Trump Says US Must Re-Open Even If People Die

Okay, very good morning to everyone. It is Wednesday the 6th of May. Hope you're doing well. Just quickly wanted to mention a blog post that I put out yesterday. I will share the link on the video description if you want to have a read in more detail, but it was just a quick piece about our Advanced trader program. I know a couple of the guys still with us at the moment, still in the development program, but we did basically a 1-week intensive training course at the end of April. And fortunately, I asked some of the guys for some feedback and they were happy to provide some. And so I thought it would be a really good thing for people to see. Obviously, we, as much as having a proprietary trading arm, we also have various different training programs that we offer, typically taught from our trading floor in the City of London. However, obviously that's not possible given COVID-19, the lockdown, and although we await more details from the government at the end of this week in the UK, at least it's looking likely that given social distancing rules, we're not going to be able to get back into the office in terms of physically teaching for a while. So we wanted to convert then everything we were doing. We already kind of had the ability to, to have remote access to the trading floor for some of our traders from outside of the UK. But now we've kind of, with the addition of using Zoom video technology a lot, and as you can see here, this is kind of a screenshot of myself at my desk at home, but then you can see the Zoom where we can, we can basically get online with all the guys and act in pretty much exactly the way that we would in person, having our morning calls any kind of lecture content that we need to go over as the guys are still learning new concepts, the sharing of live trades, the risk monitoring, the reviewing at the end of each day. Everything goes on as per normal. And obviously the beauty of being online for anyone who was ever interested in training with Amplify is that, you know, we've got guys like Raul from London, but then we've got guys like Philip from Russia, Gareth in Wales, Car in Singapore, and so on and so forth. So a great opportunity actually for us to really open the net for what otherwise would have been people who would have been restricted to having to come physically to London. So check that blog out. I think it would be quite an interesting read for you to see how kind of hopefully the online virtual experience has been a good one for the guys so far. And touch wood, long may that continue. But looking at the markets then for this morning, what have we got on the docket for today and the general feelings, the sentiment going into the European Open, and it's relatively subdued. We had a slightly firmer positive close on Wall Street. Oil prices have come off a touch in the overnight session, albeit, you know, we've had such a phenomenal recovery in the front month June future. And the currency market still keeping an eye on that euro. Of course, we're going to discuss this, a bit of a recap from yesterday, but obviously this is that very pronounced move that we had on the back of the German Constitutional Court hearing ruling quite, quite whipsaw at the initial release. I think people were particularly, I'd say, in the speculative market, perhaps those who are not clued-up economists, caught a little bit off or blindsided by how to interpret what was happening. But net-net, although I will explain shortly, it's a negative, and the euro eventually did come off. However, pretty seesaw price action came right back up to pretty much those, those initial dip lows that we had prior to the announcement early in the European morning. You can see then before we saw the next push to the downside. And this morning, just as we've come in, just before I've kind of hit the, the live button, we've just broken the Asia-Pacific, uh, kind of lower end of that range, and that's just caused a bit of a pronounced move to the downside. Consequently then, the Dixie just getting a bit of a lift on the back of that and therefore cable kind of following suit to some degree. DXY currently trading up 0.2%. Cable yet to break that same kind of setup from the, the late Asia test low and that initial volatility that we saw around that constitutional hearing announcement yesterday. But worth keeping an eye on. But the euro kind of the lead there for some of the currencies for the moment and worth keeping an eye particularly just given the context of the fundamentals at the moment. Equity-wise, we are positive. Uh, the, the DAX still slightly down, but the US index futures are up, eradicating what had been a little bit of a dip in the overnight session and late on Wall Street. Uh, gold finding— top right here— a little bit of resistance short-term on a trend line from last night late US trading hours high. We had that retest in the Asia-Pacific session and as Europe first came in. So if equities do remain buoyant and we continue to push up to the highs that were posted in kind of yesterday evening London time in the US indices, then perhaps that trend line going to hold for the time being. And that kind of encapsulates some of the rough zone or area of resistance that defined as well most of yesterday's price action. It's worth keeping an eye on any further push down. Obviously the pivot would act as a good area to keep an eye on of near-term support, that being the Asia low on two occasions where the market respected that So that's generally what's, what's going on. So a little bit of moderate risk on, I'd say. Equities, as I'm speaking, are actually pushing higher right now. So T-notes down 7.5 ticks and gold reversing off that trend line and rough overnight yesterday high level. Let's have a look then at some of the things that have come out in the news. And this is one, Fed's Clarida the vice chair of the Fed. So definitely someone of which the market does listen to quite closely. The vice chair position generally in the Federal Reserve historically tends to be very aligned, um, with the chairman, so Jerome Powell, in terms of shared view of that, of the stance of the overall central bank. And Clarida sees an economic recovery starting in the second half, but importantly pledges the Fed will continue with proactive and aggressive actions. And I think that's a really important and quite bold statement. He went on to kind of continue to push home the point that, to be honest, governments need to continue to do more on the fiscal side— something similar we've heard from Powell before. But this commitment that the Fed are kind of active and willing to do, to do more is something that a lot of people have been looking at elsewhere. One thing we had Shanghai, the Chinese market returned to market for the first time in 5 days because they've been on holiday for the first part of this week, and their market generally traded flat. So this is despite some of the ongoing tit-for-tat escalation that we've seen in the trade war being reignited by some of the rhetoric coming out of the Trump administration. The Chinese onshore yuan fixing on Wednesday was slightly stronger than some had expected in the wake of declines in the offshore currency over that holiday and rising tensions with the US. But what I wanted to show here on this graphic, this is a picture of the offshore yuan's 1-month implied volatility. And so as you, you're seeing in those broader charts, that's just showing you it's relative calm with a mild touch of optimism, let's say, at the European Open. But certainly despite all of this confrontation renewed between the US and China, markets certainly are not showing the sort of large bouts of volatility that we have seen before. And obviously March encapsulates, you know, the severity of the big global market fallout, um, but I wanted to just give you some context as to what volatility is looking like in comparative terms from where we are. And it's certainly a quite a bit more subdued in that respect, albeit it has picked up over the course of the last couple of days. The other story, of course, people continuing to digest at this point is that one of the ECB yesterday. So the European Central Bank has responded. They had a, what I understand is a conference call late yesterday evening, and they responded to the German court ruling by criticizing, or that criticized its bond buying program, the ECB pledging to continue to do everything that is necessary to revive inflation. So very much continuing to push ahead with their full commitment, the policies of which they're deploying at the moment. Um, what are these policies? Well, I thought this was quite a good table because for some of you, I understand that, you know, the complexities of monetary policy can come into play. And certainly if you weren't trading around the point of the European sovereign crisis, that was when they kind of rolled out that OMT. OMT stands for outright monetary transactions. And I do remember this one very clearly because this was at the point where, you know, kind of Greece, Ireland, Portugal were buckling under the pressure of post-financial crisis era that led ultimately to their sovereign bailout. But one of the things here was that the market was still kind of in a state of panic then. Contagion was a key word, disintegration of the eurozone, Grexit, and all these types of things were being tabled. And this is when Draghi in 2011 was coining these kind of famous phrases like, "We'll do whatever it takes." And the OMT kind of came on the back of that, designed in 2012, but importantly was never used. And this was quite a an interesting thing in terms of the ability and the importance of central banks' forward guidance, because at the time they created this program, this outright monetary transactions that would allow the ECB to buy nearly unlimited quantities of an individual nation's sovereign debt. The country must also take a credit line from the EU's bailout fund. So this commitment then to buy unlimited quantities was kind of that whatever it takes. And at that point, the OMT was never used. It was almost as if, right, the market, upon the design of this, this policy tool, then decided, well, look, there's no point in market going any further down. They are literally willing to do everything. So therefore they never actually had to use the system. The market turned and started to recover at that point. So these things though do start to tread on some legal ground that is a little bit suspect in terms of how the EU treaty is formed. And a couple of different things. So the ECB obviously started their asset purchase program. So now we're talking about the kind of more traditional form of QE that we would monitor, and this is tied to this— the, the capital key purchases are proportional to the relative size of each economy. And there's some other rules around this as well, but generally speaking then, if you think about the structure of the eurozone countries like Germany, um, are much larger and a bigger contributor then to— in terms of the proportionate capital key— than someone like Slovakia, Slovenia, Malta, and so on. And hence then starts to open up the issues that, that can come with this, because they feel like they're being footed with the bill in that respect. That's not the only thing though. So this then leads us on to the PEPP, which is the latest thing that we've heard. Now, this has been the response obviously to the economic shock that we're going through right now with the immediate lockdown of mainland Europe, obviously to try and contain and delay the further outbreak of COVID-19. This is kind of temporary in nature. It's not the same as the APP. So the ruling yesterday was not, or does not have anything direct to do with Europe's ability to be able to do the PEPP. However, just the way that the law works, a ruling on a similar type of policy tool then can set a precedence which could then further lead to challenges over other tools or systems that they're deploying at the moment. And here therein lies the, the kind of issue. So the ECB was given 3 months to prove this asset purchase program that they've been running. So the APP is within the law. The key concern, as I said then, is whether sovereign bond purchases break EU's law banning direct, direct financing of governments. That should not happen as per the treaty, but obviously we're in quite, you know, lack of a better word, unprecedented times at the moment. So it's interesting to see how how this plays out. But I think from a, from a very top level, one thing that a lot of bears will be looking at is that this kind of highlights the difficulties and perhaps the question marks on the longevity of the eurozone as a whole. Because, you know, when you talk about governments from the fiscal side coming out with a coordinated shared action to help support the European area it's been a particular struggle. Germany, Netherlands are kind of on one side, then you've got France proposing other things, then you've got Italy requesting quite different things. And that's a problem, you know, trying to identify it and who is going to be willing to pay for these things has been incredibly difficult despite the situation. Now you've got the ECB being questioned more thoroughly by the Bundes— or the German Constitutional Court system. You know, it kind of epitomizes the situation that's ongoing in the eurozone at the moment. A lot of friction, um, particularly when it comes to who's financing these types of things. So at the moment, are we going to get a continuation and a further push lower in euro? Well, I guess a lot of that move factored in from yesterday, of course. So I definitely think it, it kind of acts as a bit of a bias to weigh to some degree on the euro. So just looking at a few different things here. So the lows that we just printed this morning is getting close proximity to that low on the 28th of April. If we continue to move lower beyond that point, then, you know, we've got a long way to go down That's not to say that it could not happen. I mean, just given the severity of yesterday's move, but you'd probably be looking for another catalyst to happen before we got to that point. The 108 handle, that brings in a kind of area of interest perhaps, which is that area of the low on the 24th of April, and that kind of area here with that rectangle circle I've just put there now from the low at the beginning of April. So there's kind of near-term interim targets then in the futures at least. 108 um, kind of 21. Then you've got the S1 and interim period, and then down to the 108 handle, which just below there is those levels we just said. So yeah, definitely fundamentally probably more tilted to a negative bias in euro short term, just given some of that. But context is the market's already moved about a point from where it was pre that announcement. So just worth keeping an eye on the Dixie, perhaps if that can get a bit of a break on to the move to the upside as well. But if strength comes in and we can get above yesterday's high, then that might help accelerate things as well. All right, back to the news. A few final points. Trump says US must reopen even if more Americans get sick and die. Pretty bold statement, but you'd expect nothing different, I guess, from, from Donald. It's pretty similar to what you remember what Boris Johnson was saying right at the very beginning. You know, he's kind of saying that statement, look, herd immunity is the way forward, and unfortunately that's going to mean a lot of people are going to die, we're going to lose little loved ones. Politically backfired for him. But this is the political, I guess, buffer that Trump has created by being so outrageous with his comments right from the beginning, that he's probably the only politician that can get away with saying such things. Now interestingly then, he has, or the White House is weighing dissolving the virus task force team. Now that was led by Vice President Mike Pence, and that can be wound down as soon as the end of the month according to the press this morning. Now interestingly, as we know and we talked about in the briefings before, he not only has, has made Mike Pence the kind of coronavirus czar, but he's also given local kind of governors of the states the real kind of power in order to reopen economies. So he's kind of pressing home the point because politically, I guess, it makes him look very proactive. I saw a poll out this morning, and basically Joe Biden is losing a little bit of the, the edge that he had in recent opinion polls. Because Trump is really kind of polarizing these key subjects of the virus and the reopening of the economy, getting people back into jobs and earning money again, and, and control of the virus and blaming the Chinese for it. And so, you know, very difficult for Biden really to get in because the president is such a recurring figure in the media at the moment. And obviously these subjects that he's talking on are so relevant for the general public right now, given it's a health concern and people's employment and livelihood. So yeah, I think with this, Trump, as we've said, it's kind of going about his usual business. I wouldn't say that this comment should be taken in any way to really change things immediately in the intraday environment. But what was quite interesting was I did see this And this is a graphic of obviously United States of America, but what we're looking at here are different states. And a couple things: the New York— the state of New York, which is still in lockdown, they had their lowest kind of cases since basically the end of March. However, neighboring states such as New Jersey, New Jersey, which is still in lockdown, basically is one of the— this is the second hardest hit area with the pandemic in America. And that actually saw quite a sharp increase yesterday, as too did neighboring area Pennsylvania. And so one of the things here is that as part of the instructions from the kind of team at the White House, this White House Coronavirus Task Force. They had what they call a series of gating criteria. Now, what does that include? Well, it means that a state can reopen for business, so to speak, on a decline in symptoms of the virus as monitored by local health workers, fewer cases, or a declining percentage of positive tests, and finally, the hospital systems can handle the strain of the outbreak. And Basically what's happening at the moment, and definitely I think this is going to come home to roost in about 2 or 3 weeks' time, is as you can see there are partial reopenings happening across, and understandably these ones are going to go first because they're much more less hit. The severity is definitely on the East and respective West Coast areas. But Bloomberg's analysis that they've been running overnight has found that 20 of of these states that have lifted restrictions basically don't even meet the White House's criteria. But of course, these governors are under extreme pressure from the president and his public rhetoric to try and get the economy opening, as well as, you know, people within their, their kind of local constituency or area. So yeah, this is going to be so interesting, I think, in 2 or 3 weeks' time to see then those trajectories but on a state-led level as to then identify the severity or significance of the potential second wave as and when it occurs. Because as we know, a virus is not gonna be forthcoming for a long time. There are obviously these other therapies like the Gilead one that's looking quite positive at the moment. But again, that's not gonna catch up to the fact that a lot of these areas are reopening already at this point in time. As you can see, a number of them, as per the green with the stripes, without meeting the criteria that's been put forward. In fact, only two areas, Florida and Montana, have reopened upon actually ticking all the boxes at this point. Definitely going to be interesting to see how that plays out in the weeks to come. The other final thing is, um, didn't really react too much. Oil in fact actually continued to move higher post this data But we'll look out for the Department of Energy's any crude inventories later. The APIs came out last night, so after markets took a bit of a boost from the Cushing number on Monday from Genscape after it showed a build, but a much more smaller one at that key strategic point in Oklahoma. The API had a crude build of 8.44 million, Cushing a build of 2.681 million, gasoline draw of 2.2, distillate build 6.1. So yeah, not too much really to read into that. The 15th weekly rise in crude stocks, touch higher than expected, um, but overall, I mean, if anything, oil is stabilized and you've got a pretty good platform for price at the moment from a support basis at the 24 handle, which is basically the pivot level at $23.97 in the futures in WTI. That is pretty much it. Calendar, what have we got this morning? These are final service PMI readings, Eurozone retail sales. It doesn't really matter, it's not gonna, not gonna be a real key thing for, for the euro. It never really is. We've got the ADP National Employment Number, and perhaps that could be interesting. As you know, it often acts as a bit of a precursor for the Bureau of Labor Statistics report Non-farm payrolls we'll get on Friday. Of course, this kind of sets the, uh, the tone for expectations. And obviously we're looking for a -21 million on the headline change in payrolls on Friday. ADP here is expected at a similar level, -20, with a similar type of range, -25 million to minus basically 9 million. So look out for that at 1:15. That's the major data this afternoon. All right, that is it. Gonna leave you guys to get on. Um, obviously I don't go over the charts, uh, too much from a technical perspective, but remember to get in contact with Sam on Twitter, @snorth19, for those who do need any advice or help on that front. He'll be available in the chat room, of course, all day. But otherwise, have a good day ahead. Thanks very much, guys. Take care.