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PBOC Rate Decision & Brent Crude

Chart of the Day: Brent Spot (4hr candlesticks)
Source: GKFX / MT4 (July 19, 2020)

•    Less pressure on PBOC rate decision after positive China GDP
•    EU takes Recovery Fund deliberation to third day
•    Oxford AstraZeneca COVID-19 vaccine trial results are released today
•    CHART: Brent Crude Oil

We start a busy week for company earnings with a rate decision in China and rumoured good results from the Oxford AstraZeneca vaccine trial, but possibly without an agreement on EU recovery fund. 
 

MARKETS


The Euro-strength seen at the end of last week hangs in the balance. EUR/USD touched 4-month high last week but EUR/GBP and EUR/JPY were more muted, staying below the late June peaks. The Chinese yuan was hugging its highest levels in March versus the dollar (USD/CNH) ahead of today’s PBOC rate decision.

Stock markets finished the week mixed on both hopes for more government stimulus and successful vaccine trials but also disappointment from Netflix Q2 earnings. The Netflix earnings ended a tough week for tech shares, which have pulled back before results get under way this week. 

While gold digested its 9-year peak, it was silver’s time to shine last week, building on 10-month highs and coming just shy of $20 per oz. We have highlighted Brent crude oil (chart below) because volatility has become so compressed, it would suggest $44-45 per barrel is becoming make or break for another leg higher.

“Do not anticipate and move without market confirmation, being a little late in your trade is your insurance that you are right or wrong.” -Jesse Livermore
 

PBOC Rates


The return to growth in the second quarter for Chinese economy according to official statistics released last week reduces the pressure on the PBOC to add more stimulus, however there is a dovish bias and we suspect more rate cuts before hikes. Most major central banks have held pat in July amid calmer financial markets. 
 

EU Recovery?


Are European markets about to have their own ‘TARP moment’?     The US stock market famously had one of its biggest down days ever when Congress failed to pass the TARP bill in 2008 on first attempt. The market declines spooked lawmakers into passing it the second time. A failure to deliver a deal on the EU Recovery Fund when expectations were set high by German Chancellor Angela Merkel could hit the euro and European shares.
 

Oxford Vaccine


Talk of imminent positive results from the AstraZeneca-sponsored vaccine research at Oxford University came to the aid of markets last week. The results are published today in the Lancet, a peer-reviewed medical journal. Positive results add to the market’s current ability to look past rising coronavirus cases worldwide.
 

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