Market Commentary – July 22, 2020

Kevin Jock

22nd July 2020

     US dollar continues its decline whilst precious metals surge towards historic highs. News of stimulus packages deals in Europe whilst US in disagreement spurred investor sentiment to more safe haven assets against the dollar. Markets fear political frays will leave the size of the stimulus package short of expectations.

Figure 1 (source: Refinitiv Eikon): Silver tears higher

Figure 2 (source: Refinitiv Eikon): XAU trades higher

Headliner Review
     Members of the European Union struck a historical deal yesterday. A 750bn recovery fund, dispersed accordingly across members to assist in their economic reconstruction for the next 7 years. Of which, 390bn in the form of grants favouring weaker states. Originally deadlocked by Austria, Denmark, Netherlands, and Sweden, of whom wanted to pare back the size of the fund and preferred a loan structure instead. Settled in return for a boost in their budget rebates. Netherlands the biggest winner with rebates increasing to1.92bn from 1.57bn.

     Across the Atlantic, House and Senate members struggle in negotiations on a top-up stimulus package for the US. Disagreement predominantly centred on the size of the package. Republicans offering 1 trillion dollars. Democratics believe 3 times that amount is required to support America’s ailing economy.

     Amidst intense scrutiny, both Judy Shelton and Christopher Waller successfully obtained approval from the Senate Banking Committee. A final vote by a full Senate awaits. Many weary of Shelton’s narrative as concerns grow that she could politicise the Fed and diminish the institutions independence. During the committee, Shelton received no votes from Democratics, whilst Waller obtained five.

  • Retail sales falter, disappointing markets. Canadian figures rebounded after easing lockdown posting a MoM increase of 18.7%. Analyst expected 20.2%. Similarly, Aussie sales declined dramatically to 2.4% after experiencing two consecutive months of stellar MoM 15% growth.

Headliner to Watch

  • US existing home sales continue its recovery with figures expected to increase to 4.77M from 3.91M. Amid the pandemic, US housing remained relatively robust. MoM HPI whilst slowed, still posting positive gains with June seeing an increase of 0.3%
  • Even with a production cut agreement among most OPEC members, crude oil inventory set to build from -7.5M to -2.1M. Two factors seen boosting stockpiles. A global resurgence in Coronavirus cases and Iraq in dissent, restarting production in Gharraf oil fields. Previously suspended in efforts to contain the pandemic.
  • Market consensus sees Canadian inflation MoM increase from 0.3% to 0.4%.
  • Japan on holiday for the next two days. The country celebrates Marine Day and Health and Sports Day. The former to appreciate the importance of the ocean and it’s bounty as Japan is an island nation. The later commemorates the 1964 Summer Olympics held in Tokyo.


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Antony Tan
Ben Li
Kevin Jock