Signs indicate market stabilization as Sino-US trade talks resume, reports suggest Ashraf Laidi.
The appetite for global risk is generally improving after the US and Chinese authorities announced the resumption of trade talks by telephone, aimed at completing phase 1 of the Sino-US trade agreement.
The Cboe Volatility Index (VIX) is approaching its lowest level in more than two months, while crude oil is trying to retest its 55-day moving average of $ 26.00.
The US Treasury’s plan to borrow nearly $ 3 trillion between April and June to finance the government’s response to the economic fallout from the coronavirus means the federal deficit will exceed $ 4 trillion for the year. This may not be an immediate problem as long as the Federal Reserve is ready to buy US debt. But the fact that the debt jubilee has gone around and the rumors that the United States is reconsidering the payment of its debt obligations to foreign investors, with whom it has political / commercial disagreements , could raise a more serious matter for a later date.
Meanwhile, as a sign of stabilization, the US stock market indices have not seen a day + (-) 3% for more than weeks, while the VIX is approaching the two-month low. SPX eyes 2920 and the Dow Jones index 24200.
The British pound (GBP) was temporarily boosted by the Bank of England’s decision to vote unanimously to keep rates unchanged at 0.10% and bond purchases stable at £ 645 billion (797 billions of dollars). While the cable would retest the 1.2280, the cross euro / pound (EURGBP) extends the gains towards 0.8830.
The GBP lost its post-BoE gain to fall below 1.23, causing all GBP crosses. Weekly jobless claims in the United States reached nearly 3.2 million last week, up from 3.8 million the previous week and the record 6.9 million recorded in late March. Total claims have reached 33 million in the past seven weeks.
You can see Ashraf’s daily analysis on www.AshrafLaidi.com and sign up for Premium Insights. Ashraf discussed the yield spread trends at TradersEXPO in New York on March 8.