US Open – Markets, BoE, Oil Rally, Gold, Bitcoin

Investors Growing in Confidence

Stock markets are back in positive territory on Thursday, growing in confidence throughout the European morning as investors continue to celebrate the reopening of economies around the world.

As governments prepare to gradually ease lockdown measures, assets that have been savaged by the crisis are starting to look attractive once again. There is still an enormous amount of uncertainty in the global economy right now, not least the potential for measures to be reinforced should the lifting of restrictions prompt another spike that threatens to overwhelm healthcare systems.

That’s not proving much of a deterrent though. Stocks are still trading at a heavy discount and now they have trilllions of extra dollars of stimulus behind them, like fuel on the fire. This was always likely to eventually make a rebound far more explosive than it should otherwise be. We’re going to hear a lot of “these markets make no sense” over the coming months as we plunge into recession and unemployment goes through the roof. This is why.

Obviously, it doesn’t help when tech stocks are generally among those to have done well out of the crisis. It can sometimes look like a one person team, with tech basically dragging the rest of the market up with it and there may be a case of this contributing to the gains we’re seeing.

BoE raises stimulus hopes and delivers nothing but dour forecasts

The Bank of England got everyone’s hopes up late last week when it moved its announcement from the usual midday slot to 7am. They last did that on budget day and announced a raft of complementary stimulus measures, aimed at supporting the economy through the crisis. So you can imagine the disappointment when they remained on hold this morning, ending a week of speculation about what they could possibly be preparing us for.

The pound remains a little higher on the day, having pared earlier gains. The lack of rumours and speculation around what they could be about to announce had already cast doubts over whether they’re going to do anything at all but when it was actually announced, you could still sense the disappointment. Instead we got a forecast for the worst annual contraction in more than three centuries. No silver lining on this occasion.

A repeat performance of last month looking less and less likely for oil

Oil prices are on the rise again on Thursday, continuing their relentless rally and casting huge doubts over a repeat of the WTI May contract expiry fiasco. I mean, these are extraordinary times and facilities are still near capacity so I certainly wouldn’t write it off but production cuts and soft reopenings all over the place are having the desired effects. Inventory data has done little to deter, with EIA reporting an increase of only 4.6 million last week, continuing the downtrend. The market is gradually moving towards balance but its far from there yet and we shouldn’t count on demand too much.

Gold held back by dollar gains

A continuing rise in the dollar is putting pressure on gold prices, sending them lower on Wednesday. They’ve recovered a little today but should the greenback gather momentum, gold will likely remain under pressure. Still, for now it remains in a tightening consolidation period. A breakout may deliver another surge in activity, but when that will be isn’t clear. Momentum was with the bulls prior to this but these type of patterns can be quite unpredictable; the dollar will likely be the key factor.

Bitcoin losing momentum into halving day

Bitcoin is edging higher again today as it closes in on $10,000. It’s dropped a little momentum in recent days which may case doubt over its potential to break above here prior to the halving. A failure to do so may take the wind out of its sails and see it pull back. A break above though could take the rally beyond the halving day though and put it back in the headlines and we’ve all seen what impact that can have.

Economic Calendar

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

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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