Date: 01 May 2020

FOREX

The Pound is down against most of its peers on a quieter than usual European Friday session, due to the May 1st holiday, which is observed throughout most of the continent. The main driver for sterling’s weakness is the change in market sentiment to a more sombre mood, and this won’t support currencies that are more closely linked to risk. The impact of this change becomes clearer when we compare the performance of the pound versus a traditional safe haven like the Japanese yen, with sterling down more than 0.5%.

Ricardo Evangelista – Senior Analyst, ActivTrades


GOLD

After a huge volume of sell orders for gold yesterday, the short term technical scenario has changed again. The spot price was unable to challenge the resistance level of $1,730-$1,735 and after two failed attempts in April to break above $1,730, this has now formed a double top, opening space for a temporary correction, particularly after gold lost more than $40 dollars in just 24 hours. The spot price is now trading near the key support level of $1,675 and a clear breakdown of this threshold would be a clear negative signal, with potential space for further falls to $1,630.

Carlo Alberto De Casa – Chief analyst, ActivTrades

 

UK STOCKS 
Investors are set for a trading day lacking any clear direction as most financial places around the world will be closed for Labour Day. However, there remains considerable volatility on UK stocks, which have had many drivers to shake their prices recently. From the reassuring news on the virus front to the mixed picture provided by corporate results, investors have had a lot to digest in the last 24 hours. Nonetheless, UK stocks traders have been surprised after Shell, in whom two thirds of UK equity income funds have a holding, decided to cut its dividend for the first time since WW2. Even though the collapse in the oil price and the bleak demand outlook posed by the coronavirus outbreak are well-known, this decision has sparked fresh concerns to income investors. BP on the other hand chose to maintain its dividends payment, a move that raises concerns that by focusing on the short-term need to repay investors, the company may weaken its position to tackle the long-term challenge posed by historically low oil prices and this could significantly impact its results on the long run. Income investors’ concerns wouldn’t be as acute if dividends cuts were only related to the energy sector but even companies posting profits like supermarkets (Sainsbury, Tesco, Waitrose etc..) are reducing payouts. In these uncertain times, where it is hard to get a clear picture of the economic outlook, companies are choosing to hold as much cash as possible to be able to face any potential further downturn.

 

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