On business activity, oil prices and the W-form

24 sept. 2020

Business activity data from Markit were released yesterday, prompting markets to speculate about a W-shaped economic recovery. In Germany and Eurozone, the manufacturing sector continues to recover, but the services sector is experiencing problems (indices are below 50, that is, activity is declining). In the UK, the situation is generally better, but given the latest pandemic trends, one should not be too hopeful. In the US, both components are above 50, so buying the dollar against the euro and the pound remains the basic trading idea for the FOREX today.

Given such data and current statistics on the pandemic in Europe and the world as a whole, the economic recovery may well take a W-shape. That is, after a rather sharp recovery in the summer, the economy will sink to the bottom again. So short positions in the overpriced stock markets are our trading ideas for today and the nearest future.

As a result, the ECB, campaigning for additional stimulus. In particular, Board Member Fabio Panetta said on Tuesday that it would be better to do too much than too little. There are more and more voices from the Fed for additional support for the economy, but not by the Central Bank, but by the Government.

As for commodity markets, the dollar's rise is a reason for gold and oil sales. Moreover, news from Libya (a sharp increase in oil exports from the country is expected) is definitely set up for oil sales. The data for oil reserves in the United States (according to EIA, again decreased by 1.6 million barrels) are unlikely to be able to change the situation on the market.