Fibogroup Market Analysis 2020

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Coronavirus claims the title of black swan. Now, commodity markets are paralyzed by fear of the Wuhan Plague, which hit air travel, stunned Chinese industry, and in the event of a global pandemic, it will drop the world economy more than the 2008 crisis.
Here are a few numbers:

Worst January in 29 years. In the first month of 2020, oil prices collapsed by 15%. because of this, OPEC + members will hold an emergency meeting on February 4-5 in Vienna.

“Unprecedented sale”: Chinese investors returning from the New Year holidays have fallen off the Chinese stock market (at the moment it is losing 9.1%).
The largest regulators added #virus to other uncertainties that will affect the market.
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Weekly Calendar:

02/03/2020, Monday

No significant events

02/04/2020, Tuesday
Rate of the Reserve Bank of Australia (RBA).
Emergency OPEC + meeting.
Message from Donald Trump to the US Congress.

02/05/2020, Wednesday
Changes in employment in New Zealand.
Report of the European Commission on the revision of budget rules.
US crude oil reserves.

02/06/2020, Thursday
Day off - New Zealand.
Speech by Christine Lagarde in Brussels.

02/07/2020, Friday
Change in US employment !
Change in employment in Canada.

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fibogroup.com

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The pound reached its biggest recession in seven weeks, as conflicting statements by the UK and the European Union raised concerns that negotiations between the two parties on a future trade deal would be tough.
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#hard_tags
EU chief negotiator Michel Barnier said in Brussels that Britain is offered a “very ambitious” trade deal, but only if London agrees with its rules.
Speaking a few minutes later in London, Prime Minister Boris Johnson DENIED the demand and insisted that Britain would prosper, even if the negotiations failed.
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#GBPUSD still confirms its status as one of the most volatile currency pairs. As we see, the fog over Albion has not cleared and political upheaval will affect sterling throughout the current year.

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fibogroup.com

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The cost of a barrel of Brent crude oil fell below $ 55 for the first time since January 3, 2019, increasing losses from the beginning of the year to 18%.
Contracts for WTI (traded with us #USOIL during the bidding dropped to $ 50 per barrel and stopped, seemingly, having found local support there.
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The main reason is the #pandemic from China and the collapsed demand from them. That is why an emergency meeting of OPEC + members should start #today in Vienna. However, some participants say that this meeting will not help get rid of the problem, because symbolic steps cannot rectify the situation for one simple reason.
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According to the reports of #OPEC and #IEA, even without the Chinese factor, world production in the first half of the year exceeds 1.2 #million barrels per day. Here you can add the growing volumes of Brazil and Norway, which add another barrel per day.
To all this, we can add the demand from #China, which collapsed by 20%, we add these 3 million barrels to the current surplus and we get the storage facilities filled to capacity. Oil #traders will be forced to provide significant discounts to bidders, which will put pressure on #oil for the first half of this year.
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The unexpected decision of the Reserve Bank of Australia (RBA) to maintain interest rates forced the Australian dollar to grow slightly. Despite the threat of coronavirus and damage from forest fires, the RBA chose a wait-and-see position, making it clear that there was still no time to reduce it.
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However, RBA Governor Philip Low sets ambitious economic development goals: growth of about 2¾% this year and 3% next year, which will be a step forward compared with the growth rate over the past two years. Without easing monetary policy, achieving such a pace will be difficult. So now this #trigger (rate cut by 0.5%) is shifting to the March meeting.
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US Private Sector Employment Growth in January

US companies significantly increased their workforce in January. According to the labor market provider Automatic Data Processing Inc (ADP), compared with the previous month, 291,000 jobs were created, which is 2 times more than the forecast (159,000 people).
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The US dollar reacts extremely unpredictably:
In relation to major currencies, it is stronger than ever. Most likely, this is a reaction to the growing signs of the readiness of foreign Central Banks of the world to lower rates (if necessary to maintain economies in the face of the epidemic).

In relation to the Australian dollar, the “American” on the contrary, has significantly weakened, thereby demonstrating a strong imbalance in the capital market.
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In any case, the situation with coronavirus puts pressure on the markets, the Central Bank of the world is ready to launch printing presses to keep the economy afloat.
So far, only one thing can be said - this week we will not see active actions. We interpret market signals without paranoia:
- stock indices are rising,
- business activity indices indicate the recovery of the economies of Great Britain and the Eurozone,
- The number of people employed in the USA has grown significantly.

We are waiting for confirmation of the data on Friday and continue to earn in the US dollar.
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The main indicators of the economic calendar of the current week are the values of the #PMI index for January.
These are the first statistical indicators that reflect the state of the economy in 2020 (since the published values of inflation, GDP reflect the state of the economy of the LAST year).
As of February 6 (Thursday), according to surveys, almost half of all countries surveyed reported a PMI above 50.0, which is an undeniable sign of recovery, despite the trade debate between the US and China, and a raging pandemic.

About ten of the 15 markets reporting expansion in January were the so-called emerging markets, including: China, Vietnam, the Philippines, and Brazil. In Asia, excluding Japan and China, the PMI reached a 19-month high in January.
The situation in developed markets:

USA recorded the strongest PMI growth.

UK PMI has stabilized, ending an eight-month recession.

Eurozone factories reported the smallest drop in activity since April last year (the fastest declining manufacturing sector was re-discovered in Germany).

Japan also remained in decline, registering a seventh contraction in a row.
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These indicators are leading and make it possible to judge the strength of a particular economy. It appears that the US is ahead of everyone except China, and the crisis has already come in the Eurozone and is not going to end.
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Since 2014, the ECB lowered the deposit rate below zero, requiring banks instead of earning interest income to pay extra for the storage of reserves.
The largest banks in Germany rushed to the physical cache, filling banknotes to failure, storing which becomes more profitable than keeping non-cash funds in accounts with the Central Bank.
By the end of 2019, they had tripled and reached a historic record of 43.4 billion euros, Bloomberg reports, citing ECB statistics.
This is 442 tons in banknotes of 100 euros, 800 tons - in 50-euro banknotes of 1.7 thousand tons, if you use the face value of 20 euros.
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Negative deposit rates this year will cost German banks $ 2 billion euros, which does not add to the positive banking system and puts pressure on the single European currency.
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Canada's unemployment rate fell to 5.5% in January.

#USDCAD drops to 1.3280.
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The growth in the number of workers amounted to 35.7 thousand people, which is more than 2 times more than the projected 15.0 thousand new jobs.

- Growth occurred mainly in the industrial sector (construction, manufacturing).
- Decline in the health sector and socially oriented areas.
This indicates a powerful development potential in the region - in fact, the beginning of a new four-year business cycle. Volumes of construction are growing not from scratch, but as a result of necessity. We are also reporting rapid growth in the manufacturing industry. The Canadian dollar is reasonably strengthening today and we believe that the region will maintain this organic growth for many years to come (sell #USDCAD)
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fibogroup.com

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We continue to monitor events: commodity markets are recovering, but overall the picture is weak, #OPEC and #IEA reports can serve as drivers. Federal Reserve Chairman Jerome Powell will once again be in the spotlight: for two consecutive days he will report to Congress on his work.
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Weekly Calendar:

02/10/2020, Monday

• January inflation in China

02/11/2020, Tuesday
• Preliminary UK GDP data
• Speech by Christine Lagarde in the European Parliament
• Jerome Powell's Report to the US House of Representatives

02/12/2020, Wednesday
• Rate of the Reserve Bank of New Zealand (RBNZ)
• Report of Jerome Powell to the US Senate
• Overview of #OPEC oil market

02/13/2020, Thursday
• January inflation in the USA
• IEA Oil Market Review

02/14/2020, Friday
• The United States and China will reduce duties under the previously signed agreement
• The final OPEC + decision on an emergency reduction in oil production
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fibogroup.com

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The Canadian dollar strengthened to a one-week high against its American counterpart on Wednesday, as declining concern over the economic impact of the outbreak of coronavirus led to an increase in risky assets and oil prices, one of Canada’s main export commodities.

The #USDCAD pair touched its strongest intraday level from February 5 to 1.3264.
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