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June 1, 2020

High Volatility - USA vs WHO and Protests worldwide

​Protests rock the US while economy is trying to bounce back. Can democracy and violence co-exist?

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This article is originally referred from IronFX Market Report.

US vs WHO and Hong Kong

The U.S. is expected to say “no” to the WHO and Hong Kong.

Last week, President Trump was making hints at possible changes in the relations between China and the U.S.

But during his press conference on 29 May, he did not make any further steps.

Trump announced that the U.S. would be breaking off relations with the World Health Organisation, which is a surprise to no one.

The President did not speak on the issue of tariffs but did announce the revocation of preference for Hong Kong, and the migration policy would be revised.

This news was met by growth on Forex and stock markets.

The U.S. macro statistics came up weak as consumer spending fell 13.6% in April, and the trade deficit added 4.7 billion.

Americans’ income grew 10% due to unemployment benefits, but people are not spending this money.

During the U.S. Federal Reserve Chairman’s speech, Jerome Powell rejected the idea for negative interest rates, saying that the central bank, which was active in building its balance, has not reached any limits.

The upcoming week will provide many macrostatistics, including three meetings of major central banks, a critical report on U.S. employment, Australian economic statistics, as well as labour and market data for Canada.

While payrolls are a significant market driver, we are unable to assess until Friday; however, we don’t expect it to have a substantial impact on monetary policy.

The rate of decline of this measure should slow down in June, but if its release does not meet expectations, then talks might resume regarding negative interest rates.

For the most part, ISM and payroll reports should support a slow economic recovery.

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How US Protests affecting economy?

Protests rock the US while economy is trying to bounce back.

For this week’s report, we find it suitable to open up on the inner social instability taking place in the US, currently and since the past week but also on the current economic circumstances.

The killing of an African American during his arrest by a police officer seems to be the firestarter for protests in many states in the US, leaving us guessing to which extend the matter could end up.

On the other hand, the economic circumstances in the US seem to be improving as the major stock markets have displayed a rebound, even as some issues persist.

Further examination on both matters will be made through this report and we will attempt to view similarities of the incidents from the past.

For the first part will also attempt to examine if the matter can lead to possible destabilization of the US political stage and even internationally, as it seems that after the happening many people from all around the world are either shocked or enraged.

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Worldwide Protests for a man. What’s happening?

First of all on a brief note, we would like to note how the first incident played out.

On May 25, 2020, George Floyd was killed after he had been arrested by a police officer who kneeled on top of his neck leading him to suffer from asphyxiation.

Even though should George Floyd had been rightfully arrested, he was wrongfully treated during the arrest, and the violence he suffered had without doubt lead to his death.

Many argue that racism could be the main reason behind the incident.

In the US and all over the world many people have become victims of such circumstances, in our opinion.

Yet, in the US specifically we have seen violence taking place between people from various origins and the police.

It seems to us that every time this happens the intensity of the reaction is even worse.

Happenings like the pre mentioned seem to promote animosity and violence leading to distrust of the citizens and their governments.

Even though it seems like we live in a civilized world were democracy flourishes, police brutality, racism, violence and criminal actions co-exist, giving us the cold side of the reality we live in.

Speaking generally however, it would not be wise to consider only one side even though a life has been lost.

Yet, for the benefit of humans it would be just to view both sides of the coin and learn from it.

Moreover, as a result massive protests have broken out in many US states, and fires as well as explosions, looting, vandalism have erupted.

Even after two months of being in a lockdown to face the coronavirus outbreak, people are out on the streets protesting but also fighting, damaging and steeling other people’s properties.

Since the epidemic is still ongoing and people are still carriers of the virus, isn’t this threatening a new spread of covid-19 among citizens?

Can the world and the US afford another wave of coronavirus?

Protests have also broken out in major capital cities like London and Berlin, as the happening seems to emotionally impact people from all around the world.

It creates sadness and despair as people rightfully support the idea that authorities should be very cautious when dealing with any kind of circumstances, even wrong doing.

Any sort of abuse of authority could lead to massive destruction and anger.

The happenings do not only increase unrest and fighting, they also have the potentiality of damaging the economy and lifting economic risk.

This has been the case for a long time in Hong Kong and 20 years ago in the US.

Economics is not the epicenter for the pre mentioned happening but at the specific time when almost all the global economy is trying to uplift its activities, the chaos from these protests worsen the situation.

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How is US financial market doing?

At the moment, the US economy and global economy is showing signs of a rebound.

After the past two months manufacturing and services had been put on hold due to the lockdowns, in May fewer people signed up for jobless claims and economic activity had increased.

Impressively and until the present moment, the US stock markets have performed a significant rebound since the sharp drop in late February and March.

Also, companies that dominate the US economy displayed confidence they would overcome the crisis, fueled by the central bank pouring lots of cash in the economy for support.

It is evident that the chaos breaking out within the protests comes as a cost to a very crucial point in the US economy’s re-awakening.

It also promotes division instead of unity when the most dangerous enemy for the time being is the virus.

This could be the case until an effective vaccine is manufactured and distributed all around the world.

In any case, even though the combination of the latest happenings seem to have shocked the world once again, this is not something we have not come across in the past.

However, it is very sad as it could be perceived in many negative ways.

For instance it proves we still live in a world of violence coming from all directions.

It implies we are still not ready to evolve as human beings as our ways are rooted in rage and racism.

Additionally, it takes us backwards as opposed to the unrealistic vision we have of ourselves being better off than 500 to 600 years ago as we repeatedly step into the same mistakes and traps.

For the time being the protests do not seem to have majorly moved the financial markets but they do pose threats as in the latest days the National Guard was called in to control the situation.

Should riots and violence persist, as they have in the past days, we could be on our way for further economic deterioration or a postponement of the current rebound.

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Recent market’s activity and trend

While the recent political and global matters haven’t affected directly to many markets, the market trends are constantly changing.

Here are the recent key trends.

Precious Metals
Gold prices are expected to follow a growth trend. The level of 1,760 is likely to be tested. If a breakout occurs then great, our next target would be 1,800. If this does not happen, then we can expect a return to a level between the range of 1,690 and 1,755. The assumption that silver prices will begin rising faster than gold is correct. It’s critical for silver to breakthrough 19 and 19.5. If this occurs then a definite trend may start.
Forex market
Several currencies continue to strengthen against the U.S. dollar, including the U.K. pound, the euro, and the Canadian dollar. They’re all a little bit higher. The Chinese yuan has stopped falling. Also, currencies in developing markets continue to make gains against the U.S. dollar.
Stock Indices
The American futures indices are in a positive area. Asia is up, too. The trend continues despite being incredibly overbought. Markets seem to be ignoring U.S. and China tensions. Also, no one is reacting to the developing situation within the U.S. optimism is beyond rational.
Oils
Its current level is comfortable for many, but the uptrend continues.

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Original Source: IronFX Market Report

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