Surprise from the Bank of England, ECB decision, hello pandemic

The main global event of yesterday - WHO officially recognized the epidemic of the coronavirus pandemic. This hasn’t changed anything, but once again it emphasizes the seriousness of what is happening just right now.

This is supported by yesterday’s decision from the Bank of England to urgently cut the rate by 0.5% (the first emergency decision since the global financial crisis). Despite the fact that this event took the markets by surprise, the pound after falling 100 points quickly recovered losses and even showed new intraday highs. The reason for optimism was the information that the British Government proposed a package of measures aimed to help the economy.

Today it is the ECB's turn. President of the Central Bank Christine Lagarde has already stated that European leaders should think about fiscal measures, and not to look towards the Central Bank. It will be interesting today to observe the results of the ECB meeting and what they decide to do there. In general, we expect new reasons for the weakness of the euro and today we will continue to sell it in FOREX.

Saudi Arabia, meanwhile, continued to give reasons to oil sales. We are talking about the intention of Saudi Aramco to increase oil production to 13 million bpd (now they produce about 9.7 million bpd), which essentially means flooding the market with oil. We observe what is happening with interest, but keep our heads cold. What is happening now in the oil market is a great opportunity to build an extremely promising and profitable position.

We consider what is happening now in the oil market a temporary phenomenon, and current oil prices are deviated from equilibrium (are undervalued). Accordingly, our medium-term plan is to buy oil from $ 30 (WTI) with an addition to the position every $ 5 down. This position will definitely require patience, as well as funds to keep it alive. But we have no doubt about its final positive outcome.

Note that the medium-term purchase does not cancel the intraday sells of the asset to trade in the current trend, to work out a fundamental negative such as yesterday's statement by Saudi Aramco or data on oil reserves in the USA (increased by 7.6 million over the week).