What you need to know for markets opening: Nations reopening should be risk positive

  • COVID-19: A combination of antiviral medicines can swiftly reduce the amount of virus in their bodies.
  • Nations reopening society should be risk positive for the open.
  • RBNZ week, eyes on forwarding guidance and negative rates.
  • GBP/USD to be pressured as Brexit talks resume. 

Markets will be fixated on nations and many US states starting to reopen after a number of weeks in lockdown in an attempt to thwart COVID-19. The process will be slow but it is never less positive for markets at the start of this week. 

For a round up of Friday’s close, see here: Forex Today: PM Johnson to set the tone for the Asian session

A focus on GBP

Today, the UK’s PM, Boris Johnson, unveiled a “conditional plan” to reopen society on Wednesday, which will enable people to spend more time outdoors. The PM also said people who could not work from home should return to the workplace – but avoid public transport. He hoped the next step “at the earliest by 1 June” would be for some primary pupils to return to school in England. More on this here: UK PM Johnson: We are establishing a new COVID alert system run by a new joint biosecurity centre.

While this a positive for GBP, Brexit, on the other hand, is not. Brexit talks will start again on Monday and given that the British government has insisted it won’t ask to extend the 11-month transition period. the risks are tilted to the downside for GBP. However, should there be renewed intent on an extension, the pound would benefit from such a theme. Given the COVID-19 outbreak, an extension is more likely than it was before. Meanwhile, while there are expectations for an extension to the QE programme at next month’s MPC meeting, GBP will struggle to maintain a bullish bias. 

  • GBP/USD Forecast: Buying interest limited ahead of Johnson’s speech

In other news relating to COVID-19, Reuters has reported on a triple-drug combination of antiviral medicines which have helped relieve symptoms in patients with mild to moderate COVID-19 infection. It reports that the combination can swiftly reduce the amount of virus in their bodies, according to results of a small trial in Hong Kong. 

People’s Bank of China tipped to cut rates

Meanwhile, the People’s Bank of China is tipped to cut rates again and has said the country faces unprecedented economic challenges from the coronavirus pandemic and it will resort to “more powerful” policies to counter the hit to growth.

RBNZ interest rate decision week

The Reserve Bank of New Zealand is meeting this week, Wednesday 13th (Asia) where it is expected to keep rates unchanged but increase size of Large Scale Asset Purchase programme. 

“After slashing the Cash Rate by 75bps in March and having said that the OCR is likely to remain at 0.25% for at least the next 12 months an unchanged policy rate outcome would not be a surprise,” analysts at TD Securities explained. “There is a risk of increased bond purchases from the current $30bn and echoing the RBA in targeting a rate on government bonds. Another option could be to strengthen forward guidance.”

  • RBNZ MPS Preview: Expected to keep rates unchanged at 0.25%

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