Tuesday, June 23, 2020

EUR/USD Bounces Back After Four Sessions

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News shaping
the markets today

     

What’s happening: The euro gained against the US dollar on Monday, after falling for four consecutive sessions.

What happened: The EUR/USD pair climbed to a daily high of 1.1269 during the US session, with the dollar index giving back gains after being on an upturn for four straight days.

The greenback found some support at the beginning of the forex trading day, mainly due to weak investor sentiment in the Asian session, which saw stocks trading mostly in the red. The focus shifted, however, to the continued rise in covid-19 cases across various US states and the dollar was unable to hold its gains.

Why it matters: The Eurozone’s shared currency found favour following an improvement in consumer sentiment data amid the reopening of the region’s economies and the injection of fiscal stimulus. The preliminary estimate of consumer confidence rose to -14.7 in June, from a reading of -18.8 in the previous month.

The US, on other hand, released mixed economic reports, with the Chicago Fed National Activity Index climbing to 2.61 for May, from a reading of -17.89 in April, but new home sales declining 9.7% for the month.

The EUR/USD also found support as markets remained hopeful of the European recovery fund being announced soon, as negotiations commenced between the leaders of region’s nations.

The US dollar had been on an uptrend last week, as investors sought the safe haven currency amid a rise in coronavirus cases around the world. Although California and Florida are still reporting higher daily cases, the outbreak in Beijing seems to be under control.

The US Dollar Index, which measures the value of the dollar versus a basket of foreign currencies, fell towards the 97.00 mark on Monday, retreating from a 20-day high level of 97.72 reached on Friday.

The EUR/USD closed the day at $1.1263 and the forex pair gained during the Asian session today to trade at $1.1268.

What to watch: Investors will focus on the preliminary estimates of June PMIs for the US and Eurozone. Manufacturing and services activities are expected to rebound during the month, although the numbers may remain in the contraction levels. The US is also scheduled to release the Richmond Fed manufacturing index and new home sales later today.

Investors will continue to assess the global coronavirus numbers, with total cases surging past 9 million.

The Markets Today

     

The UK stocks will be in focus today, ahead of PMI reports scheduled for release later in the day.

Context: UK shares closed lower on Monday as various countries reported a rise in new covid-19 cases, sparking fears of a second wave causing further economic damage.

Details: Investors are closely monitoring covid-19 developments after reports of a rapid rise in new infections in the US. More than 30,000 new cases were reported by the US on Friday and Saturday, with infections spreading fast across Florida and South Carolina.

Meanwhile, the Confederation of British Industry reported a further decline in industrial output to a fresh low of -57 in the three months to June.

Shares of Glencore tumbled to a three-week low in London after reporting a criminal investigation by Switzerland. Carnival’s shares also fell around 10% as the company announced to suspend its operations in North America through September.

Capita Plc bucked the trend, with its stock climbing around 13% after the outsourcing group agreed to sell its education software solutions business.

The blue-chip FTSE 100 slipped 0.8% on Monday, while the mid-cap FTSE 250 declined 0.6%.

What to watch: Markets await manufacturing and services report from the UK. The IHS Markit/CIPS UK manufacturing PMI is expected to rise to 45 in June, from May’s reading of 40.7. Analysts expect the services PMI to climb to 40 in June, from a reading of 29 in the previous month.

Investors will keep an eye on covid-19 cases in the country, with the UK reporting around 306,760 cases and 42,730 deaths.

Other Markets: US indices trading closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.59%, 0.65% and 1.11%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

IHS Markit French manufacturing PMI, services PMI and composite PMI, IHS Markit/BME German manufacturing PMI, services PMI and composite PMI, UAE’s money supply M3, loan growth and inflation rate as well as the US Redbook index and API crude oil stocks.