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Germany R-rate spikes & GOLD - DAILY MARKET UPDATE

Chart of the Day: Gold (1-year line chart)

•    Germany coronavirus reproduction rate = 2.88 on Sunday
•    30,000 new US COVID cases = 7-week high
•    Day ahead: Eurozone confidence, US home prices
•    GOLD: Breakout Coming?


A quadruple witching day, where index futures and options were expiring on top of an S&P 500 index rebalancing contributed to a volatile day of trading on Friday that ultimately saw small losses in the Dow and S&P 500, while the Nasdaq snuck out a daily gain. All US indices finished the week higher, but remain off the prior week’s highs. 

Official reassurance that the small cluster of coronavirus cases in Beijing has been “contained” helped Chinese shares finish the week higher alongside mostly positive Asian indices. European shares too rebounded from the prior week’s sell-off as the Bank of England added to its bond-buying and EU member states began negotiations over the proposed EU Recovery fund.

The tone in FX markets over the past week was much more ‘risk off’. Haven currencies including the dollar and Japanese yen gained while perceived riskier growth-orientated currencies like the pound and Aussie dropped. Sterling was especially weak with GBP/USD diving 1.5%to a 3-week low.

Gold pushed up to the top of its $1680-1750 per oz trading range and is again toying with a possible upside breakout. Huge declines in US shale oil output alongside signs of better compliance with OPEC+ output cuts helped oil prices gain ground. WTI crude could retake $40 per barrel this week.


"If you can learn to create a state of mind that is not affected by the market’s behaviour, the struggle will cease to exist.” – Mark Douglas

Germany R-Rate

Markets begin the new week with more information from over the weekend that might heighten concerns around rising coronavirus cases in some parts of the world. The US saw 30,000 new daily COVID cases, its biggest rise since May 1 and the highest ever reported rise in new cases in Arizona, Florida and California.

In Germany the coronavirus reproduction rate (the rate at which the virus spreads from an infected person to others) rose to 2.88, well above the 1.0 level where the spread is judged to be falling. The statistic is a major consideration for how quickly the German government reopens the economy, and in a worst case scenario whether it decides to shut down again. The RKI, which released the figures, however said “a nationwide increase in case numbers is not expected”. 

Coming Up…

The PBOC set interest rates today after having already made a surprise cut to the 14-day reverse repo rate to 2.35% from 2.55% last week. US home price data and Eurozone consumer confidence data probably take top billing in a slow day for economic data on Monday. A first major speech by the new Governor of the Bank of Canada Tiff Macklem could influence the CAD as traders look for any change in policy stance.