Gold rallied to $1637 per oz. The actual positive move in gold prices are backed by a shortage of physical gold in the markets as a result of ceased
activity in gold refineries due to the Covid-19 outbreak. This situation causes liquidity issues in gold markets, which mostly explains
the recent rise in price volatility and the gains despite an improved market sentiment.

In the foreign exchange, the euro extended
gains to 1.0933 against a broadly softer US dollar. The pair is now preparing to test the 1.10 offers. Federal Reserve (Fed) ultra-loose
policy stance versus the European Central Bank’s (ECB) neutral attitude towards interest rates should back a further recovery in the
single currency. Stops are seen above the 1.10 mark and support the euro’s appreciation if cleared. Yet soft economic data is the highest
barrier for the euro appreciation as activity in Europe slows at a historical rate.
German consumer confidence tanked to a record low of 2.7 for
April, versus 7.1 expected by analysts and 8.3 printed a month earlier. In-store German retail apparel sales are down by 90% year-on-year.

British retail sales fell 0.3% in February versus 0.2% expected and 0.9% posted a month earlier. There will be a decent fall in this number as
activity slowed meaningfully in March. We expect up to a two-digit slump following the full lockdown in April.
In Switzerland, the
leading retailers are overwhelmed with a deluge of online orders that they can’t process.
Unfortunately, European online shopping may not be as
developed as in Asia and in the US to give the necessary support to the economy right now.

Cable bumped into decent offers sub-1.20 on
Wednesday. The Bank of England (BoE) is expected to stay pat at today’s monetary policy meeting after British policymakers slashed
interest rates to the historical low of 0.10% and increased its asset purchases program by 200-billion pound at an emergency gathering
earlier this month. But we expect the BoE to maintain an ultra-dovish policy stance given that the UK’s economy is expected to shrink by 10% in
the first half of this year. Combined with the mounting anxiety that the Brits would rush out of the European Union by the end of the year
without a trade deal in hand, the price advances in sterling could remain limited. We believe that a broad-based downside correction in the
US dollar could back a mid-term advance toward the $1.30 mark, but core short positions will likely cap a further advance above this level.

By Ipek Ozkardeskaya

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