Market Update - June 5

The capacity for this bull run to continue higher has been given a boost once more as the European Central Bank announced a larger than expected increase to its pandemic support programme.

The risk recovery is back in full swing after the ECB increased its Pandemic Emergency Purchase Programme by more than expected at a further €600bn.

The euro has been a big beneficiary to this move, but risk appetite being strong is a big negative for the dollar right now, which is getting hit hard again across its major pairs. The one exception is versus the uber safe haven Japanese yen. The big story has now become just how far a recovery on the euro can go. The policy action of the ECB has suggested that the central bank will be the ultimate backstop during this pandemic and the prospect of massive purchasing of government debt for the next 12 months, it is significantly reducing the risk premia for the euro. It is leading to a key re-rating of the euro. However, with such a huge move, also comes the risk of near term profit-taking, but for now the run remains on track.

Today the focus turns to the US labor market and Nonfarm Payrolls for May. The consensus expects another 8m jobs to have been lost and unemployment to have soared to close to 20%. However, unemployment is backward looking data, and the economy beginning to come out of lockdown will not be factored in to the data to any real extent. Whilst any negative surprise would still jolt the market, the appetite to buy into this FOMO (Fear Of Missing Out) rally will still be a dominant factor, especially as traders see central banks still willing to backstop the whole game.


As mentioned in June 3rd Market Update long entry has been placed and today 1TP has been reached.

Good Trading,


Dominik Stone

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