The Friday Forex Takeaway – Episode 36

<h2>Key Points From This Week</h2>
<p><strong>COVID-19 Vaccine Hopes Increase</strong></p>
<p>Following on from reports that US biotech company Moderna had noted positive results with one of their candidate vaccines, markets received further good news this week. US biotech firm Novavax reported that they have begun human testing on one of their candidate vaccines, further increasing hopes that a treatment will soon be found.</p>
<p><strong>US/China Tensions Increase</strong></p>
<p>Relations between the US &amp; China have been strained over recent weeks amidst the ongoing clash over COVID-19. The US has been highly critical of China over its alleged role and has threatened to hit China with fresh tariffs as well as possible financial penalties. Tensions increase further this week as China approved the controversial National Security Law for Hong Kong. Trump had previously warned against the move and, following confirmation, has said he will announce measures against China later today.</p>
<p><strong>Oil Inventories Return to Surplus</strong></p>
<p>Following three consecutive weeks of inventory decline, which had raised hopes of a pickup in demand, oil inventories were higher again by nearly 8 million barrels in the US last week. Oil markets have been buoyed by better risk sentiment though momentum has faltered following news that Russia is planning to ease its current supply restrictions in July – leading to fears that other non-OPEC nations could follow suit.</p>
<h2>Key Events next Week</h2>
<p><strong>US &amp; Chinese Manufacturing</strong></p>
<p>Investors will be keen to see if there has been any further pickup in manufacturing in the two leading world economies. Data has been improving recently, adding weight to the post-lockdown recovery and further data improvements here will help to continue the lift in risk sentiment.</p>
<p><strong>RBA Meeting</strong></p>
<p>The RBA meeting next week could see the bank acting further. In light of the new trade dispute with China, the RBA might look to further supplement the economy over the summer to help enhance the recovery by increasing QE, though no further rate action is expected at this point.</p>
<p><strong>BOC Meeting</strong></p>
<p>The BOC recently signalled that negative rates could be necessary in the future. While negative rates aren’t expected at this coming meeting, there are downside risks and we could see the BOC opting to add to its easing program at this point, as a preventative measure to help bolster the recovery rather than waiting until September.</p>
<p><strong>ECB Meeting</strong></p>
<p>The ECB’s June meeting takes place next week also and the market will be keen to hear the bank’s latest assessment as countries begin moving out of lockdown measures. Data has improved recently and the bank is expected to remain on hold though its message will remain one of concern and caution.</p>
<p><strong>US Labour Reports</strong></p>
<p>Following last month’s record drop in the NFP reading (-20.5 million jobs in April) traders will be keen to see if this figure has extended further over May or if there has been any recovery.</p>
<h2>Keep An Eye On</h2>
<p><strong>US/China Tensions</strong></p>
<p>With the US due to announce measures against China today, there is a risk of China reacting with its own measures. With this in mind, there is a fear that tensions will spill over, threatening the trade negotiations and risking a return to the trade war which damaged the global economy over the last two years.</p>
<p><strong><i>Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.</i></strong></p>
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