27th May 2020 - USD dented, S&P smashes through 3000, AUD visits fresh highs at 0.6675.

Good morning


  • U.S. stocks jumped, propelling the S&P 500 past the key psychological level of 3,000 points as optimism about developing coronavirus vaccines and the revival of business activity helped investors overlook simmering China-U.S. tensions. The benchmark S&P 500 crossed 3,000 for the first time since March 5, but came off session highs after White House adviser Larry Kudlow said President Donald Trump was "so miffed with China on virus and other matters that the trade deal is not as important to him as it once was.”

  • White House adviser Larry Kudlow said in a Fox News interview that President Donald Trump is so "miffed" with Beijing over the novel coronavirus and other matters that the U.S.-China trade deal is not as important to him as it once was. Kudlow also told Fox Business that China was making a big mistake with its moves in relation to Hong Kong. "And incidentally we welcome any American companies in Hong Kong or China mainland. We will do what we can for full expensing and pay the costs of moving if they return their supply chains, and their production to the United States. That's one of our key policy issues," Kudlow said in the Fox Business interview.

  • U.S. consumer confidence nudged up in May, the index edging up to a reading of 86.6 this month from a downwardly revised 85.7 in April. Economists polled by Reuters had forecast the index rising to 87.5 in May.

  • The NY Stock Exchange partially reopened the trading floors at its iconic 11 Wall Street building on Tuesday for the first time since March 20 when the bourse was forced to go all-electronic due to the coronavirus pandemic.

  • U.S. stocks closed higher on optimism about developing coronavirus vaccines and the revival of business activity, but the S&P 500 failed to hold above the key psychological level of 3,000 points. Unofficially, the Dow Jones rose 531.53 points, or 2.17%, to 24,996.69, the S&P 500 gained 36.36 points, or 1.23%, to 2,991.81, and the Nasdaq added 15.63 points, or 0.17%, to 9,340.22.


  • The USD fell across the board as optimism about a potential vaccine and a reopening world economy sapped demand for safe-haven assets. The DXY index traded down 0.92% at 98.92, after slipping as low as 98.89.

  • EUR was 0.83% higher, bouncing from 1.0914 up to 1.0996 high.

  • GBP jumped 1.18% from 1.2220 up towards 1.2363.

  • USDJPY remained relatively flat, improving from 107.85 down to 107.50.

  • AUD was the best performer overnight, vaulting up a huge 1.75% from 0.6570 to touch 0.6675 high.  

  • NZD rose more than 1% reaching a 0.6229 high from 0.6136 lows.

  • AUDNZD traded a 30 point range with both currencies indecently improving. Range 1.0700 / 1.0730.

  • AUDEUR blasted through 0.6000 to reach a 0.6072 high.


  • U.S. Treasury yields rose as improving risk appetite boosted stocks and reduced demand for safe-haven U.S. bonds. 

  • The Treasury saw good demand for $44 billion in two-year notes, the largest two-year sale on record. The auction had a bid to cover ratio of 2.68 times. 

  • 2 year treasury yields were last 0.178%. They have risen from a record low of 0.105% on May 8 but have held below 0.20% since that date.

  • Benchmark 10-year note yields rose four basis points to 0.697%.

  • Italy's 10-year bond yield fell to a seven-week low as risk assets rallied and comments from a European Central Bank official boosted hopes of further stimulus soon. 

  • The latest rise in prices pushed 10-year yields as low as 1.53% but closed the day at 1.55%. 

  • German bond yields rose to one-month highs, with the 10-year Bund yield rising almost 6 bps to -0.43%.


  • Gold fell over 1% as major economies further eased coronavirus-linked restrictions, fuelling hopes for recovery and bolstering risk appetite. Spot gold fell 1.1% to $1,710.95 per ounce, having earlier hit a low since May 13 at $1,708.47.

  • Iron ore futures in China extended losses into a second straight session, dropping nearly 3.5% as data showing higher shipments from mainstream miners last week eased supply woes. Benchmark iron ore futures on the Dalian Commodity Exchange faltered as much as 3.47% to 695 yuan ($97.42) a tonne on Tuesday, before closing down 3.0% to 699 yuan. Spot prices of iron ore with 62% iron fell to $98.5 per tonne.

  • Copper prices rose as much as 2% - Benchmark LME copper was up 1.8% at $5,405 a tonne and near last week's two-month high of $5,464.

  • Other metals: LME aluminium was up 0.9% at $1,520 a tonne, nickel rose 0.5% to $12,310, lead gained 1.6% to $1,672.50 and tin was up 0.3% at $15,400.

  • Oil prices rose, supported by signs that producers are following through on commitments to cut supplies and as fuel demand picks up with coronavirus restrictions easing. Brent crude futures gained 64 cents, or 1.8%, to settle at $36.17 a barrel. U.S. WTI crude futures rose $1.10, or 3.3%, to settle at $34.35 a barrel.


  • Australia - Q1 construction work (last -3.0%, forecast -1.5%). Underlying weakness & some disruptions. Downside risks.

  • New Zealand - RBNZ financial stability report. Regulatory initiatives put on hold during COVID crisis.

  • China - April industrial profits %yr (last -34.9%). Oil, metals and motor vehicle profits very weak in March.

  • US - May Richmond Fed index (last -53, forecast -40). Shipments, new orders and conditions were soft in April.

  • US - Fed Reserve’s beige book. Gauge of COVID shock across 12 districts.

  • US - FOMC’s Bullard. To discuss the economy during the pandemic.


The global economic recovery story persisted overnight which saw equities and emerging currencies lift to fresh new highs across the board.  The S&P drive to break up through key psychological 3000 resistance was enough to see AUD reach 2 significant resistance points, the 200-DMA (0.6659) and the 76.4 Fibonacci level of 0.7032-0.5510 (0.6673). The buying interest finally subsided at 0.6679 late NY with S&P falling back below 3000. Today in Australia we have the release of Q1 construction work. Construction work weakened ahead of COVID–19, moving lower from mid–2018; down by –12% (–$6.8bn) over 6 quarters. March 2020 will see a further fall, reflecting underlying weakness and some disruptions (bushfires and COVID). Private new home building work (–5%qtr, –13.7%yr in Q4) has further to fall (a forecast –3.5%) given the drop in approvals. Private non–residential construction (–3.8%qtr, –7.2%yr in Q4) is also likely to fall further given lacklustre infrastructure commencements in the non–mining sector. Public works (25% of the total) rebounded over the second half of last year, +3.6% in Q3 and +0.7% in Q4, to edge 0.5% higher in 2019. This improvement likely extended into 2020 with governments adding new projects to the pipeline. Today’s RBNZ Financial Stability Report could hold NZD back a bit, if the perceived odds of a negative OCR are seen to rise afterwards. Gov Orr says the banking system has been instructed to prepare for the possibility of rates going negative. But it will take time for computer systems and documentation to be updated to handle such a scenario. Today’s semi-annual report seems like a good place to elaborate on these technical issues, although waiting until the next edition in November is another option. If the report doesn’t address negative rates today, the follow-up press conference two hours afterwards might. Politicians are also likely to quiz the governor on negative rates during his parliamentary testimony two hours after that. For the AUD, opens this morning at 0.6650. The 10-DMA support, rising daily & monthly RSIs provide technicals a bullish lean with the next resistance coming from the March 9 high (0.6685) with stops likely above that. A potential break of this level leads to the February 2020 monthly high, possible 0.7020/40. Any further selling may be short lived and only a temporary pullback, levels 0.6550, 0.6510. Watching U.S. equities extremely closely for any further upside swings and any further USD gauges for the AUD to potentially lift higher from here.

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