Wednesday, July 8, 2020

US Dollar Gains as Covid-19 Infects Sentiment

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News shaping
the markets today

     

What’s happening: The US dollar rose versus most major currencies on Tuesday, ending its five-session losing streak.

What happened: Worries of the resurgence of coronavirus cases hurting the US economy finally caught up with investors after several bullish sessions. Sentiment was hurt by news of some US states rolling back their reopening measures, sending investors rushing for safety.

Riskier currencies, including the Australian dollar and the euro, which have recorded strong gains since April, moved lower on Tuesday.

Why it matters: Investors scurried for safe-haven assets like the US dollar, as stocks tumbled amid concerns over a rise in covid-19 cases in various states of the country.

Florida’s greater Miami area was the latest to roll back its reopening measures following a spike in coronavirus cases, which surpassed 3 million in the US with the death toll exceeding 130,000. Texas also recorded a record surge in hospitalisations for the eighth consecutive day.

No major economic data was released by the US yesterday, but Wall Street recorded losses as the rise in covid-19 cases continued to slow down reopening measures across the globe.

Meanwhile, the number of cases continued to increase in Melbourne and Victoria in Australia, triggering stricter travel-related restrictions in the country. The AUD/USD forex pair declined after the Reserve Bank of Australia held interest rates unchanged at 0.25%.

The EUR/USD fell to an intraday low of 1.1260 on Tuesday, versus Monday’s high of 1.1346.

After declining to as low as 96.565 on Monday, the US Dollar index, which measures the greenback’s performance versus a basket of six major currencies, gained 0.15% to 96.889 yesterday.

What to watch: Investors will continue to focus on the coronavirus numbers, which remains a major concern. The number of global covid-19 cases surpassed 11.7 million, with the death toll rising above 540,000. No major US economic data are scheduled for release today.

The Markets Today

     

Crude oil will be in focus today, ahead of the EIA’s (Energy Information Administration) report on crude inventories.

Context: Oil prices closed with a modest loss yesterday, as the rise in covid-19 cases continued to dampen energy demand.

Details: The US Energy Information Administration lifted its projections for US and Brent oil prices.

The EIA now expects the WTI (West Texas Intermediate) crude price to average $37.55 a barrel in 2020, up 6.9% versus the June outlook. The EIA also projected prices to average $45.70 per barrel in 2021. For Brent crude, the EIA raised its 2020 forecast by 6.5% to $40.50 a barrel and its 2021 forecast by 3.8% to $49.70 a barrel.

After finishing slightly lower on Monday, WTI crude for August declined a penny to settle at $40.62 a barrel on the NYMEX (New York Mercantile Exchange).

Brent oil for September slipped 2 cents to end at $43.08 a barrel on the ICE Futures Europe exchange, after rising 0.7% in the prior session.

Late Tuesday, the API (American Petroleum Institute) reported a 2 million rise in US crude supplies for the week ending July 3.

August gasoline gained 2.8% to $1.275 a gallon, while August natural gas rose 2.5% to settle at $1.876 per million British thermal units on Tuesday.

What to watch: Investors await the EIA’s report on crude stockpiles. Analysts expect crude stocks to decline 3.7 million barrels last week. Gasoline supplies are expected to fall 1.2 million barrels, while distillate supplies are projected to drop 500,000 barrels.

Other Markets: US indices trading closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down 1.51%, 1.08% and 0.86%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Switzerland’s unemployment rate, Canada’s housing starts as well as the US MBA mortgage applications and consumer credit.