The Friday Forex Takeaway – Episode 31

<h2>Key Points from This Week</h2>
<p><strong>Oil Turned Negative</strong></p>
<p>As the COVID crisis continues, the oil market this week gave the clearest indication of the economic damage being caused. Dropping over 100% on Monday as futures traders scrambled to roll their May contracts (due for expiry on Tuesday) into the front month, oil prices collapsed below the $0 level for the first time in history to mark lows of -$37.63 before rebounding the next day to end the week back in positive territory. Despite the technicality which caused the move, the record amount of roll itself reflects the dramatic loss of demand for oil as traders sought to avoid taking receipt of the commodity in the current environment.</p>
<p><strong>Trump Announces US Immigration Ban</strong></p>
<p>Despite much media attention over the last week for his provocative calls to re-open some US states or, as he put it on Twitter; “LIBERATE” them, Trump this week announced that he would be signing an executive order to temporarily ban all immigration into the US. This move, is of course, designed to protect the “GREAT American workers” and in no way reflects an attempt by Trump to capitalise on the current despair and tragedy to target immigrants, which he has done consistently throughout his presidency.</p>
<p><strong>Worst Manufacturing PMIs on Record (US, UK &amp; EZ)</strong></p>
<p>With lock-downs still in place across the world the damage to the factory sector was laid bare this week. Manufacturing PMIs in the US, UK and Eurozone each fell to their lowest levels on record in the April preliminary readings. With stay-at-home orders due to stay in place for at least the next few weeks, these readings could even be revised lower by their final count later in the month.</p>
<h2>Key Events Next Week</h2>
<p><strong>BOJ Rate Decision</strong></p>
<p>The BOJ meets next week and traders will be keen to see if the bank makes any adjustments to its monetary policy. The BOJ refrained from cutting rates last month, instead adjusting its asset purchase programs which, in light of the worsening outbreak there, might be adjusted again</p>
<p><strong>FOMC Rate Decision</strong></p>
<p>The Fed is not expected to cut rates next week given that rates are now just above zero and the bank will want to keep its powder dry in the event that there is any further escalation in cases which fuels a further leg lower in the economy. Traders will be focusing on the outlook, however, and the guidance which is expected to see the bank reiterating its message that it is willing to act further if necessary.</p>
<p><strong>ECB Rate Decision</strong></p>
<p>The ECB meets next week also. While market conditions have stabilised somewhat since the initial outbreak, the downtrend in data is providing concerning. While no further action is expected at this point, after the bank announced this week it will now accept “junk bonds” as collateral on debt, traders will be keen to hear bank’s assessment of current conditions and forward guidance.</p>
<h2>Keep An Eye On</h2>
<p><strong>US/Iran Updates</strong></p>
<p>This week saw a re-emergence of hostilities between the US and Iran as Trump and Iranian Army figures traded barbs via the press. The tension between the two nations has been simmering below the surface since the US assassination of a top Iranian general earlier in the year. If tension start to boil over once more this could start to prove a drag on risk appetite.</p>
<p><b><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></b></p>
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