MOAR Rally

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BOE leaves rates unchanged
Equities rally extends
Nikkei0.22% Dax 1.06%
UST 10Y 0.71%
Oil $27/bbl
Gold $1691/oz
BTCUSD $9300

Asia and the EU
GBP UK BoE on hold

North America Open
USD Weekly jobless claims 8:30

Another day of risk on flows in stocks while FX was generally subdued with traders showing little reaction to Bank of England interest rate announcement which came in as expected with no change in policy.

Cable did rally in the immediate reaction to the release on the news that two members of the MPC voted to expand QE now – a sign that the bank remains in a highly accommodative mode as it tries to grapple with the fallout from the coronavirus crisis. The UK now holds the dubious honor of having more deaths in Europe than any other country despite the fact that its infection rates did not start to accelerate a full six weeks after Italy and Spain.

The COVID-19 statistics are a terrible political stain on the Johnson administration but more importantly, the state of danger is likely to keep the populace homebound regardless of whether the government lifts the lockdown or not.

UK policymakers for their part remain highly optimistic that the UK economy will recover quickly with Andrew Bailey stating that he expects the rebound to be much more rapid than during the Global Financial Crisis. He did concede that the impact on demand could last for longer than a year and that there could be some long term damage to the economy.

At this point, of course, no one. can confidently say just how long the COVID-19 effects will last in the economy. G-3 officials are starting to make tentative steps towards easing the lockdowns and returning to a semblance of economic activity. Equities continue to respond positively to the news with US index futures up again in overnight trade by more than 1%.

On the docket today the market will get a look at the weekly jobless claims and the productivity stats but unless that data is truly terrible investor sentiment is unlikely to be dented. For now, the mood remains distinctly risk-on as markets bet on the best possible scenario.

Boris Schlossberg
Managing Director

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