For this week’s gold traders article we’re focused on the big push higher over the past two days in real US Treasury yields.
We also evaluate the effect on the USD which has coincidentally had its best day since 2016.
During this move USDJPY and EURUSD were well-traded, with USDJPY rising to 105.92, helped by the rise in Treasuries and S&P500.
Today is a new day though, and we see risk sellers emerging here in Asia, with S&P500 futures -1.5 percent, Asian equities lower (ASX 200 -1.3 percent) and traders back buying bonds, so the USD is offered.
Gold (USD) is attracting investors again in the face of such changes – as the S&P500 does, as is the case for gold.
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We should consider the broad range of steps that have been unveiled over the past 24 hours, both at fiscal and monetary level, and if equities are going to rally, then, given the ability of this data, it had to do so. The movements have been short lived, as I have said, but we need to change our movement standards – 1.5% is the new 0.3%.
The measures proposed were:
- Trump talking to Republicans about lowering the payroll tax to 0 percent for 12 months, but that would only kick in after the elections in November – a huge virus politicization – seems rather ambitious considering how stimulatinh it will be.
- Italy is proposing an E16b / E25B intervention to combat the virus – PM Conte calls on the ECB to do whatever it takes to mitigate the virus fallout.
- ECB president Christine Lagarde has requested a fast fiscal response from European Union governments– the market expects the ECB to cut 10bp and a host of other steps.
- In Australia we will hear Scott Morrison’s $10b fiscal plan soon.
- Indonesia’s govt says they focus on further stimulation.
- The Abe administration is thinking of a second Y430.8b fiscal stimulus (in Japan).
- RBNZ Orr puts all the measures on the table – rate cuts, FX interference, QE – he really doesn’t think NZ needs it.
- Bank of Korea indicated that they would intervene in FX markets if necessary – also interesting that Korea’s daily rate of new infections fell to the lowest level in 11 days.
- BCB (Brazil CB) revealed 20k FX swap contracts at auction.
- Mexico CB increased interventions from 20b to 30b.