- Rates: Bumpy Asian ride
Markets had a bumpy ride this morning, selling off as WH trade advisor reportedly said that the trade deal was over. He later downplayed those reports, backed by a presidential tweet that the deal is fully intact. Today’s eco calendar centers around PMI’s. The EMU gauge is expected to rebound as economies gradually reopen. - Currencies: EUR/USD rebounds off key support area.
EUR/USD succeeded a nice technical rebound yesterday leaving the key 1.1160 support area intact. An intraday reversal in risk sentiment and comforting headlines on the dispute between German and the ECB on APP helped the single currency. Today, a constructive EMU PMI might support the EUR/USD bottoming process.
The Sunrise Headlines
- A rally in tech stocks eventually pulled WS in the green yesterday. The Nasdaq (+1.11%) outperformed. Asian stocks recovered V-shape style from an early dip after conflicting US/Sino trade comments. Indices rise up to 1% (Japan).
- Spain is mulling to increase the size of its loan guarantee fund due to strong demand. The current size amounts to €100 bn of which the state backs 70 to 80% (dependent on company size) and could increase with another €50 bn.
- The US is considering to re-impose a 10% tariff on Canadian aluminum imports if Canada refuses to restrict its exports. USTR Lighthizer said there have been surges on imports and is concerned about struggles by US producers.
- Japan has set up an extremely tight 6-week schedule to strike a trade deal with the UK in order to have it passed before the end of the year. Tokyo’s chief trade negotiator warned that limits both parties’ ambitions.
- US president Trump extended a ban on green card applications until the end of the year and beyond if necessary and suspended types of guest worker visas, saying Americans who’ve lost their jobs due to the coronavirus need protection.
- Texas governor Abbott said the contagion is accelerating at ‘an unacceptable rate’ and must be contained but keeps a lockdown only as last resort. 302 new patients were admitted to the hospitals, the highest daily rise since June 4.
- Today’s economic calendar is all about PMI business confidence: in the EMU over the UK to the US. Fed’s Bullard discusses monetary policy. Germany and the US sell bonds.
Currencies: EUR/USD Rebounds Off Key Support Area
EUR/USD rebounds off key support area
EUR/USD started below the 1.12 handle yesterday. Sentiment on risk turned cautious as corona infections were reported growing at a record pace worldwide. However, bad news on corona again didn’t translate into losses of risk assets in a one-to-one correlation. Equities bottomed and the USD-bid eased. Some headlines that a solution for objections of the German Court ruling against the ECB’s APP might be developing and a solid EC consumer confidence were euro supportive, too. EUR/USD succeeded quite a nice rebound and closed at 1.1261 (1.1178 on Friday). USD/JPY still decoupled from the broader market dynamics holding an extremely tight range in the upper part of the 106 big figure.
This morning, global markets were haunted by diffuse comments of US president Trump aid Navarro as he was quoted that the US-China trade deal was over. Risky assets (temporarily) nosedived and the dollar jumped higher, but the moves were reversed after president Trump said the deal was fully intact. EUR/USD is trading little changed (1.1265 area). The Navarro related volatility finally pushed USD/JPY out of the very narrow ST consolidation pattern. The pair regained the 107 barrier (107.15 area). AUD/USD (0.6903) maintains most of yesterday’s gain, but fails to build on that momentum this morning. The publication of the PMI’s will take center stage today. EMU PMI’s are expected to show a rather forceful rebound in June after being held back at low levels due to a slow restart of the economy as first lockdown measures were eased. The link between data and FX was rather loose of late with sentiment on risk still the dominant factor. Still a constructive EMU PMI might help the EUR/USD bottoming process.
After a solid rally in May/early June, EUR/USD fell prey to profit taking. The EUR/USD momentum eased, but first important support in the 1.1160 area survived. We expect that area to hold and gradually look for yesterday’s bottoming out process to continue. 1.1294 and the 1.1350 area are next topside reference on the technical charts.
EUR/GBP held a sideways range in the mid 0.90 area yesterday. Comments of BoE Baily indicating that the Bank would start reducing the balance sheet before hiking rates, didn’t help sterling much. This morning, Japan is reported to put a tight deadline for the UK to reach a post-Brexit trade deal. Later today, the UK PMI’s are interesting too. For now, we don’t see a trigger for a sustained sterling rebound. The EUR/GBP 0.9050 area remains under test
EUR/USD: rebounds off 1.1160 area
