US Open – PMI, EU Growth, ADP, Oil, Gold, Bitcoin

Excitement Continues Around Economic Soft Opening

Stock markets are a mixed bag across Europe, while the US is seeing a decent lift ahead of the open on Wall Street.

As ever, the useful combination of countries across Europe and parts of the US starting to ease lockdown conditions, the blind-eye approach to the data and earnings, and unprecedented monetary stimulus is keeping the party going in stock markets.

We’re now very close to the levels we saw on multiple occasions in the US last year when everyone was worried about the yield curve signalling a possible recession. Let that sink in. What everyone would give to be back in a situation when a possible recession and end to record bull market run was such a major concern.

As we enter the back end of earnings season, attention will fall almost entirely on the grand economic reopening, although the next couple of months will be more like a soft reopening as we feel our way through the next phase of the crisis. Balancing preserving lives and livelihoods is no easy task when we’re still operating without a cure or vaccine. Which makes the optimism we’re seeing look premature; we can only hope it proves justified.

We’ve already had a bunch of atrocious PMI readings from the euro area this morning and a grim assessment of the regions economic prospects this year from the European Commission. Nothing encourages hope like a 7.7% annual contraction, vanishing inflation and ballooning deficits. That’s all weighing on the euro this morning which is off around half a percent. It’s over the the US next where the ADP may attract a little more attention than normal ahead of the worst jobs report we’re ever to likely witness.

Is the oil rally sustainable?

Oil prices are a little higher again this morning, building on the impressive run that’s seen WTI rise 150% from its lows just over a week ago. Of course, that’s the volatile June contract which fell to 10% last week as the largest US oil ETF decided to offload its vast holdings. Reports of economic reopenings and production cuts have naturally lifted prices since.

Of course, that contract is still approaching expiry in a couple of weeks and storage is not far from capacity. These moves have been encouraging but there may be a few more fireworks yet unless we see evidence that near-term surpluses are shrinking. API did not provide those yesterday, it will be interesting to see if EIA offers any good news today.

Gold consolidation goes on

Gold remains in consolidation mode. It’s barely budged the last couple of days, hovering around the $1,700 level. The dollar has strengthened the last couple of days and we’ve seen decent moves in equity markets during that time, it just hasn’t really filtered through to the yellow metal. It was appearing to move somewhat in line with risk aversion again recently but even that’s not really evident now. We can only hope that this muted trading will soon be followed by a burst of energy, it’s just now clear in which direction that will be.

Interesting week in store for bitcoin

Bitcoin is eyeing up last week’s peak again as it continues to capitalize on the buzz around the halving event next week. Whether it can take it back into five figure territory and be the catalyst for another surge is unclear at the minute. The greater risk is that the event passes without many fireworks and the crypto gives back a bunch of its gains. Could be an interesting week.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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