May 2020 Market Wrap

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EUR displayed unusual levels of volatility at the start of May as German judges challenged ECB on its QE activity and gave them 3 months to justify their bond buying program, increasing risk for a euro break-up. This added to the woes of a shrinking Eurozone GDP and a possible second wave of coronavirus infections, and we have hedged our trade positions to prevent unwanted downward volatility as part of our Risk Averse approach.

Last week, European Commission unveiled a EUR 750 billion pandemic recovery plan which coincided with improvements in German business confidence and eurozone economic data, propping up our EUR long trades. On the back of market uncertainty, Gold continues its rally in the month of May to hit a 7-year high.

U.S. jobless rates exploded to 14.7%, the highest unemployment rate seen since the Great Depression. However, the focus is instead on the escalating tensions between the U.S. and China. President Trump declared that he will strip Hong Kong’s special trade status with the U.S. in response to China’s plan in taking a stronger stance on anti-government protests and dissents in Hong Kong. This is in addition to the threats to delist Chinese companies from exchanges, restricting new Chinese companies from listing, capping U.S. exposure to Chinese investments and approving a controversial arm deal with Taiwan.

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