock market, but also hurt the dollar.
As risk aversion has weakened, and after the Federal Reserve has taken a series of major actions, market liquidity has eased. The market has no such “desire” for “cash”, which is not good for the dollar.
The US announced on Thursday that the initial jobless claims was 3.283 million, a record high, far exceeding the 1982 record of 695000.
The data clearly reminds the market that the global economy may be far more worse than expected. Investors will be likely to pay more attention to the global economic data in the future which may not be priced in yet.
If the data performance continues to be unsatisfactory, the demand for safe-haven will rise, meaning it is high chance that the gold price will rise. However, the oil market remains weak. Yesterday, the International Energy Agency warned that global crude oil demand may fall by 20 million barrels per day this year, and the US Department of Energy said that the $3 billion budget is not yet confirmed by the US Congress so that the purchase plan of strategic petroleum reserve will be temporarily suspended, which are negative to the oil prices.
The dollar index fell below the 99 mark on Friday in the Asian session, but rebounded back to 99.5 level in the European session, likely to be a technical adjustment after the three consecutive days of decline. As weak fundamentals in oil market, US oil (WTI) is tending to be downward and trading at $23 level. Gold price still fluctuated between $1615-$1625, falling back from the high of $1644.6.