27/ 05/ 2020

The ECB and the EU Commission in Focus alongside China

The ECB may well pick up the Bundesbank’s PSPP commitments if a German court rules that the current quantitative program is not legal and appropriate. According to a Reuters report, the ECB would take up the Bundesbank’s PSPP allotment and in a worst-case scenario also launch legal action against the German central bank to bring it back into the fold. While there is a possibility or one or both of these actions occurring, it is likely that the Bundesbank will prove to the German court that the ECB’s actions are appropriate. If however the German court rule against additional bond buying, the Euro would come under heavy pressure and talk of the demise of the single currency would increase. The German court ruling is expected in early August.

The haven-linked US Dollar encountered aggressive selling pressure after the Dow Jones Industrial Average and global equities bottomed in late March. Since then, gains in equities have notably slowed with US benchmark stock indexes, for the most part, trading flat since the end of April. It is then understandable to have seen weakness in the US Dollar slow since then. A reason behind this dynamic in financial markets, particularly as over 38 million US citizens filed for unemployment thus far, could be the diminishing momentum from the Federal Reserve efforts to stimulate the economy. While the central bank’s balance sheet swelled to over US$7 trillion last week, growth in it has been noticeably unwinding.

As market jitters over the U.S and China resurface, the ECB and the EU Commission will be in focus later today.

12/ 05/ 2020

Dollar rallies against rivals on Safe Haven Bids

The dollar rose to a two-week high against major peers on Tuesday, propelled by rising U.S. bond yields and increasing safe-haven demand amid growing fears about a second wave of corona-virus infections, which sent riskier currencies lower.
The biggest loser was the Australian dollar, which dropped about 0.8% to a one-week low, while the kiwi extended falls.
The greenback was buoyed by a steepening U.S. yield curve, as Federal Reserve officials talked down the prospect of negative rates, and as the bond market braces for an immense borrowing spree from the U.S. Treasury.
At the same time, progress on plans to re-open economies has been overshadowed by worries about fresh infections of COVID-19 as easing of restrictions in South Korea and Germany were soon met by spikes in new cases there.

07/ 05/ 2020

Euro falls amid worries about ECB bond-buying

The euro dipped against dollar on Wednesday as a court decision challenging German participation in the euro zone's stimulus program weighed on the euro. Germany’s highest court on Tuesday gave the European Central Bank three months to justify purchases under its bond-buying program or lose the Bundesbank as a participant in a scheme aimed at cushioning the economic blow from the coronavirus.
The pound fell to a 12-day low against the dollar on Wednesday, ahead of a Bank of England meeting on Thursday where monetary policymakers will try to quantify the impact of the coronavirus on the world’s fifth largest economy.
The GBP/USD pair fell to 1.2334, its lowest in two weeks, amid resurgent demand for the greenback, and worse than expected UK data. 
US President Trump showing increasing tendency to question China over origins of the Covid19 virus, a position supported by VP Pence and Secretary of State Pompeo, and the Trump administration is pressuring the EU To support an international inquiry into China’s handling of the early stages of the outbreak, as well as the virus’ origins.