Key Points From This Week

Trump Steps Up Rhetoric Against China

The ongoing tensions between the US and China dominated the early part of the week with Trump stepping up threats against the world’s second-largest economy over its alleged role in the COVID-19 outbreak. Trump has threatened china with the cancellation of the current trade contract and the application fresh tariffs along with separate financial penalties. China seems to be attempting to calm tensions, however, and pledged $2 billion this week to the global COVID-19 effort long with reducing tariffs on some us goods.

Vaccine Hopes Emerge

The market was given its first glimpse of hope of a vaccine this week. On Tuesday, us biotech firm Moderna announced that one of the candidate vaccines it is trialling has shown good results. The drug was said to have created a positive immune response in the eight test patients similar to that seen in patients who have recovered from COVID-19. Moderna said it will now increase testing and continue development.

Manufacturing PMIs Improve

Hopes that the worst of the economic shock from COVID-19 have passed were raised as the first set of May flash manufacturing PMIs came in better than expected in the US, UK and Eurozone. While readings are still in negative territory for now, the recovery across the indicators is encouraging and suggests that a full recovery could be seen over the coming months.

Oil Inventories Fall Again

Oil prices received further upside support this week as the EIA reported a further inventory decline of 5 million barrels. As lock-down measures continue to ease around the globe, industrial and transport demand is starting to increase. Parts of the aviation sector have also announced plans to begin increasing services again as of next month which should offer further support for oil prices.

Key Events Next Week

BOC’s Poloz Speaks

The BOC governor kicks off the week with comments due on Monday. The BOC has refrained from any further easing following the adjustments made to its QE program last month. Traders will now be keen to hear the bank’s latest assessment to gauge whether any further easing is likely in the near term.

US Preliminary GDP (Q/Q)

The first look at US GDP for Q2 will be the main data release next week. Traders are expecting a negative reading in light of the lock-downs which have only just started to ease in some parts of the country. However, the key will be the extent of the decline and whether the easing of lock-down measures has helped to avoid the type of contraction many feared for Q2.

Fed’s Powell Speaks

The Fed chairman speaks again on Friday and traders will be keen to received the latest assessment and outlook, particularly in light of the recent uptick in manufacturing and with lock-down measures continuing to ease. This week, Powell once again called on the need for greater fiscal support for the US economy when testifying in Congress.

Keep An Eye On

UK Lock-down Review

The UK lock-down measures are due for review next week and in light of the continuing downward trend in infections and deaths, many are expecting that measures will be eased again in a bid to help stoke the ailing economy. There are risks however, and the potential for a second outbreak if measures are eased too soon is still a grave concern.

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