 Good morning. My name is Anthony Chung. I'm the head of market analysis here at Amphi Trading It's Monday the 18th of May going to look at the not only the session ahead But also for the week ahead as a whole my job here to bring to you some of the main fundamental themes that I'll be looking at talking over the calendar some of the news that's been in play over the weekend and All of that is summarized in this as you can see on my screen This is the macro menu that I write every Sunday Evening and I post on my Twitter account my handle is here if you want to access it and read in more detail But it's a good way to prepare for the week ahead because most of you guys I know will be doing your own technical studies on your charts looking at potential trade setups So this could be a nice complement to that just giving you a bit of a fundamental flavor of some of the main things to Be aware of Also, you might have seen some of you might be watching in fact this briefing on the Amphi Trading YouTube channel and Couple of things or changes I've made here And I've recreated three different playlists on our main Amphi Trading homepage on YouTube One is my market briefings. So I'll be doing this every weekday and usually these get published early in the morning My colleague Sam North which I know many of you are familiar with he is now going to be doing this new weekly trading setup Video on a Sunday and he's only going to do it on a Sunday, but look ahead for the entire week So definitely something which I suggest that you watch because he'll make clear all of the main Cross-asset levels you need to be aware of which is a nice addition then to Compliment the fundamentals that I cover and then you might have seen as well a couple videos We dropped one over the weekend which was Explaining this idea of negative interest rates So my colleague Eddie Donbez now has his own playlist where every Saturday He'll be releasing a video explaining one of the hottest topics in markets Simplifying quite complex subjects like negative rates for example in more detail so don't forget to like and subscribe to the channel and Absolutely feel free to engage. We'll be happy to help, but let's talk about the week as a whole and starting off then with How's the week begun and a little bit of general optimism? You could say equity index futures are trading on the front foot. The DAX is up about a hundred and eighty seven points this morning US futures the the S&P's up 33 Despite that gold though is up about 15 16 dollars You can see in the top right here has found some resistance around this R1 the initial push during the Asian Pacific session so despite some general Moderate risk appetite there still is this kind of necessity to hedge if you like in regards to potential future inflation for potential then of a of a virus second wave Pandemic return if you like as the number of countries start to loosen their lockdown measures. They're just that general Diversification to gold seems to be helping support the price at the moment And there's some comments out of Powell who appeared on CBS yesterday Also helping just lift the price of yellow metal as well Elsewhere though oil prices will have a look at that a bit more detail on the news side But you can see elevated up about a dollar and thirty five cents and north of thirty five dollars or thirty dollars Excuse me, and this comes ahead of the June futures contract expiration, which we'll get tomorrow So fixed income futures a little bit more reflective So just xing out gold from the traditional kind of correlations then down marginally with the general move higher in equities and also In addition that move higher in oil and in the FX markets the Dixie's pretty flat If anything sterling perhaps a touch under performance, but any of that more Firm under performance has been eradicated from what we've seen at initial opening overnight And we'll have a look at some of the reasons behind that as well. So let's get into some of the news stories First off starting with this now, I know this is quite a quite detailed Infographic but basically what I wanted to draw your attention to here really is this is the commencement of The corona virus to where it is at the moment and you can see this is encapsulating all of the daily deaths of patients Diagnosed on a seven-day rolling average and the main thing is here is the shape It's almost like this kind of bulb shape that you're seeing at the moment but importantly the tailing off of the the back phase of the bulb if I can use that analogy is What is being seen as a slight positive at the moment at least in most Countries and looking at the global picture obviously not quite the same if you're looking at areas like India for example I saw Goldman Sachs who said that given the lockdown that they're seeing in India at the moment as they're still and somewhat the Acceleration phase of the virus given they were quite Later down that that kind of incubation period Their GDP could be hit by nearly 50% so it's going to be absolutely decimating for their economy, but overall globally that these Distances are continuing to narrow and Italy's shops bars restaurants in barbers will be allowed to reopen on a regional basis People also be able to move within their own regions starting Monday there was a decree passed by the Italian government of the weekend And so people can now freely move about the country again So Italy which was obviously one of the mainland European hotspots Starting to try and get back to some degree of normality Germany which if you remember at the beginning of last week actually saw a renewed flare-up in cases Well on Sunday they reported their third lowest increase in new coronavirus cases since late March Separately Spain of course is the other country a lot of people have been looking at they recorded their smallest number of fatalities in two months So overall then that's helping sentiment to a certain extent However elsewhere we still need to be monitoring some of the other Areas in the US and we're going to talk about that a little bit more when we talk about some of the risks associated what Powell was highlighting, but just going through some of these news stories from a more Sequence if you like to explain some of these moves we've had this morning one is oil Oil prices have been moving higher in the overnight session Obviously a lot of people were a little bit apprehensive going into the futures Contract role the expiration of the front month We've already switched in terms of the volume into the July contract but a lot of that risk when we had the the expiration of the the previous contract on the back of the idea then that You know a lack of storage at Cushing was forcing people to basically, you know I'd pay you money in order to take this this contract off my hands that negative price scenario very unlikely to unfold now Talked about this many times about this idea of the the the United States oil fund Which held a lot of these speculative positions generally in the oil market had already averaged out their kind of duration further out down the the calendar curve if you like Meaning that there wasn't going to be such a pressure point like what we saw just a few weeks ago So I don't really anticipate too much fluctuation on the back of that And why are we generally have been supported in oil? Well, it hasn't really changed what we talked about at the end of last week US oil production generally is decreasing and a fairly rapid rate because active drilling rigs in the US Continue to fall quite sharply. I think it was around 55% now since mid-March in terms of the number of rigs that have come off line so that does mean That obviously production rates are decreasing sharply stockpiles at key storage hub in Cushing shrank for the first time since late February Elsewhere on the OPEC side Iraq who typically would normally be the second largest of the OPEC producing nations said it plans a halt output from one of its oil fields due to a protest and These American cuts that we've been seeing come on top of almost 10 million barrels a day of curbs from OPEC plus So this is also including then extension of Russia that kicked off at the beginning of the month So overall remember we had that report as well and one of the energy agencies last week talking about Perhaps the hit to demand not quite as bad as they initially might have feared in addition then to this Recalibration if you like on a supply side Meaning that we've got a nice supportive theme going on in oil at the moment So continuation really of what we had of last week and in context that that active rig count What does that look like in a historical sense? Well, those of you who were trading back a few years ago will remember you had that really Quite spectacular move in oil when back in late 2014 going into 2015 This is when the price of oil was trading well north of a hundred dollars, but we ended up getting below $30 we actually traded at what 26 bucks or so in February of 2016 This came with a combination of a few different things Here was around, you know if I was to put a dotted line of the production rates of shale in North America It was basically moving North on a fairly steep gradient at that point And so what was happening was OPEC i.e. the Saudis could definitely see this Competition coming from America and so what they decided to do was just generally flood the market and continue to pump oil despite at the time what was then some fears emanating from China about hard landing and it was a misjudgment and the US industry had the flexibility to weather the storm although we saw active rigs in the US dropped Substantially actual production rates and efficiency Levels per individual site meant that their productivity levels were really not dented That much at all and actually it was Saudi that was suffering and then we got the OPEC deals obviously kicking in And we've had a bit of a global recovery However, since that point the pandemic has seen an almost immediate drop off here To the magnitude if not steeper than what we saw back in that 2014 15 periods So you can see here we're now lower than that trough So if you think about the active rig count now, you know, this was when the oil was trading at 26 bucks We're now trading around 31 at the moment To give it a comparison's sake The other thing that a lot of people obviously have looked at from the weekend was this a lot of fed commentary Last week you had fed commentary at the weekend and you've got more fed commentary coming This week because drone power is looking at taking questions on the scale and time of additional Fiscal relief when he appears before the Senate banking committee on Tuesday of no doubt He's going to be pushed once again on this idea of negative interest rates So so basically he spoke in an interview on CBS 60 minutes program on this idea of negative rates He once again said that they're probably not appropriate or a useful tool for the US But didn't go as far as completely ruling them out pretty similar to what other Central bankers like Andrew Bailey at the Bank of England has said Palo did say that assuming there's not a second wave of the coronavirus I think you'll see the economy recover steadily through the second half of this year But he said that the US economic recovery may stretch deep into next year and a full comeback might well depend on a Coronavirus vaccine, but the Fed has more ammo. So he was Yeah, a little bit cautious if you like about the economic recovery and a lot of people suggesting that that's what's helping fuel This kind of further support for gold at the moment Given the fact as well that the full recovery hinges on a vaccine and we know that that's not going to be anytime soon one of the main risks here of course then is the idea about the implications that the second wave could have and This is a map of the United States and the different colors define different phases of the unwinding of the stringency of the lockdowns So here California Their economy is now roughly about 75% open according to data created by the New York Times While upstate New York is also set to reopen Parts of New York, Virginia, Maryland moved toward lifting lockdowns on Friday and Connecticut, Minnesota set to ease their Restrictions in the coming week. So once again, you know, just given as well the kind of mixed opinions here The administration obviously quite keen to get the doors reopened. However, that Fauci that chief medical adviser in America just a week ago or so was was very Much bringing to the to the table the notion of getting this wrong could have very severe consequences for American citizens in terms of their health, but also the broader economy So yeah, definitely still keeping a close eye on this and it does come in the context, of course of a continuation of this this kind of tension simmering on the trade war side Just giving you this latest one is quite unbelievable Comments actually that came out of the weekend from the White House traded by the Peter Navarra who spoke on ABC News He basically suggested that not only did China create this virus, but they then ordered and sent airline passengers purposefully places like Italy To the United States in order to spread the infection worldwide. So Some pretty bold accusations flying around Out of the White House at the weekend Trump then this is what you do tend to see whether it's The trade advisers whether it's Trump himself, but they tend to have this kind of almost Coordinated effort where if one sounds quite aggressive the other sounds much more conciliatory They tend to balance each other out and Trump Said that while he suspects the outbreak may be connected with the Wuhan Lab he said it's unlikely the Chinese deliberately unleashed the pathogen So saying pretty much just tempering back what Navarra was saying But the point is the idea is out there and and everyone's quite clear what the US are thinking by making these two statements US lawmakers and officials are crafting proposals apparently The American companies to move operations or key suppliers out of China including tax breaks new rules and carefully constructed subsidies On the flip side China's Commerce Ministry said on Sunday that is firmly opposed to the latest rules by the United States Against Huawei and will take all necessary measures to safeguard Chinese firms rights and interests So yeah, definitely this continues to be a subject to monitor throughout the weekend again another reason why to be Positioned accordingly in gold and what's probably further help that price movement Because if you think about the period of the months ahead It's probably more than likely that this anti-China rhetoric will continue to ramp up as we going towards the election at the latter part of this year This of course is that infamous trade war cycle I guess kind of pick where we're at at the moment is kind of around this sort of phase I guess the market not quite at the point where it's in sheer panic that they've pushed too far on this kind of aggressive rhetoric, but this administration is certainly talking tough about China at the moment How long they can do that before then the inevitable kind of downturn might take place is yet to be seen and then we go through that kind of Infinity loop of them them hinting towards a potential resolution the market kind of breeze aside relief before then It becomes evident that a lack of progress is being made and we go full circle again So definitely worth bearing this all in mind Yeah, as I said gold Continues to be supported by a lot of this type of price movement if you think about gold as well in a longer time frame You know we are trading up at Levels that haven't been seen for a very long time and if I actually just switch over here This is looking at a monthly candlestick This this chart completely unaltered from what we were looking at when we were initially seeing some spikes of price activity through the beginning of the year and You can see now we're retesting up at around on the on the monthly where we were back in April Any push above here then the real key levels start to come in really around that 1800 dollar mark I'm looking at the futures here so 1795 that would be that kind of triple top November 2011 Feb October 2012 So you're going back several years of course the last time we were up this high But also comes as well increase this you know big pickups in money supply With the feds doing copious amounts of new QE and that being a real global situation at the moment so yeah those Who have been in that long gold position for a while obviously quite happy with the developments and how that's unfolding at the moment Just going back then putting all of this together. What does it mean for fed policy? I did actually put a poll out yesterday I'm always quite interested to see where the general Sentiment lies at the moment and thankfully just given the kind of volume of responses I think this is quite a good reflection of where people's heads are at the moment I asked a question. Will the Fed eventually adopt negative interest rates and 62% of you said yes 38% of you said no I Guess some of you might be thinking well. What does that think? At this present point in time without getting too bogged down in the technicalities I actually do think that the Fed moving negative is quite a high probability I think that they've tried to fight back against The notion of the market pricing at this point But it almost if the markets continue to price this way it becomes almost a built-in Expectation and if the Fed doesn't respond then at a point in time Not sure what exactly but there are multiple catalysts that could create that on the macro side Then the Fed could be forced almost by the markets positioning to be able to do this now Obviously the Fed doesn't like to respond in that way But if it becomes self-fulfilling then I think it is Seemingly becoming somewhat inevitable that we could well be heading down this route the idea that the Fed you know Historically having never gone negative is that a barrier? Well symbolically yes But you know having lived through the financial crisis and seen the advent of things like quantitative easing and lots of other Weird and wonderful unconventional measures from central banks. I don't think the idea of going negative in the US would be a shocking one To that extent, so I'd be leaning on the on the yes camp for now All right final things that I wanted to have a look at were we're kind of UK based Quite a few things to look out for this week Firstly just talking about the political side This was obviously the speech that was delivered by the PM probably around eight days ago now so not this weekend the one before and Reports over the weekend how Boris is accepting frustration over lockdown rules. He's really come under some pressure in the media about the lack of clarity from the phasing of the general unwinding of lockdown and one of the things that came out of the weekend was this which was an opinion observer poll and It did show then when asked in this poll to what extent did you approve or disapprove of the government's handling? Of the coronavirus situation so far. This is the chart on the left You can see them through really the last month or so particularly at the beginning there was a really positive response by the British public towards going on quite onerous lockdown You know being told to stay at home save the NHS and so on really did resonate quite well with the public However, as we've gone through the last I'd say three or four weeks The the uncertainty I guess about the Specifics the UK has been generally was very slow about putting the lockdown on in first place And equally it's been a little bit slower than what we've been seeing in mainland Europe albeit the virus has been in a slightly different period of its development, but the The telegraphing if you like of real details about how we're going to get out of the lockdown has been a little bit lacking almost polarized then by that recent borrows speech and for the first time since Really the the outbreak has begun the government approval rating has now turned negative Disapprovals now 42 approvals at 39 and to what extent do you have confidence about the government's ability to handle the situation as it develops going forward and again People are starting to lose a little bit of confidence and you know how much is this relevant for markets? Well, really you've got to look at it more of the translation into politics because it does heap more pressure Onto the government to make the right calls. There are a real pivotal point in the Period of history where they've got to make that judgment about getting the economy back Reopen as quickly as possible in order to offset what's going to be one of the worst economic downturns in the history of this country And so doing that though comes at the precarious nature of the cost and casualties of life So, yeah, really tough at the moment for the government to strike that right court Which if anything I think could have well have negative implications for generally how the How the pound might react but the pound not only is it really down to the virus the other thing is Well, first of all on the on the political side, which is also going to be in the spotlight this week is Economic data this week. We get a couple of data points coming out of the UK There are retail sales and there is inflation data Both of which cover the month of April So the full entirety of the most strict part of the lockdown so as you can imagine both numbers are going to be Very negative reading from a from a media point of view How much of a surprise is it going to be not a great deal? So again? I don't think it's going to have a massive market moving impact, but you know from the retail side specifically If you think about it shops aren't probably able to reopen Not until around the end of June in Britain and then even so it's going to have social distancing It's gonna be lots of rules and things like that. And so, you know, it's gonna be a real Tough time for retailers going forward and all of this again is going to put more pressure On the government politically on the on the flip side. There is also Brexit and we saw Brexit kind of rear its head Last week on the pre-automated talks going into that End of June deadline when the UK needs to make a decision about requesting extension beyond then The end of this year. Otherwise we face the prospect again potentially of a no-deal Brexit And what I was looking at here are a few different things This is from the analysts at ING the Dutch Bank and then we're looking at here sterling volatility curves don't show any any kinks so Basically, I mean this is looking at sterling at the money-implied volatility term structure And I know that sounds awfully complicated But think of it quite simply is what we're looking at here is trying to look out further in the future as to identify when peer People could see potentially a Area in the calendar of potential volatility force coming So generally speaking if people were a bit apprehensive About the request or not of an extension and the risk of a no-deal probability Materializing you should see this reflected in this volatility curve And at the moment what this curve would suggest is that the market is still relatively complacent about the idea then of that Happening i.e. Brexit You know two sides not finding agreement the UK not buckling and asking for extension And the real tangible prospect then of already on the back of an economically devastating period of the pandemic You're then going to throw in the idea that we could have a no-deal Brexit to boot Now I actually see that as an unlikely scenario at the moment I think the UK government has the political wiggle room to blame the pandemic for the Not delivering brexit to the timetable they previously said but you know what ing is saying is that on previous occasions there was basically Six or seven weeks before the october 2019 brexit deadline the march deadline These were the previous deadlines. There was a distinct Pickup reflecting that about two months ahead And if you think about it end of june is about a six or seven weeks away And the volatility curve does not show that type of hedging for the potential Pickup and volatility in the pound Now the secondary one here is then you could also overlay that with looking at the cable speculative positioning as a percentage of open interest So again in plain English, how many people are long and how many people are how many people are short in these open contracts and generally speaking then That's fairly neutral It is very ever so slightly negatively positioned But nowhere near as much as on previous occasions on this brexit kind of narrative So there's plenty more I guess sterling short positioning Potentially to take place over the next next six to seven weeks is what i'm saying if that comes Alongside this continued pushback Against negative rates and as long as equity markets remain stable And then if the u.s. Government comes forward and the republicans are able to tweak and then pass another sizable stimulus bill You know, I think you could see some interesting moves in cable With the risk being to the downside over the coming weeks Okay, that is that is pretty much it So just finally at the end of the macro menu, you'll find a full economic calendar Today is pretty quiet overall We've got a couple of speakers bostick to cost for the ecb the fed and then you've got bank of england's tan reiro speaking on Monday Tuesday You do have a few different things probably the interesting one could be fed's power testifying the senate banking committee on Marisaid relief and economic security act From the earnings perspective, it is pretty quiet You get the kind of brick and mortar retailers out the u.s. This week So you've got hallmark on tuesday home depot and you've got target on wednesday On wednesday, you can do get the fomc minutes probably the highlight on that on that day And then thursday you start to see the various manufacturing service pmi numbers Alongside some housing data coming out the states And you've also got quite a few fed speakers as well Williams karida and power once again with bank of canada governor polo is also speaking on thursday And then on friday, you get the european Based manufacturing service pmi data is that uk retail sales number as well So yeah, if you want to check that out in more detail I'll put the link to this report in the top line of the description on the video It's got sam's video on the trading setups as well So you should one stop shop for everything you need to kick off the week ahead Any comments, of course just feel free to To drop a comment and i'll be happy to respond throughout the day And otherwise remember to subscribe to the channel and i wish you a good week ahead. Thanks very much guys. Take care