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London Open: Higher stocks and virus hot spots kick off the week

Market Analysis - 2 Min Read Stephen Innes | 11 Aug 2020

US exceptionalism index, which has admittedly been a poor indicator for the US Dollar of late, is climbing higher again as EMs struggle, the EURO shifts lower and US stocks punch higher.
 
Meanwhile, the Fed's balance sheet stopped growing exponentially a while ago. This is not news, but after the USD dropped 10% in a straight line against most G10 pairs, it’s worth keeping in mind.
 
In an interview with Xinhua [in Chinese] on Sunday, PBoC Governor Yi said that China would continue to implement its part of the 'phase one' trade deal with the US and fulfill its pledges to open up the financial sector, despite worsening relations between the two countries which are undoubtedly taking the sting out of the US-China trade talks.
 
Asian stocks have opened mostly higher on a de-escalation of trade talk risk premium and on the hope that a heftier US stimulus package will be offered up soon, And growth assets like oil are finding some comfort with the first favorable bend lower in the US Covid case curve in some time. 
 
With hotspots still flaring up around the world, one can never let their Covid-19 guard down as the northern hemisphere pivots to winter months when the virus outbreaks are thought to be more prevalent. 
 
TIPS' price action was reasonably one-way on Monday, with traders interested in selling 5y swaps or break-even. Coupled with the rise in real yields triggering a stronger dollar, gold is for sale in early Asia trade.
 
So, with Xi reaffirming China’s commitment to the P1 deal and real US yields rising while getting wrapped in a package of US exceptionalism, long gold positions continue to take profits while fast money traders are likely building more short on a break of $2,025.

For more market insights, follow me on Twitter: @Steveinnes123 

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