Market movers today
Only few things on the radar today. In the US Conference Board releases consumer confidence for July. Consensus is a decline to 95.0 in July from 98.1 in June.
In Sweden retail sales are up for release. Interestingly, overall sales have been quite unaffected by the coronavirus as a result of higher sales in food stores offsetting lower turnover of durable consumer goods. It might look strange that people spend more on food but an explanation is probably that many people work from home and fewer visit restaurants. We look for a further gradual recovery (forecast 0.5% m/m/1.5% y/y).
Selected market news
Late last night, the Republican senators published their proposal for the next stimulus bill, which includes an extension of the higher unemployment benefits but at a lower level (an additional USD200 per week versus USD600 per week currently) through September. From October and onwards the Republicans propose a new system compensating workers for up to USD500, which combined with the regular state unemployment benefit may compensate as much 70% of the lost wage (up to a state cap). The proposal also includes another round of direct payments to Americans (USD1,200 per qualified American, USD2,400 for married couples and USD500 per dependent) and enhanced employee hiring and retention payroll tax credit. The proposal is unlikely to fly with the Democratic Party, who demands a much bigger package including an extension of the current USD600 per week, which is set to expire this week. For this reason, we expect the negotiations to drag on until mid-August.
EUR/USD continued its recent climb yesterday pushing above 1.17. We continue to see upside in the cross although our 1M forecast has already been reached; look for 1.1815 (Sep-18 high). On top of concerns about US growth, virus development and tensions with China, the tailwind for EUR/USD is the result of better news out of the euro area. Yesterday, a decent German IFO business confidence number added to the positive euro area picture as the forward-looking expectations index beat consensus by a wide margin. The index increased from 91.6 in June to 97.0 in July, the highest reading since November last year.
The soaring gold price took a breather overnight after moving close to USD2000 an ounce. Gold has been supported by US-China tensions, a weaker USD, worsening virus numbers and aggressive money printing by central banks.
Stock markets made further gains yesterday in the US, again lifted by tech stocks. Positive news on the vaccine front is also underpinning share prices as both Moderna and Pfizer launched phase-3 trials on Monday, which could pave the way for a vaccine already by year-end. The latest virus numbers point to stabilisation in the US, while more countries in Europe and Asia are challenged by new outbreaks.
