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World currency market news from 8 August 2020

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07.08.2020
19:30
Key events for next week: China and the United States consumer price index, UK and Australia unemployment rate, RBNZ's interest rate decision, UK and Eurozone GDP, U.S. retail sales

On Monday, at 01:30 GMT, China will publish the consumer price index and producer price index for July. At 05:45 GMT, Switzerland will announce the change in the unemployment rate for July. At 08:30 GMT, the Euro zone will release the Sentix investor confidence indicator for August. At 14:00 GMT, the United States will publish JOLTs Job Openings for June.

On Tuesday, at 01:30 GMT, Australia will release the NAB business confidence index for July. At 05:00 GMT, Japan will present an Eco Watchers Survey for July. At 06:00 GMT, Britain will announce changes in the number of applications for unemployment benefits for July, as well as the unemployment rate and average earnings for June. At 09:00 GMT, Germany and the Euro zone will publish an index of business sentiment from the ZEW Institute for August. At 12:15 GMT, Canada will report changes in the housing starts for July. At 12:30 GMT, the US will publish the producer price index for July. At 22:45 GMT, New Zealand will report a change in the number of tourists for June.

On Wednesday, at 00:30 GMT, Australia will release the Westpac consumer confidence index for August, and at 01:30 GMT , the labor cost index for the 2nd quarter. At 02:00 GMT, the RBNZ interest rate decision will be announced. At 06:00 GMT, Britain will report changes in GDP for June and the 2nd quarter, as well as industrial production, manufacturing, the balance of visible trade and investment for the 2nd quarter. At 06:00 GMT, Japan will announce a change in the volume of orders for equipment for July. At 09:00 GMT, the Euro zone will report changes in industrial production for June. At 12:30 GMT, the US will publish the consumer price index for July. At 14:30 GMT, the US will report changes in oil reserves according to the Ministry of energy. At 18:00 GMT, the US will report changes in the federal budget for July. At 22:45 GMT, New Zealand will announce a change in the level of food prices for July.

On Thursday, at 01:00 GMT, Australia will report a change in expectations for consumer price inflation for August. At 01:30 GMT, Australia will announce changes in the unemployment rate and employment for July. At 06:00 GMT, Germany will release the consumer price index for July. At 12: 30 GMT, the US will present the import price index for July and announce changes in the number of initial applications for unemployment benefits for August. At 22:30 GMT New Zealand will release the index of business activity in the manufacturing sector for July. At 23:30 GMT in Australia, the head of the RBA Lowe will make a speech.

On Friday, at 02:00 GMT, China will report changes in fixed asset investment, industrial production and retail trade for July. At 04:30 GMT, Japan will publish the index of activity in the service sector for June. At 06:30 GMT, Switzerland will present the producer and import price index for July. At 06:45 GMT, France will release the consumer price index for July. At 09: 00 GMT, the Euro zone will announce changes in GDP and employment for the 2nd quarter, as well as the foreign trade balance for June. At 12: 30 GMT, the US will announce changes in retail sales for July, the level of labor productivity in the non-manufacturing sector for the 2nd quarter and the level of labor costs for the 2nd quarter. At 13:15 GMT, the US will report changes in the capacity utilization factor and industrial production for July. At 14: 00 GMT, the US will publish the consumer sentiment index from the University of Michigan for August and announce changes in the business inventories for June. At 17:00 GMT in the US, the Baker Hughes report on the number of active oil drilling rigs will be released.

19:00
U.S.: Consumer Credit , June 8.95 (forecast 10)
17:00
U.S.: Baker Hughes Oil Rig Count, August 176
15:00
BoE: QE still favoured vs. negative interest rates - UOB

FXStreet reports that economist at UOB Group Lee Sue Ann assessed Thursday’s BoE event.

“As expected, the Bank of England (BOE) held its benchmark interest rate steady at the recordlow of 0.1%, with the central bank having cut rates twice from 0.75% since the beginning of the COVID-19 pandemic. The BOE also left its target for buying government and corporate bonds unchanged at GBP745bn, after having announced an additional GBP100bn expansion in June.”

“Of more interest was the set of economic forecasts unveiled by the central bank. The nine-strong Monetary Policy Committee (MPC) said its central projection forecasts that GDP will continue to recover in the near-term, but is not expected to exceed levels from the end of 2019 until at least the end of 2021… The BOE also forecast the unemployment will jump, with the rate reaching 7.5% at the end of 2020, before gradually declining from the start of next year.”

“In all, we continue to believe the BOE is ready to emback on further efforts to counter the economic slump. The few pages that policymakers have presented on negative rates seem to highlight their potential drawbacks, rather than on their positive attributes. Hence, whilst they are reviewing the sustainability of negative rates and are careful not to rule anything out; it seems that, for now, the BOE will steer clear of going negative and stick with QE as the main stimulus tool.”

14:47
NFP: Better data print leaves USD bid as tenuous, USD/JPY to retest 104.20 - TDS

FXStreet notes that Nonfarm Payrolls were +1.8 million in July, above the +1.5 million consensus while Unemployment fell to 10.2% from 11.1%. In short, not as strong as in May and June, but stronger than expected nonetheless. Economists at TD Securities think that USD shorts were covered ahead of this report and a better data print now leaves the USD bid as tenuous. They see attractive risk/reward to lean short USD/JPY.

“Payrolls were +1.8mn in July, above the +1.5mn consensus; we had forecast +0.5mn. June is still +4.8mn and May still +2.7mn. Within payrolls in July, government was +0.3mn, with strength likely exaggerated by seasonal adjustment issues, but private payrolls rose a sizable 1.5mn (consensus: 1.2mn, TD: 0.0mn). The unemployment rate fell to 10.2% from 11.1%, below the 10.6% consensus (TD: 11.1%). The household survey employment measure rose 1.4mn, while the participation rate fell 0.1pt.”

“We think the market was covering USD shorts ahead of this data out of caution over downside potential. Since this downside did not materialize, we think the USD's bid now looks tenuous. EUR/USD's pivot around 1.1820 is tactically significant, but unless 1.1720 supports fail to hold, we think dip buyers will be content to re-engage in topside again.”

“We think USD/JPY downside looks attractive in the wake of further breakdowns in stimulus talks and as a hedge to downside in risk assets. We also find much cleaner positioning in the yen than other G10 currencies at the moment. With USD/JPY rejecting the move above 106 this week, we think the pair is setting itself up for another retest towards the 104.20 level observed recently in the weeks ahead.”

14:27
Trump administration to impose sanctions on Hong Kong leader Carrie Lam and 10 other Chinese and Hong Kong officials - CNBC
14:23
U.S. wholesale inventories decline 1.4 percent in June

The Commerce Department announced on Friday the U.S. wholesale inventories fell 1.4 percent m-o-m in June, better than the preliminary estimate of a 2.0 percent m-o-m decline. This was the largest drop in wholesale inventories since July 2009.

Economists had forecast the reading to stay unrevised at -2.0 percent m-o-m.

In May, wholesale inventories fell by 1.2 percent m-o-m.

According to the report, durable goods inventories declined 1.7 percent m-o-m in June, while stocks of nondurable goods decreased 1.0 percent m-o-m.

In y-o-y terms, wholesale inventories dropped 5.6 percent in June.

14:08
Canada's private sector activity unexpectedly expands at quickest pace in more than two years in July

The Ivey Business School Purchasing Managers Index (PMI), measuring Canada’s economic activity, increased to 68.5 in July from 58.2 in June. That was the highest level since April 2018.

Economists had expected the gauge to hit 57.5.

A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Within sub-indexes, the employment measure rose to 57.6 in July from 52.8 in the previous month and the prices index increased to 60.5 from 56.4. At the same time, the inventories indicator edged down to 61.7 in July from 61.8 June and the supplier deliveries gauge fell to 50.1 from 53.4

14:00
U.S.: Wholesale Inventories, June -1.4% (forecast -2%)
14:00
Canada: Ivey Purchasing Managers Index, July 68.5 (forecast 57.5)
13:59
White House economic adviser Kudlow: Congress doesn't seem to be making much progress on stimulus

  • Says executive order on delaying payroll tax is ready if needed
  • Trump not bluffing on using his executive authority to provide coronavirus relief
  • Coronavirus aid talks are at stalemate
  • White House believes president Trump has authority to address evictions through executive action

13:43
Share prices will soar when a precise date for a COVID-19 vaccine is known - Natixis

FXStreet notes that uncertainty related to health, economic and political issues is still very high, and yet stock market indices have already recovered sharply. It is clear that this is explained by the abundant liquidity created by central banks and the long-term real interest rates. When uncertainty declines, then these same monetary conditions will lead to a surge in share prices, according to analysts at Natixis.

“Currently, uncertainty regarding the health situation is still very high as the Covid-19 virus continues to spread. Political uncertainty is also high due to tensions between the United States and China, new protectionist threats and the US presidential election. Yet the equity market has already recovered sharply, and PERs are already well above pre-COVID crisis levels.”

“The role of the highly expansionary monetary policy conducted in OECD countries is well known: thanks to the surge in the money supply, part of the money held is invested in equities; monetary policy is shifting to yield curve control and control of long-term interest rates, which has led to expectations of a long period of negative real long-term interest rates. The excess money supply and negative real long-term interest rates are driving up share prices and equity valuation.” 

“Once uncertainty declines (precise date known for a COVID vaccine, visibility on 2021-2022 growth, etc.), share prices will soar due to massive investment of the liquidity in equities and negative real long-term interest rates.”

12:52
Canada adds 418,500 new jobs in July; unemployment rate decreases to 10.9 percent

Statistics Canada reported on Friday that the number of employed people surged by 418,500 m-o-m in July (or +2.4 percent m-o-m) after an unrevised climb of 952,900 m-o-m in the previous month. Economists had forecast an increase of 400,000 m-o-m.

Meanwhile, Canada's unemployment fell to 10.9 percent in July from 12.3 percent in June, slightly better than economists’ forecast for 11.0 percent.

According to the report, full-time employment rose by 73,500 (or +0.5 percent m-o-m) in July, while part-time jobs jumped by 345,300 (or +11.3 percent m-o-m).

In July, the number of public sector employees increased by 48,900 (or +1.3 percent m-o-m), while the number of private sector employees surged by 375,800 (or +3.5 percent m-o-m). At the same time, the number of self-employed fell by 6,200 (or -0.2 percent m-o-m) last month.

Sector-wise, employment increased both in goods-producing (+1.9 percent m-o-m) and service-producing (+2.5 percent m-o-m) businesses.

12:45
U.S. nonfarm payrolls increase more than forecast in July

The U.S. Labor Department announced on Friday that nonfarm payrolls rose by 1,763,000 in July after an unrevised 4,800,000 climb in the prior month, reflecting he continued resumption of economic activity that had been curtailed due to the coronavirus pandemic and efforts to contain it.

According to the report, employment rose sharply in leisure and hospitality (+ 592,000 jobs), government (+301,000), retail trade (+258,000), professional and business services (+170,000), other services (+149,000), and health care (+126,000).

The unemployment rate fell to 10.2 percent in July from 11.1 percent in June.

Economists had forecast the nonfarm payrolls to increase by 1,580,000 and the jobless rate to drop to 10.5 percent.

The labor force participation rate decreased by 0.1 percentage point in July to 61.4 percent, while hourly earnings for private-sector workers rose 0.2 percent m-o-m (or $0.07) to $29.39, following a revised 1.3 percent m-o-m decrease in June (originally a decline of 1.2 percent m-o-m). Economists had forecast a 0.5 percent m-o-m drop in the average hourly earnings. Over the year, average hourly earnings have increased by 4.8 percent, following a revised 4.9 percent rise in June (originally an increase of 5.0 percent).

The average workweek decreased by 0.1 hour to 34.5 hours in July, exceeding economists' forecast for 34.4 hours.

12:30
U.S.: Unemployment Rate, July 10.2% (forecast 10.5%)
12:30
Canada: Unemployment rate, July 10.9% (forecast 11%)
12:30
U.S.: Labor Force Participation Rate, July 61.4%
12:30
U.S.: Average workweek, July 34.5 (forecast 34.4)
12:30
U.S.: Average hourly earnings , July 0.2% (forecast -0.5%)
12:30
U.S.: Government Payrolls, July 301.0K
12:30
Canada: Employment , July 418.5K (forecast 400)
12:30
U.S.: Manufacturing Payrolls, July 26 K (forecast 253)
12:30
U.S.: Nonfarm Payrolls, July 1763 K (forecast 1580)
12:30
U.S.: Private Nonfarm Payrolls, July 1462 K (forecast 1474)
12:27
European session review: USD strengthens as U.S.-China tensions intensify

USD rose against its major rivals in the European session on Friday, as risk sentiment turned off after the U.S. President Donald Trump signed an executive order to ban dealing with owners of China-based social media apps TikTok and WeChat, igniting a new round of tensions between Washington and Beijing. The ban will come into effect next month. In addition, the U.S. President’s Working Group on Financial Markets issued recommendations on protecting investors from "significant risks" from Chinese companies, listed in the U.S. In accordance with recommendations, the Securities and Exchange Commission (SEC) is expected to request Chinese companies to grant access to materials used by principal audit firms of these companies. Companies that refuse to provide satisfactory materials could be subject to delisting. 

Investors are also awaiting the U.S. non-farm payrolls (due at 12:30 GMT), which are anticipated to show U.S. jobs creation slowed in July from the previous month, as a spike in coronavirus cases undermined the economic recovery. It is expected that the jobs data could certainly spur Republican and Democratic lawmakers to compromise on the next coronavirus rescue package.



12:15
S&P 500: Door open to challenge the 3394 record high - Credit Suisse

FXStreet reports that the S&P 500 has broken with ease through the top of the February “pandemic” price gap at 3328/38 and analysts at Credit Suisse look for this to clear the way for a challenge on the 3394 record high.

“S&P 500 strength has extended through our next flagged resistance/’objective’ and to be honest, what we had expected to be tougher initial resistance at the top of the February price gap at 3328/38.”

“Whilst we remain concerned the trend is getting overstretched this suggests we can see strength extend further yet with resistance seen next at 3373 and then and critically the 3394 record high, where we would expect to see at least some form of rejection, even if this proves only to be a brief pullback.”

“Support at 3318/17 needs to hold to keep the immediate risk higher. A break can see a deeper setback to 3307, then what we would look to be a better support from its 13-day average and lows from the beginning of the week at 3286/71.”


11:36
EUR/USD seen at 1.23 by end-2021 on global recovery - Westpac

FXStreet notes that as a result of improved fiscal progress and with COVID-19 suppressed, the euro has appreciated by 5% against the US dollar in the last month. EUR/USD should see further gains to end-2021 on global recovery, accordingly, economists at Westpac forecast the pair at 1.23 by end-2021.

“The agreement reached by European lawmakers in late July to extend centrally funded grants and loans to individual Euro-area countries is seen as a game changer by markets with respect to both political cooperation and joint economic progress across Europe. 

“This Euro move seems sustainable. Unless proven otherwise, we have to assume that the agreed policies will receive the approvals necessary by year end, and thereafter that the funds will make an array of projects possible across the continent, providing sustained gains for activity and employment.”

“With the balance of short-term risks skewed against the US, a further move higher for EUR/USD into early-2021 seems probable. Our baseline view calls for a modest move to around 1.20, though clearly a stronger gain is a distinct possibility. As we look further ahead to end-2021, the global recovery from COVID-19 will also favour the euro over the US dollar, with EUR/USD seen at 1.23 by end-2021 as a result.”

11:15
Germany proposes to bring forward stimulus spending of EUR26 billion to boost economy - Der Spiegel reports

According to the report, the government plans to bring forward stimulus spending worth EUR16 billion for a total of EUR26 billion. This compares with the previous plan to speed up only EUR10 billion in investment in digital, security and defense projects.

11:00
U.S. dollar: Most oversold in 40 years, tactically neutral – Morgan Stanley

U.S. dollar: Most oversold in 40 years, tactically neutral – Morgan Stanley

FXStreet reports that in its latest client note released on Friday, analysts the US investment banking giant, Morgan Stanley, switched its bearish stance on the US dollar to tactically neutral, as the greenback remains at the most oversold level in over four decades.

The bank exited its short position on the dollar index while closing out its long positions on the euro and Australian dollar against the greenback.

“A sentiment gauge called the Combined Market Timing Indicator was now giving a ‘sell’ signal for the first time since January 2018.”

“With global markets appearing tactically stretched a sell signal on our MTI (market timing indicator) would certainly add to the notion that upside on markets may be capped near term.”

10:42
EUR/USD needs to clear 2018 top at 1.1923/26 to ease threat of correction - Credit Suisse

FXStreet reports that EUR/USD briefly moved above the 1.1909 recent high yesterday but was then abruptly stopped at the 1.1923/26 key resistance. The pair needs to surpass the mentioned 1.1926 level to confirm a direct resumption of the uptrend for 1.2140/55, per Credit Suisse.

“With daily RSI momentum now showing a clear bearish divergence we remain of the view the risk is for a lengthier consolidation phase before the core uptrend resumes, potentially even a ‘double top’.” 

“Near-term support moves to 1.1818, then more importantly at 1.1799/92, below which can add weight to this consolidation scenario with support next at 1.1774, then 1.1721. Only below 1.1699/97 though would see a “double top” established with support then seen next at 1.1630/22 – the 38.2% retracement of the rally from late June.” 

“Support at 1.1792 holding can maintain a high-level range with resistance seen at 1.1894 initially, above which can see a retest of 1.1916/26. An eventual move above here should confirm a resumption of the uptrend to our next resistance/’objective’ at 1.214 0/55 – the ‘neckline’ to the early 2018 top.”

10:22
China's top diplomat Yang Jiechi calls for U.S. to create favourable conditions for implementation of Phase 1 trade deal

  • Hopes U.S. will strengthen cooperation with China to create favourable conditions for implementation of Phase 1 trade deal

09:58
Trump advisers urge delisting of U.S.-listed Chinese cos that fail to meet audit standards

Reuters reports that Trump administration officials have urged the president to delist Chinese companies that trade on U.S. exchanges and fail to meet U.S. auditing requirements by January 2022, Securities and Exchange Commission and Treasury officials said on Thursday.

The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton, with drafting a report with recommendations to protect U.S. investors from Chinese companies whose audit documents have long been kept from U.S. regulators.

It also comes amid growing pressure from Congress to crack down on Chinese companies that avail themselves of U.S. capital markets but do not comply with U.S. rules faced by American rivals.

“We are simply leveling the playing field, holding Chinese firms listed in the U.S. to the same standards as everyone else,” a Treasury official told reporters in a briefing call about the report.

The U.S. Senate unanimously passed legislation in May that could prevent some Chinese companies from listing their shares on U.S. exchanges unless they follow standards for U.S. audits and regulations.

Democratic Senator Chris Van Hollen, who sponsored the bill described the recommendations as “an important first step,” but said that “without the added teeth of our bill, this report alone does not implement the requirements necessary to protect everyday American investors.”

The administration’s recommendations, if implemented via an SEC rulemaking process, would give Chinese companies already listed in the United States until Jan. 1, 2022, to ensure the U.S. auditing watchdog, known as the PCAOB, has access to their audit documents.

They can also provide a “co-audit,” for example, performed by a U.S. parent company of the China-based affiliate tasked with auditing the Chinese firm. However, companies seeking to list in the United States for the first time will need to comply immediately, the officials said.

09:40
USD/CNH moved into a negative phase – UOB

FXStreet reports that in opinion of FX Strategists at UOB Group, USD/CNH risks a potential move to 6.9050 in the next weeks.

24-hour view: “We highlighted yesterday, ‘the sharp and rapid decline is severely oversold and further sustained weakness is unlikely for today’. We added, ‘USD is more likely to consolidate and trade between 6.9300 and 6.9500’. Our view was not wrong even though USD traded at slightly higher range than expected (between 6.9330 and 6.9533). The current movement is still view as part of a consolidation phase and USD is likely to continue to trade sideways for today, expected to be within 6.9350/6.9550 range.”

Next 1-3 weeks: “Our latest narrative was from Monday (03 Aug, spot at 6.9850) where we highlighted that ‘the downside risk still appears to be higher’ and added, ‘USD has to crack and close below the July’s low of 6.9645 before a sustained weakness can be expected’. While we are aware that 6.9645 is a critical support, we did not quite anticipate the sharp sell-off upon the break of this level (USD cracked 6.9645 and plunged to a low of 6.9325 yesterday). The current movement is viewed as the start of a negative phase and a break of the next critical support at 6.9300 could lead to a quick move to 6.9050. Resistance is at 6.9550 but only a break of 6.9730 (‘strong resistance’ level) would indicate that our view is wrong.”

09:19
BOE policymaker Ramsden: Debt, higher borrowing was a necessary response to the pandemic

  • Yields in the gilt market are extraordinarily low

  • Trends over many years have pushed down rates

  • We are not actively planning for negative rates

  • We are using tried and test policies such as QE

  • Important to stress that negative rates are now in the toolbox

  • Financial structure is a key conditionality for negative rates

  • BOE can support the transition by keeping rates low

09:00
AUD/USD: RBA to be uncomfortable with aussie above the 0.76 fair value – Westpac

FXStreet reports that once a clear trend has been established, the aussie has a solid history of sustaining the trend for a number of years. Economists at Westpac forecast AUD/USD at 0.76 by end-2021, however, they do see the gap with fair value closing significantly in 2021. In case AUD move substantially above fair value, the RBA will become uncomfortable and may establish negative rates. 

“With AUD now four months into what appears likely to be an established up swing history is clearly encouraging us to expect that upswing to be sustained through, at least, 2021 if not considerably further. That outlook is certainly in line with our forecast that AUD/USD will lift consistently through 2021 from 0.72 to 0.76. With fair value currently estimated at 0.77 and spot at around 0.72, there is a 0.05 undervaluation of AUD – fundamentals are consistent with a higher AUD.” 

“Our commodity price forecasts are consistent with a AUD/USD fall in fair value next year from 0.77 to 0.75. However, with the risk environment easing significantly through 2021 it seems likely that ‘spot’ can hold above fair value, consistent with our current 0.76 forecast.”

“Our AUD/USD 0.76 forecast by end-2021 has upside risks. If the aussie was to move markedly above fair value the RBA would be less comfortable that AUD is in line with fundamentals. That discomfort is likely to be exacerbated by an unemployment rate around 7.5% and inflation near to 1%. Under those circumstances, the current policy approach, which is to characterise policies to address the currency as ‘extraordinarily unlikely’ might have to be reconsidered. That style of policy includes negative interest rates and currency intervention.”

08:39
‘Stars are aligned against the dollar,’ top currency strategist warns

CNBC reports that a top currency strategist is predicting an ugly quarter for the dollar.

Brown Brothers Harriman’s Win Thin warns the nation’s inability to contain the coronavirus pandemic as effectively as other countries is spooking the market.

“This is one of the rare occasions when Europe will actually outperform the U.S.,” the firm’s global head of global currency strategy told CNBC’s “Trading Nation”. “The stars are aligned against the dollar.”

The dollar index is on track for its seventh negative week in a row. It has declined more than 7% over the last three months. On Thursday, the index closed at 92.79.

And, it may be about to drop further. Thin sees the greenback testing the 2018 low before year’s end. 

“I do suspect given the cyclicals, we’ll test the downside of that range, and for the DXY [dollar index] that’s around 88,” said Thin. “So, we’ve got some ways to go.”

Thin turned bearish on the currency in April when the Federal Reserve began flooding the market with dollars as part of its aggressive virus relief plan.

Despite his negative outlook, Win is not in the long-term dollar collapse camp.

“The debate is between whether it’s a structural or cyclical decline,” he said. “The Fed is being much more aggressive than other central banks, and the U.S. economy is likely to underperform in the coming months due to the pandemic. So to me, that’s a cyclical issue.”

Thin is also confident the damage will be contained.

“In normal times, the weaker dollar would tend to feed into inflation, right? Imported goods become more expensive,” said Thin. “But in this current environment, I’m not too worried about inflation.”

He believes importers will be forced to absorb the price increases. And, he’s ready to become constructive on the dollar later this year.

“If we can get the virus under control, you know maybe we can bottom in Q4,” Thin said. “I don’t think it’s the end of the dollar as we know it.”

08:22
USD/JPY: Further rangebound lies ahead – UOB

FXStreet reports that USD/JPY should remain side-lined between 105.00 and 106.60 in the short-term horizon, noted FX Strategists at UOB Group.

24-hour view: “In line with our expectation, USD traded sideways yesterday but the registered range of 105.28/105.69 was narrower than our expected range of 105.25/105.75. Indicators are mostly ‘flat’ and further sideway-trading would not be surprising. Expected range for today, 105.20/105.80.”

Next 1-3 weeks: “We highlighted on Monday (03 Aug, spot at 106.00) that the ‘outlook is unclear and USD could trade in a choppy manner within a broad 105.00/107.00 range’. However, USD traded in a relatively calm manner as it drifted lower over the past few days. The price action offers no fresh clues and for now, we continue to expect USD to consolidate, albeit within a narrower range of 105.00/106.00. Looking forward, only a clear break of 104.70 would indicate that USD is ready to tackle the 104.00 level.”

08:21
China says it firmly opposes U.S. orders against TikTok, WeChat

Reuters reports that China's foreign ministry on Friday said that it firmly opposes executive orders announced by U.S. President Donald Trump on Thursday banning U.S. transactions with the Chinese owners of messaging app WeChat and video-sharing app TikTok.

China will defend the legitimate rights and interests of Chinese businesses, foreign ministry spokesman Wang Wenbin told a media briefing.

08:01
Goldman says Covid-19 vaccine approval could upend markets

Bloomberg reports that Investors should consider the risk of a successful coronavirus vaccine unsettling markets by sparking a sell-off in bonds and rotation out of technology into cyclical stocks, according to Goldman Sachs Group Inc.

The increased probability of an approved vaccine by the end of November is underpriced by equity markets, wrote strategists including Kamakshya Trivedi in a note. Over the next few months, the ramifications of the U.S. election and the evolution of the virus -- in part as schools reopen -- are also likely to be key drivers of the market, they said.

Approval of a vaccine could “challenge market assumptions both about cyclicality and about eternally negative real rates,” the team wrote, adding such a scenario may support steeper yield curves, traditional cyclicals and banks, while challenging the leadership of technology stocks.

If this happened along with a change in the U.S. administration, emerging market equities could benefit “if trade policy risks diminish while U.S. tax risks rise,” according to the note.

While the strategists suggested it may be too early for investors to position themselves aggressively for such a shift, they recommended options trades as a way to play the theme. For example, some call options on the S&P 500 still look attractive, and Goldman sees upside to around the 3,700 level should there be an early vaccine.

That compares with a potential downside target of 2,200 should there be a significant reversal of activity from a second wave of the virus, the strategists added. 

The Goldman team was more forthright on keeping its bearish view on the dollar. “The range of outcomes is wide and our highest confidence is still in ongoing U.S. dollar weakness,” they said.

07:46
EUR/USD to trade at 1.21 by year-end due to dollar vulnerability – ANZ

FXStreet reports that US fiscal policy is turning tighter and unconventional monetary policy will be eased further. That supports USD weakness whilst no stimulus agreement would send the USD sharply lower, according to economists at ANZ Bank who forecast EUR/USD at 1.21 by end-2020.

“In essence, fiscal policy is turning tighter, and over time we think its emphasis will change from emergency programs, to areas of growth (digital, environment, infrastructure). Against the uncertainty of the coming election and expectations of further Fed easing in the fall, the backdrop favours weakness into year-end.” 

“We are forecasting a move into a 1.20-1.25 trading range for EUR/USD with a year-end spot target of 1.21. However, we realise that if Congress fails to agree a package, that could weigh heavily on the USD in the short term. In that case, more dynamic losses could occur, possibly forcing a move into a 1.25-1.30 range. For the moment, we view retracements as buying opportunities.”

07:31
United Kingdom: Halifax house price index, July 1.6% m/m
07:31
United Kingdom: Halifax house price index 3m, July 3.8 y/y
07:14
Asian session review: the dollar rose against the euro and pound, and stabilized against the yen

TimeCountryEventPeriodPrevious valueForecastActual
01:30AustraliaRBA Monetary Policy Statement    
05:00JapanLeading Economic Index June78.4 85.0
05:00JapanCoincident IndexJune72.9 76.4
06:00GermanyCurrent Account June6.5 22.4
06:00GermanyTrade Balance (non s.a.), blnJune7.0 15.6
06:00GermanyIndustrial Production s.a. (MoM)June7.4%8.1%8.9%
06:45FranceIndustrial Production, m/mJune19.9%8.9%12.7%
06:45FranceTrade Balance, blnJune-7.5 -8
06:45FranceNon-Farm PayrollsQuarter II-2.5% -0.6%


During today's Asian trading, the US dollar strengthened against the euro and changed little against the yen.

On Thursday, investors were evaluating data on the US labor market. The number of Americans who first applied for unemployment benefits fell by 249,000 in the week ending August 1 to 1,186 million, the lowest since the start of the coronavirus pandemic.

The pound declined against the dollar and rose against the euro. The day before, the Bank of England announced that the base interest rate at the end of the August meeting would remain at 0.1%. The Bank of England also decided to leave the volume of the government bond repurchase program at 745 billion pounds.

The exchange rate of the Chinese yuan is declining. Chinese exports in July jumped by 7.2% compared to the same month last year, according to data From the General customs administration of China. This came as a surprise to analysts , who on average expected a 0.2% reduction.

In addition, the People's Bank of China (PBOC) on Friday poured 10 billion yuan into the banking system through reverse REPO, the rate was 2.2% per annum.

The ICE Dollar index, which shows the value of the us dollar against six major world currencies, rose 0.31% from the previous day.

07:00
Switzerland: Foreign Currency Reserves, July 845.8
07:00
Switzerland: Foreign Currency Reserves, July 845797
06:55
France private payroll employment decreased by 0.6% in Q2 2020

According to the report from Insee, between the end of March and the end of June 2020, private payroll employment declined by 0.6%, or 119,400 net job losses after already -497,500 in the previous quarter. Over a year, employment fell by 2.5% that is -480,800 jobs. It returns to a level comparable to that of the end of June 2017.

In the so-called "non-agricultural market" field (industry, construction and market services), payroll employment has been measured in quarterly time series since the end of 1970. In the second quarter of 2020, it fell by 0.6% in this field after -2.8% in the previous quarter, that is -3.4% over the semester. This is the largest half-year decline since the series began. By way of comparison, in the middle of the economic crisis of 2008/2009, “non-agricultural market” payroll employment had fallen by 1.7% between September 2008 and March 2009.

After an unprecedented drop in the first quarter of 2020 (-40.4%), temporary work rebounded in the second quarter: +23.1% or +108,500 jobs. Excluding temporary workers, on the contrary, private payroll employment continues to decline. It dropped by 1.2% (-227,900 jobs) after -0.9% in the first quarter. As a reminder, in this publication, temporary workers are accounted for in the temporary employment sector within market services, whichever sector they carry out their assignment (industry, construction, market or non-market services). In each of these sectors, therefore, a large part of the short-term adjustment to the crisis has went through the drop in recourse to temporary work.

06:47
France: Non-Farm Payrolls, Quarter II -0.6% QoQ
06:45
France: Industrial Production, June 12.7% m/m (forecast 8.9%)
06:45
France: Trade Balance, June -8.0 bln
06:31
Germany's trade surplus rose sharply in June compared with May - Destatis

According to the provisional data from the Federal Statistical Office (Destatis), Germany exported goods to the value of 96.1 billion euros and imported goods to the value of 80.5 billion euros in June 2020. Destatis also reports that exports declined by 9.4% and imports by 10.0% in June 2020 year on year.

Compared with May 2020, exports were up 14.9% and imports 7.0% after calendar and seasonal adjustment. For exports, this was the strongest month-on-month increase after calendar and seasonal adjustment since the beginning of the time series in August 1990. Imports saw the largest month-on-month increase since May 2010 (+10.6%). Compared with February 2020, the month before restrictions were imposed due to the corona pandemic, exports decreased by a calendar and seasonally adjusted 16.0%, and imports by 12.5%.

The foreign trade balance showed a surplus of 15.6 billion euros in June 2020. In June 2019, the surplus amounted to 16.5 billion euros. In calendar and seasonally adjusted terms, the foreign trade balance recorded a surplus of 14.5 billion euros in June 2020.

The German current account of the balance of payments showed a surplus of 22.4 billion euros in June 2020, which takes into account the balances of trade in goods (+16.1 billion euros), services (+1.6 billion euros), primary income (+6.4 billion euros) and secondary income (-1.7 billion euros).

In June 2019, the German current account showed a surplus of 19.5 billion euros.

06:16
German industrial production rose more than forecast in June

According to the report from the Federal Statistical Office (Destatis), in June 2020, production in industry was up by 8.9% on the previous month on a price, seasonally and calendar adjusted basis. Economists had expected a 8.1% increase. Compared with June 2019, the decrease in calendar adjusted production in industry amounted to 11.7%.

In June 2020, production in industry excluding energy and construction was up by 11.1%. Within industry, the production of intermediate goods showed an increase by 5.0%. The production of consumer goods increased by 7.3% and the production of capital goods by 18.3%. Outside industry, energy production was up by 5.5% in June 2020 and the production in construction increased by 1.4%.

Production in the automotive industry in June continued to increase markedly by 54.7% month on month. However, it was still by just over 20% lower than in February 2020.

In May 2020, the corrected figure shows the production in industry an increase of 7.4% (primary +7.8%) from April 2020.

06:02
Germany: Current Account , June 22.4
06:02
Germany: Trade Balance (non s.a.), June 15.6B
06:00
Options levels on friday, August 7, 2020 EURUSD GBPUSD

EUR/USD

Resistance levels (open interest**, contracts)

$1.1958 (1223)

$1.1921 (1285)

$1.1889 (965)

Price at time of writing this review: $1.1843

Support levels (open interest**, contracts):

$1.1795 (720)

$1.1748 (981)

$1.1699 (555)


Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 7 is 66364 contracts (according to data from August, 6) with the maximum number of contracts with strike price $1,1400 (4026);


GBP/USD

Resistance levels (open interest**, contracts)

$1.3302 (149)

$1.3254 (2862)

$1.3211 (191)

Price at time of writing this review: $1.3128

Support levels (open interest**, contracts):

$1.2998 (1390)

$1.2949 (248)

$1.2849 (141)


Comments:

- Overall open interest on the CALL options with the expiration date August, 7 is 21443 contracts, with the maximum number of contracts with strike price $1,3250 (2862);

- Overall open interest on the PUT options with the expiration date August, 7 is 20542 contracts, with the maximum number of contracts with strike price $1,2400 (1511);

- The ratio of PUT/CALL was 0.96 versus 0.94 from the previous trading day according to data from August, 6

 

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

06:00
Germany: Industrial Production s.a, June 8.9% (MoM) (forecast 8.1%)
05:12
Japan: Coincident Index, June 76.4
05:02
Japan: Leading Economic Index , June 85.0
00:30
Schedule for today, Friday, August 7, 2020
Time Country Event Period Previous value Forecast
01:30 Australia RBA Monetary Policy Statement    
05:00 Japan Leading Economic Index June 78.4  
05:00 Japan Coincident Index June 73.4  
06:00 Germany Current Account June 6.5  
06:00 Germany Trade Balance (non s.a.), bln June 7.1  
06:00 Germany Industrial Production s.a. (MoM) June 7.8% 8.1%
06:45 France Industrial Production, m/m June 19.6% 8.9%
06:45 France Trade Balance, bln June -7.1  
06:45 France Non-Farm Payrolls Quarter II -2.5%  
07:00 Switzerland Foreign Currency Reserves July 850.1  
07:30 United Kingdom Halifax house price index July -0.1%  
07:30 United Kingdom Halifax house price index 3m Y/Y July 2.5%  
12:30 U.S. Government Payrolls July 33  
12:30 U.S. Average workweek July 34.5 34.4
12:30 U.S. Manufacturing Payrolls July 356 255
12:30 U.S. Average hourly earnings July -1.2% -0.5%
12:30 U.S. Private Nonfarm Payrolls July 4767 1485
12:30 U.S. Labor Force Participation Rate July 61.5%  
12:30 Canada Unemployment rate July 12.3% 11%
12:30 Canada Employment July 952.9 400
12:30 U.S. Nonfarm Payrolls July 4800 1600
12:30 U.S. Unemployment Rate July 11.1% 10.5%
14:00 U.S. Wholesale Inventories June -1.2% -2%
14:00 Canada Ivey Purchasing Managers Index July 58.2 57.5
17:00 U.S. Baker Hughes Oil Rig Count August 180  
19:00 U.S. Consumer Credit June -18.2 10
00:15
Currencies. Daily history for Thursday, August 6, 2020
Pare Closed Change, %
AUDUSD 0.72311 0.55
EURJPY 125.279 0
EURUSD 1.18752 0.09
GBPJPY 138.624 0.14
GBPUSD 1.31404 0.22
NZDUSD 0.66863 0.6
USDCAD 1.33067 0.3
USDCHF 0.90906 0.14
USDJPY 105.493 -0.07

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