07 July 2020

Euro Extends Gains Despite Downbeat Economic Data

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News shaping
the markets today

     

What’s happening: The euro gained against the US dollar, lifting the EUR/USD pair to new multi-day highs on Monday.

What happened: A strong rally in Asian and Chinese stocks lifted market sentiment yesterday, helping the EUR/USD extend gains recorded in the previous session and breach the major 1.1300 level.

With rising risk appetite, the US dollar moved lower versus its major counterparts and the EUR/USD forex pair recorded gains despite some weak economic reports from the Eurozone.

Why it matters: Chinese blue-chip stocks surged to 5-year highs with optimism surrounding a strong economic recovery. Bullish sentiment in China rippled through the global equity markets, sending European and US stocks higher yesterday.

Sentiment was not dampened by disappointing economic data from the Eurozone, with Germany’s new manufacturing orders rising 10.4% in May, missing expectations of a 15% jump. Spain's industrial production declined 24.5% in May, versus the consensus view of an 18.5% contraction. Although the Eurozone Sentix Investor Confidence rose to -18.2 in July, from a previous reading of -24.8, it still missed expectations of an improvement to -10.9.

Markets cheered Eurozone’s data on retail sales, which rose by 17.8% in May, exceeding the estimate of 15%.

The euro reached 1.1345, its highest level since mid-June, earlier in the session. The EUR/USD gave back some gains, as the greenback managed to recover on the back of strong US economic reports. The ISM non-manufacturing PMI climbed to 57.1 in June, from 45.4 in the previous month, while the US Markit services PMI improved to 47.9, from a preliminary estimate of 46.7.

The EUR/USD, which closed at $1.1309 on Monday, traded higher by 0.03% to reach $1.1313 during the Asian session today.

What to watch: The covid-19 outbreak remains a major concern for investors. After reporting a record 55,000 new cases in a single day last week, the US has witnessed a decline in infections, although the number remains above the 40,000 level. Investors look forward to the numbers dropping by a substantial margin in the upcoming days.

On economic data front, Germany will release its industrial production report today, while France is scheduled to report its balance of trade data. The economic calendar is light for the US.

The Markets Today

     

Gold trading will be in focus today, after the yellow metal closed yesterday’s session at its highest level in nearly a week.

Context: Gold futures closed higher on Monday, gaining support from a softer US dollar, despite a surge in global stock markets.

Details: The US dollar index, which measures the greenback’s performance versus a basket of major currencies, slipped 0.5% on Monday, providing support to gold trading.

The precious metal climbed as high as $1,799 per ounce initially in the session but gave up gains following the release of strong economic data by the US. The US ISM index of non-manufacturing firms climbed to 57.1 in June, from a reading of 45.4 in May.

August gold gained $3.50, or 0.2%, to end at $1,793.50 an ounce on Monday, reaching the highest settlement level since June 30. Gold prices had risen 0.5% in the holiday-shortened week.

September silver gained 1.4% to settle at $18.582 an ounce, after recording a weekly rise of 1.6%.

Among other metals, September copper climbed around 1% to $2.7745 a pound, while October platinum rose 0.7% to $837.70 an ounce on Monday.

What to watch: Investors expect to add more safe-haven assets to their portfolios with a surge in coronavirus cases in the US, Brazil and India. Gold prices are likely to reach new highs this week unless there is a marked decline in covid-19 infections. Gold futures traded higher by 0.1% to reach $1,794 an ounce in today’s Asian session.

Other Markets: US indices trading closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up 1.78%, 1.59% and 2.21%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

New Zealand’s global dairy trade price index, UK’s house price index and productivity, Switzerland’s foreign exchange reserves, China’s foreign exchange reserves, Italy’s retail sales as well as the US Redbook index.

 

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