VIX at 2 Month Lows, GBP Hit
Global risk appetite improves across the board after US-China officials announced the resumption of trade talks via telephone, aimed at completing phase 1 deal. GBP lost its post-BoE gain to break below 1.23, dragging down all GBP crosses. US weekly jobless claims hit nearly 3.2 mn last week, down from 3.8 million the prior week and the record 6.9 mn seen in late March. Total claims have now reached 33 mn over the past 7 weeks. The VIX is nearing its lowest level in over 2 months, while oil attempts retesting its 55-DMA of 26.00. 4 out of the existing 5 Premium Trades are currently in the green.
The US Treasury's plan to borrow nearly $3 trillion between April and June to finance the govt's response to the coronavirus economic fallout, means the govt deficit will exceed $4 trillion for the year. This may not be an immediate problem as long as the Federal Reserve is ready to buy up the US debt. But the fact that the debt jubilee (debt forgiveness) has been making the rounds and rumblings about the US reconsidering paying its debt obligations to foreign investors, with whom it has political/commercial disagreements, may raise a more serious question for a later time.
Meanwhile, in a sign of stabilisation, US indices have not had a +(-) 3% day in over 2 weeks, while the VIX is nearing 2-month lows. SPX eyes 2920 and DOW30 24180/200.
GBP was temporarily boosted by the BoE's decision to vote unanimously at keeping rates unchanged at 0.10% and bond purchases steady a £645 bn. As cable retests 1.2280s, EURGBP extends gains towards 0.8830s.
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