Fibogroup Market Analysis 2020

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Market Watch
Quarantine until 2022

Today I will begin the review with the appearance of extremely shocking information from the Harvard School of Public Health. According to a study, or rather a report published yesterday, the United States may need to continue quarantine measures until 2022. This may be needed if the number of hospital beds for intensive care is not significantly increased or if a vaccine is not available.

As we see today, the demand for riskier assets as well as commodity currencies, has fallen dramatically. In the list of commodity currencies, I include AUD and NZD, since these countries are highly dependent on the export of raw materials to China. CAD is also sensitive to changes in oil prices. All these currencies have dropped today, but have since stabilized.

And now let us consider in more detail the situation in the oil market to understand the future movement, with which the CAD will be closely tied. Let me remind you that the deal between OPEC+ and other countries that support the organization will not compensate for the reduced demand. In support of this, the International Energy Agency (IEA) published a report that shows oil reserves are growing by 12 million barrels per day. All this contributes to lower oil prices and most likely the trend will continue in the coming days.

As a result, the CAD is likely to weaken, and the USD/CAD currency pair may also fall further, even taking into account the latest correction that has occurred. Thus, I do not exclude the possibility of a more powerful wave of growth and the pair's return to 1.4060–1.4080.

Moving to the American trading session, I will mention the upcoming publication of reports for retail sales figures and industrial production. If the numbers come in below expectations then pressure on USD will increase, thereby weakening the activity of sellers of the AUD/USD and NZD/USD, as well as buyers of USD/CAD.

Nevertheless, expectations of when the US and Europe can resume business activity remain more significant for the markets. After all, everyone understands that the economic situation is now catastrophic and will remain so until a significant reduction in quarantine measures happens around the world.

The above review is not a direct guide to trading, and can only be classed as recommendations.
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Australian Consumer Sentiment Drops Most in 47-Year History

According to a survey conducted by Westpac, consumer confidence in Australia declined in April most of all in the history of observations, after the outbreak of coronavirus turned from a serious problem into a full-blown pandemic.

The Westpac-Melbourne Institute consumer sentiment index fell -17.7% to 75.6 in April from 91.9 in March. This was the largest monthly decline in the forty-seven-year history of the survey, which brought the indicator beyond the lows of the global financial crisis.

This survey reflects the significant shocks associated with jobs and costs. Moreover, there was a collapse in confidence in the housing market.
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Bank of Canada maintains interest rate at 0.25%

The Bank of Canada left the key rate unchanged at the meeting on Wednesday and announced new bond purchase programs, saying that the coronavirus pandemic could provoke the strongest recession in the Canadian economy in the short term.
The aid to the Canadian provinces may amount to 50 billion Canadian dollars, plus another 10 billion will be given to key Canadian companies through a bond redemption mechanism.
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The Canadian regulator has adopted the habit of pouring money into the economy. The increase in the money supply should weaken #USDCAD, however, against the background of the trillions of dollars that the US Fed is pumping in, these are mere crumbs. Therefore, the factor of increasing the money supply can be safely ruled out.

In the bottom line, we have only positive drivers:
growing oil (within the framework of the year) and economic support from the Central Bank.
We confirm the forecast to reduce #USDCAD to 1.3000 in the next 4 months.
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Neutral data from Australia's labour market

Australia's unemployment rate rose slightly in March to 5.2% from 5.1% in February. Total employment across Australia grew by 5,900 per month. All this was related to the part-time sector (an increase of 6400 people).

Because the data was collected in mid-March, it doesn't reflect the deplorable state of the labour market and the impact of mass quarantine on the Australian economy. We believe that this negative factor will make itself felt in future publications, contributing to an even smoother recovery of #AUDUSD.
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OPEC: reduced oil demand

- The OPEC monthly review published yesterday provides a forecast of oil demand this year. According to OPEC estimates, in the 1st quarter, demand fell by 6.75 million bpd. In the 2nd quarter, a collapse in demand is forecasted for another 6.22 million bps.
OPEC predicts the beginning of demand recovery in the 3rd quarter and the preservation of positive dynamics in the 4th quarter.
Generally the demand is forecasted to decrease by 6.85 million bpd.
- About the same data was published the day before by the International Energy Agency. According to the IEA, oil demand in April 2020 will fall by a record 29 million b/s, in May - by 26 million b/s, and in June - by 15 million b/s.
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In the next 2-3 weeks, oil prices will remain under pressure. The oil market will be supported by news about quarantine removal in countries with high oil consumption and other verbal interventions that will continue to be received in the media from officials of oil-producing countries.
Within the framework of the current year, the OPEC++ transaction will not be able to stabilize the oil market immediately and the effectiveness of the transaction will become noticeable only in the second half of 2020.
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China GDP: Bleak outlook for economic recovery post-virus

In March China showed a sharp recovery in industry while maintaining a deep failure in trade:

- Industry: -1.1% yy (expected -7.3% yy)

- Retail sales: -15.8% yy (expected -10.0% yy)

- Investments (from the beginning of the year): -10.8% yoy vs -8.6% in January-February

The data published today on China's GDP for the 1st quarter turned out to be slightly worse than forecasts (a decrease of 6.8% year-on-year).
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The dynamics of the development of the Chinese economy due to the negative impact of the coronavirus pandemic from January to March inclusive turned out to be negative for the first time since 1992 - in the first quarter China's GDP fell by 6.8%. This was reported on Friday by The National Bureau of Statistics (NBS) of China.
Such dynamics give us a signal that it will be quite difficult for other countries to restart their economies.
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US crude plummets 19% as coronavirus pandemic ravages oil demand

US oil prices fell on Monday during Asian trading as traders continued to worry about declining demand due to the coronavirus pandemic - analysts called the situation in the US 'quite terrible'.

May West Texas Intermediate oil contract prices fell nearly 19% to $14.84 a barrel. Earlier, WTI fell to $14.47 a barrel, the lowest level since mid-March 1999, when it was trading at just $14.40 a barrel. Meanwhile, futures for Brent crude fell 2.42% to 27.40 dollars per barrel.

Daniel Hines, ANZ told CNBC in the Squawk Box on Monday that one of the reasons for the crater in US crude prices was the upcoming expiration of the May futures contract, which should expire on Tuesday. The June WTI contract fell about 6% to $23.57 a barrel.
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Economic calendar for the week

WTI oil has fallen to a minimum since 1999 on concerns about a lack of storage facilities in the world. The dollar is strengthening while investors are preparing to publish important macro statistics this week.
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Weekly calendar:
04/20/2020, Monday
- New Zealand #inflation for the 1st quarter of 2020.

04/20/2020, Tuesday
- US New Home Sales in March, the forecast -8.2% m/m;
- UK #unemployment in March.

04/20/2020, Wednesday
- UK #inflation for March;
- Canada #inflation for March;
- US Crude Oil Reserves.

04/20/2020, Thursday
- Eurozone Manufacturing Purchasing Managers Index (#PMI) for April;
- UK Manufacturing Purchasing Managers Index (#PMI) for April;
- US Manufacturing Purchasing Managers Index (#PMI) for April.

04/20/2020, Friday
- S&P Global Ratings will publish UK rating;
- US Durable Goods Orders for March.
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Historical moment: oil at a negative price

The price of oil has fallen. To sell it, you need to pay the buyer. According to analysts, this story will go down in textbooks.

This night, the price of Texas WTI crude oil fell lower than in dollars per barrel for the first time in history, as traders on the ICE exchange in London have reported.

The price of WTI crude oil for May delivery on the New York Mercantile Exchange has turned negative for the first time in history. At 21:32 Moscow time it cost almost -$40 per barrel. This is what real delivery futures mean when, after expiration, you must accept the goods.

Apparently, at the moment there is nowhere to store oil at all. June futures are trading at $20; July futures are trading at $26.
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Unemployment in the UK rose before the coronavirus crisis

According to ONS, unemployment in the UK rose before the coronavirus crisis. The British labour market weakened three months before February, preceding the outbreak of coronavirus, despite a record number of employees.

The unemployment rate rose from 3.9% to 4.0%, the number of vacancies decreased for the tenth month in a row, and wages continued to fall from a peak in June last year, according to the Office of National Statistics. It is expected that the slowdown in the labour market will worsen, as workers will be laid off in the coming months, many elderly and young people will be forced to look for low-paid jobs.

The extension of the block last week is expected to trigger a new wave of layoffs. Despite all the deplorable situations, #GBPUSD shows confident signals for growth.
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