Market sentiments, UK labor market and the Fed

Last week, financial markets closed in a rather gloomy mood. The pandemic still cannot reach the second peak, and the countries that defeated the epidemic begin to doubt it, that is, the second peak goes hand in hand with the second wave. Even the seemingly successful countries in terms of the fight against coronavirus like China and Germany have reasons for concern. In China, this is an outbreak of diseases in Beijing, and in Germany, an increase of the infection rate above a threshold value of 1.

Some words about China. Yesterday's data on industrial production and retail sales were rather disappointing. In May, retail sales fell by 2.8% (analysts expected a decrease of 2%), while industrial production grew by 4.4%, which is below growth forecasts of 5%. China is hinting to the rest of the world that it is not worth counting on a quick and painless economic recovery.

Protests in the United States continue and even became more active after the next murder by police of an unarmed black.

But despite all this market sentiments on Monday have changed dramatically. As a result we saw a sharp decline in the level of fear in the markets, growth of stock markets, a decrease in the dollar and the growth of commodity markets. In general, the swing swayed the other way.

One of the reasons for such a sharp turn was FED press-release that the US Central Bank began buying bonds in the secondary market. And although plans for this have been voiced for quite some time, the markets took the news as an occasion for optimism growth.
Today Fed Chairman Jerome Powell will testify in Congress and report for the first half of the year. And although the FOMC meeting was less than a week ago and everything seems to be said, Powell's comments are extremely important.

As for macroeconomic statistics, the main attention should be paid to data on the UK labor market. A pound, which already has an extremely negative fundamental background, may not be able to withstand another portion of weak data and will fall again. A few words about the pound. Yesterday, Boris Johnson agreed with the EU on the need to intensify the negotiation process. That is, there is reason for the emergence of hopes, but there is no any breakthrough.

After yesterday, our positions only added relevance, as they significantly improved entry points: we sell the pound against the dollar and the euro, we sell in the US stock market, we buy the dollar against emerging and also commodity currencies (for example, we will sell AUDUSD around 0.70) .