Wednesday, June 17, 2020

Euro Loses Tug of War with the US Dollar

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News shaping
the markets today

     

What’s happening: The euro settled lower against the US dollar on Tuesday, after a volatile trading session.

What happened: Tuesday was a busy day on the news front, resulting in a rollercoaster ride for the Eurozone’s shared currency. On the other hand, the US dollar not only gained against the euro yesterday, but also versus most major currencies.

The EUR/USD pair surged to the day’s high of 1.1353 in the earlier part of the European session, supported by Germany’s data releases. The forex pair pared gains in the second half of the session. The greenback garnered strength during the US session, sending the US dollar index (a measure of the dollar’s performance relative to a basket of foreign currencies) up by 0.4%.

Why it matters: Germany’s economic reports were upbeat yesterday, with the ZEW Indicator of Economic Sentiment improving by 12.4 points to 63.4 in June. This topped the analyst estimates of 60. Germany also announced its inflation rate, which met expectations of 0.6%.

The Eurozone’s ZEW economic sentiment surged to a five-year high, coming in at 58.6 for June.

With so many positive reports coming in from the Eurozone, America did not want to be left behind! The US Department of Commerce announced a 17.7% spike in retail sales in May, after a 14.7% slump in April. May’s growth in retail sales significantly exceeded expectations, fanning hopes of an economic recovery being underway.

The greenback gained against risk-sensitive currencies due to continued concerns about a second wave of coronavirus and some geopolitical tensions in Asia.

Traders also responded to the US Federal Reserve's announcement on Monday to begin buying individual corporate bonds under its Secondary Market Corporate Credit Facility, to support market liquidity amid the pandemic. The 10-year US Treasury bond surged 3.7% at 0.75% in the previous session.

The EUR/USD shed more than 100 pips in a matter of hours. After hitting a daily high of 1.1353, the forex pair slumped to a daily low of 1.1228 in the US session. The EUR/USD consolidated its losses by the end of the session, settling lower at 1.1263.

What to watch: Traders will be focusing on the Consumer Price Index for the Eurozone, followed by the US Federal Reserve Chairman Powell’s testimony before the Senate, which might prove instrumental in determining the direction for the EUR/USD pair. Annual inflation rate in the Eurozone is expected to ease to 0.1% in May. The EUR/USD was trading mostly flat in the Asian trading session.

The Markets Today

     

Silver will be in focus today, after the metal settled higher in the previous session.

Context: Silver futures closed higher on Tuesday, along with a strong surge in US equities. The metal, along with gold, found support from the Fed Chairman’s comments.

Details: Federal Reserve Chairman Jerome Powell said during his testimony before the Congress that the timing of a US economy recovery remains uncertain despite some strong economic reports from the country.

Traders also continued to monitor rising tensions worldwide, with Indian and Chinese troops clashing near the disputed border area which led to the death of dozens of soldiers. Tensions also escalated between North Korea and South Koreas, with North Korea blowing up an inter-Korean liaison office in the border town of Kaesong.

Meanwhile, the Bank of Japan announced plans to infuse about ¥110 trillion into the economy, boosting aid for coronavirus-hit firms.

Amid high stock and forex trading on Tuesday, US equities closed strongly higher and the greenback gained some strength following a better-than-expected retail sales report.

After dropping 0.5% on Monday, July silver gained around 1.5% to settle at $17.652 an ounce. Gold trading also saw some support and the yellow metal’s futures recorded gains for the first time in three days, with August gold gaining 0.5% to $1,736.50 an ounce.

July platinum rose by 2.7% to $843.90 an ounce, while September palladium rose 0.5% to $1,942.70 an ounce.

What to watch: Traders will continue to monitor the daily covid-19 numbers with some countries reporting a rise in infections. Markets will also focus on news related to the second day of the Fed Chairman’s testimony. Silver futures traded down 0.3% to $17.575 an ounce in the Asian session.

Other Markets: US indices trading closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 2.04%, 1.90% and 1.75%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Eurozone’s new passenger car registrations, construction output and inflation rate, Britain's consumer price inflation, core producer prices and retail price index, Italy’s industrial new orders and industry sales, UAE’s inflation rate, Canada’s inflation rate, China’s foreign direct investment as well as the US MBA mortgage applications, housing starts, building permits and the EIA’s crude oil stocks.