Analytics, News, and Forecasts for CFD Markets: currency news — 05-08-2020.

FXStreet reports that Lee Sue Ann, Economist at UOB Group, reviewed the latest RBA event (Tuesday).

“The Reserve Bank of Australia (RBA) decided to maintain its current policy settings in August, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.”

“Given the uncertainties about the overall outlook, the Board considered a range of scenarios at its meeting.”

“It was evident that the RBA sounded more cautious, in light of the state of disaster being declared in Victoria. Victoria accounts for around 25% of the economy and it remains uncertain as to how long the restrictions will last and how effective they will be.”

“As far as monetary policy is concerned, the RBA has effectively exhausted conventional monetary policy by cutting the OCR to its self-imposed floor of 0.25%. Thus, any further action would seem to necessitate a move further into unconventional territory, and what is left in the ammunition bag is negative interest rates. RBA Governor Phllip Lowe, however, has been unenthusiastic about negative rates; athough we suspect that the RBA will have to consider this option if the situation deteriorates further. Clearly, this is very strong justification to keep monetary policy extraordinarily easy for the foreseeable future.”

Statistics Canada announced on Wednesday that Canada’s merchandise trade deficit stood at CAD3.19 billion in June, widening sharply from a revised CAD1.33-billion gap in May (originally a CAD0.68-billion gap).

Economists had expected a deficit of CAD0.90 billion.

According to the report, Canada’s exports surged 17.1 percent m-o-m to CAD39.71 billion in June, with motor vehicles and parts contributing the most to the overall increase (+218.2 percent m-o-m).

Meanwhile, imports climbed 21.8 percent m-o-m to CAD42.90 billion in June, also driven by higher imports of motor vehicles and parts (+215.8 percent m-o-m). 

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories plunged by 7.373 million barrels in the week ended July 31. Economists had forecast a decrease of 3.001 million barrels.

At the same time, gasoline stocks increased by 0.419 million barrels, while analysts had expected a decline of 0.170 million barrels. Distillate stocks climbed by 1.592 million barrels, while analysts had forecast a gain of 0.279 million barrels.

Meanwhile, oil production in the U.S. reduced by 100,000 barrels a day to 11.000 million barrels a day.

U.S. crude oil imports averaged 6.0 million barrels per day last week, increased by 0.9 million barrels per day from the previous week.

The Institute for Supply Management (ISM) reported on Wednesday that its non-manufacturing index (NMI) came in at 58.1 in July, which was 1 percentage point higher than the June reading of 57.1 percent. The reading was the highest since February 2019 and represented growth in the services sector for the second straight month after contraction in April and May.

Economists forecast the index to decrease to 55.0 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 15 reported increases last month, the ISM said, adding that respondents remained concerned about the pandemic; however, they were mostly optimistic about business conditions and the economy as businesses continue to reopen.

According to the report, the ISM’s non-manufacturing Business Activity measure rose 1.2 percentage points to 67.2 percent from June’s figure. The New Orders gauge came in at 67.7 percent, 6.1 percentage points higher than June’s reading. The Backlog of Orders Index grew was at 55.9 percent; 4 percentage points higher than June’s reading. Meanwhile, the Employment Index decreased by 1.0 percentage point to 42.1 percent from the June reading and the Prices Index fell by 4.8 percentage points to 57.6 percent, indicating that prices increased in July at a slower rate. The Supplier Deliveries Index registered at 55.2 percent, down 2.3 percentage points from June’s reading.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for July (58.1 percent) corresponds to a 3.3-percent increase in real gross domestic product (GDP) on an annualized basis."

The latest report by IHS Markit revealed on Wednesday the seasonally adjusted final IHS Markit U.S. Services Business Activity Index (PMI) stood at 50.0 in July, up significantly from 47.9 in June and higher than the “flash” figure of 49.6. This was the highest reading since January and signaled a stabilization in business activity across the U.S. service sector as businesses continued to reopen following coronavirus lockdowns in prior months.

Economists had forecast the index to stay unrevised at 49.6.

According to the report, new orders declined at a slightly quicker rate as domestic and foreign client demand remained muted, but employment increased for the first time since February and output expectations improved to the strongest since March 2019 amid hopes of an end to lockdown measures over the longer term. On the price front, input costs and output charges rose at sharper rates as there were some reports of PPE-related costs rising, and supplier price hikes were partially passed on to customers. 

FXStreet notes that S&P 500 strength stays on course to test the top of its February “pandemic” gap at 3328/38, but economists at Credit Suisse still believe this level will cap the index at first for a fresh consolidation phase. Meanwhile, the VIX is starting to move below key support and may be returning to “normal” levels. 

“S&P 500 has held flagged high-level support at 3200/3198 and this keeps the immediate bias higher for a test on the top of the February gap at 3328/38. We continue to look for this to remain tough resistance for now for lengthier consolidation. A break in due course though should clear the way for a challenge on the 3394 record high.”

“Below 3200 would mark a minor top to reinforce the likelihood for further range-trading with support then seen back at 3128/16, which we would look to hold. A break though can see a retest of support from the 200-day average, currently seen at 3052, but with only a close back below here seen raising the risk we are seeing the construction of a potentially important top.”

“The VIX is moving below key support from the top of its 2019 range at 24.81/23.54 and a weekly close below here would be seen opening the door to more ‘normal’ conditions with support seen at 20 next.”

• There will be a rebound in economic activity in Q3
• Expects the recovery to continue through the second half of the year
• The Fed is doing everything it can to support a robust recovery
• The longer the duration of pandemic, the more damage there is to economy

The U.S. Commerce Department reported on Wednesday that U.S. the goods and services trade deficit narrowed to $50.7 billion in June from a revised $54.8 billion in the previous month (originally a gap of $54.6 billion).

Economists had expected a deficit of $50.1 billion.

According to the report, the June decrease in the goods and services deficit reflected a decline in the goods deficit of $4.0 billion to $72.2 billion and an advance in the services surplus of $0.1 billion to $21.5 billion.

In June, exports of goods and services from the U.S. climbed 9.4 percent m-o-m to $158.3 billion, while imports rose 4.7 percent m-o-m to $208.9 billion, in part, due to the impact of COVID-19, as many businesses were operating at limited capacity or ceased operations completely, and the movement of travelers across borders was restricted.

Year-to-date, the goods and services deficit declined 7.8 percent from the same period in 2019. Exports plunged 15.7 percent, while imports tumbled 14.2 percent.

• BoJ will closely monitor impact of the coronavirus on the economy and won't hesitate to do whatever it takes as a central bank if necessary
• Important to continue to provide support for financing and maintaining stability in financial markets
• Must be vigilant that liquidity risk will lead to a solvency problem
• Spread of COVID-19 has not subsided globally, and domestic and overseas economies have remained in extremely severe situations
• Despite extremely high uncertainties, domestic and overseas economies are likely to improve gradually from H2
• Pace of improvement in domestic, overseas economies is expected to be only moderate

The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed on Wednesday the U.S. private employers added 167,000 jobs in July.

Economists had expected an increase of 1,500,000.

The June number saw a dramatic upward revision to 4,314,000 from the originally reported 2,369,000.

“The labor market recovery slowed in the month of July,” noted Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We have seen the slowdown impact businesses across all sizes and sectors.”

GBP traded mixed against its major counterparts in the European session on Wednesday. It rose against USD, EUR, JPY, but fell against AUD and CAD.

The U.S. currency remained under pressure as the U.S. coronavirus relief package stalled in Congress. White House officials are reported to work "around the clock" with Democrats in order to bridge the gap between their $3.2 trillion proposal and the Republican's $1 trillion counter-offer.

The pound’s advance was also capped by fears of a second wave of infections. A new study by the scientists from the Academy of Medical Sciences claimed on Tuesday that the second wave of coronavirus could bring twice as many deaths as the first in Britain. 

Last week, the UK's PM Boris Johnson said that the next stage of lockdown easing would be postponed for at least two weeks due to a pick-up in COVID-19 infection rates. According to Johns Hopkins University, the UK has 307,257 cases of COVID-19, the 11th highest in the world. Overall, the total number of confirmed global coronavirus cases rose to 18,566,769.

Investors also remained cautious ahead of the announcement of the outcomes of the Bank of England’s (BoE) monetary policy meeting. The  BoE will announce its latest interest rate decision and rate statement on Thursday. It is expected that the British central bank will leave its policy rate and quantitative easing program unchanged.

FXStreet notes that gold has broken above $2,000 and is trading as high as $2,035 but a temporary pullback is in the cards. Silver also continues its recent surge, as real yields dive deeper into negative territory. Both precious metals are set to consolidate around $1,900 and $23 respectively before moving to new highs, Bart Melek, head of commodity strategy at TD Securities briefs.

“Fed signaling that it is weighing the abandoning of preemptive rate moves to curb inflation has many worrying that the US central bank will allow inflation to move above the historic target of 2%, driving real rates even lower. Yield suppression could very well be a target, even as fiscal policy becomes more simulative.” 

“If the yield curve goes below zero, does the Fed then move the Fed funds subzero? This, plus the fact that gold has the highest convexity is perhaps why gold is rallying, despite breakevens falling today.” 

“The near-term threat is disinflation, and higher real yields. Consolidation lower is still in the cards, as this is very much a retail speculative frenzy, with CTAs and specs both shedding length recently. Before gold moves above $2,100/oz and silver into new cyclical highs, it is likely these metals consolidate their gains near $1,900/oz and $23/oz first.”

FXStreet notes that USD/CAD has removed crucial support at 1.3331/15. Economists at Credit Suisse stay biased lower and look for a clear break of the “neckline” to the September 2019 base at 1.3269 to confirm a more significant move lower, with support then seen next at 1.3206/02.

“After removing pivotal support from the former 2020 low and 78.6% retracement of the rally from late last year at 1.3331/15, the loonie is now approaching the next important support from the ‘neckline’ to September 2019 base currently at 1.3269, where we might expect fresh buyers at first (in line with daily RSI approaching oversold territory again). Beneath here in due course though should further increase downside pressure and see support next at 1.3233.” 

“Big picture, the ‘measured wedge objective’ is seen lower at 1.3206, just shy of a more important support area at 1.3202/3191.” 

“Resistance is seen initially at 1.3308, then 1.3331/35, which we look to now ideally cap. Above would ease the immediate downside pressure and see resistance next at 1.3399, ahead of 1.3421, but with fresh sellers expected here.”

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. fell 5.1 percent in the week ended July 31, following a 0.8 percent drop in the previous week.

According to the report, refinance applications decreased 6.8 percent, while. applications to purchase a home dropped 1.8 percent.

Meanwhile, the average fixed 30-year mortgage rate decreased from 3.20 percent to record low 3.14 percent.

“MBA’s forecast calls for rates to remain at these low levels, which will continue to spur strong refinance activity and offer homeowners relief in the form of lower monthly mortgage payments during these uncertain economic times,” noted the MBA’s forecaster Joel Kan. “Purchase loan balances continued to climb, which is perhaps a sign that the still-weak job market and tighter credit for government loans are constraining some first-time homebuyers,” he added.

FXStreet notes that Bank of England’s meeting, on 6 August at 06:00 GMT, isn't expected to bring any major policy decisions. Therefore, economists at TD Securities expect a limited reaction as USD direction dominates. Dovish shifts represent the MPC marking itself to market. A hawkish surprise could help GBP close its value gap, but sterling still faces headwinds from a sluggish recovery and ongoing Brexit concerns.

“Hawkish (35%): V-shaped recovery. Rates and QE unchanged. MPR has an illustrative scenario rather than formal forecasts, suggesting that MPC could not agree as Haldane continues to push V-shaped recovery. H2 2020 and 2021 GDP growth still unrealistically strong and u-rate forecasts hold below consensus view. Medium-term inflation returns to target 2-3y forward, leaving no real need for QE beyond end-2020. GBP/USD 1.3170 EUR/GBP 0.8950.”

“Base Case (55%): Realistic Recovery. Rates and QE unchanged. BoE moves to more realistic macro forecasts, with slower recovery from H2 2020 onwards and GDP back to end-2019 level in 2022/23. U-rate seen ~8% at end-2020, in line with consensus. 2-3y inflation forecasts slightly below 2% target. BoE ‘stands ready’ to do more, but Bailey clearly more concerned about longer-lasting damage to economy and labour market in particular. GBP/USD 1.3110 EUR/GBP 0.9020.”

“Dovish (10%): Double-digit u-rate into 2021. Rates and QE unchanged. BoE slashes macro forecasts and sees u-rate at/near double digits into 2021, more in line with NIESR and OBR fcsts. Medium-term inflation forecasts are much lower on yawning output gap, with clear signal that QE will need to be extended into 2021. GBP/USD 1.3005 EUR/GBP 0.9065.”

Gold: Further push higher to $2075/80 - Credit Suisse

FXStreet reports that gold extends its move to a new record high as the yellow metal has surged above the $2030 mark. Strategists at Credit Suisse look for a further push higher to the next flagged resistance at $2075/80, but then finally some consolidation. Weakness from here though, if indeed seen, will still be viewed as temporary and corrective. 

“Our ideal roadmap remains for a still further push higher as gold has broken the psychological $2000 barrier, what we see as its next tougher resistance test at Fibonacci projection resistance at $2075/80. Our bias remains to then look for this to cap at first and for finally a consolidation phase to unfold.”

“Big picture, a pause at $2075 (if indeed seen) will still be seen as temporary with an eventual break higher seeing resistance at $2175/80 next, then $2295/2300.”

“Support for a pullback moves to $1939, then $1915, a close below which would suggest a correction has already begun, with support next at $1820/00.”

According to the report from Society of Motor Manufacturers and Traders (SMMT), UK new car registrations rose for the first time this year, by 11.3% in July. Some 174,887 cars were registered in July 2020 as dealerships across the UK opened for their first full month of trading since February.2 This represents a significant improvement on the same month last year, when declining business and consumer confidence undermined the market.

Pent-up demand and special offers led to a reprieve for the sector, but overall registrations are still down by -41.9% or 598,054 units year-to-date. Despite the increase in July, SMMT’s full year outlook is for a -30% decline in registrations, representing more than £20 billion of lost sales.

Mike Hawes, SMMT Chief Executive, said: “July’s figures are positive, with a boost from demand pent up from earlier in the year and some attractive offers meaning there are some very good deals to be had. We must be cautious, however, as showrooms have only just fully reopened nationwide and there is still much uncertainty about the future. By the end of September we should have a clearer picture of whether or not this is a long-term trend. Although this month’s figures provide hope, the market remains fragile in the face of possible future spikes and localised lockdowns as well as, sadly, probable job losses across the economy. The next few weeks will be crucial in showing whether or not we are on the road to recovery”.

FXStreet reports that FX Strategists at UOB Group still believe that if USD/CNH breaches 6.9645 would be exposed to further retracements in the near-term.

24-hour view: “We highlighted yesterday that USD ‘could dip below 6.9755 but next support at 6.9645 is unlikely to come into the picture’. While USD did dip below 6.9755, it only managed to touch a low of 6.9740. The underlying tone has weakened further and for today, USD could dip below 6.9645 but a sustained decline below this level is unlikely. Next support is at 6.9580. Resistance is at 6.9820 followed by 6.9880.”

Next 1-3 weeks: “In our latest update from last Tuesday (28 Jul, spot at 6.9900), we highlighted that ‘breach of 6.9750 would indicate end of correction phase and increase risk of USD moving below the month-to-date low of 6.9645’. Since then, USD has traded mostly sideways and downward momentum has barely improved. That said, looking forward, the downside risk still appears to be higher but USD has to crack and close below the July’s low of 6.9645 before a sustained weakness can be expected.”

According to the report from Eurostat, in June 2020, a month marked by some relaxation of COVID-19 containment measures in many Member States, the seasonally adjusted volume of retail trade increased by 5.7% in the euro area and by 5.2% in the EU, compared with May 2020. Economists had expected a 5.9% increase in the euro area. In May 2020, the retail trade volume increased by 20.3% in the euro area and by 18.3% in the EU. This means that retail trade volumes in both zones have returned to the levels recorded in February 2020, before the start of containment measures.

In June 2020 compared with June 2019, the calendar adjusted retail sales index increased by 1.3% in both the euro area and EU.

In the euro area in June 2020, compared with May 2020, the volume of retail trade increased by 20.4% for automotive fuels and by 12.1% for non-food products while food, drinks and tobacco decreased by 2.7%. In the EU, the volume of retail trade increased by 16.9% for automotive fuels and by 10.6% for non-food products while food, drinks and tobacco decreased by 2.2%.

Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Ireland (+21.9%), Spain (+16.5%) and Italy (+13.8%). Decreases were observed in Austria (-2.5%) and Germany (-1.6%).

According to the report from IHS Markit/CIPS, UK service providers reported a strong increase in business activity during July, with the rate of growth the sharpest recorded for five years. New orders also rebounded during the latest survey period, reflecting an improvement in corporate and household spending. Growth was mainly linked to the phased reopening of business operations across the UK economy. Employment was a weak point in July, with staffing numbers falling at a steep and accelerated pace amid concerns of only a partial recovery in longer-term demand from the levels seen prior to the coronavirus disease 2019 (COVID-19) pandemic.

At 56.5 in July, the headline seasonally adjusted UK Services PMI Business Activity Index picked up from 47.1 in June and signalled the fastest pace of expansion since July 2015. The index has risen in each month after reaching a survey-record low of 13.4 in April, but the latest reading was the first to exceed the neutral 50.0 threshold since the pandemic began.

Around 38% of the survey panel reported an increase in business activity during July, while only 24% signalled a decline. The proportion of service providers reporting output growth had previously risen from just 7% in April to 13% in May and 28% in June. Higher levels of business activity were overwhelmingly linked to the easing of lockdown measures and subsequent increase in customer demand. However, survey respondents often noted that output had simply risen from an extremely low base and would take a long time to recover to pre-pandemic levels.

New business volumes meanwhile increased for the first time in five months and at the fastest pace since January. Growth was mostly attributed to reopened business operations and a return of clients from furlough. Around one-third of the survey panel reported a drop in employment, while only 11% signalled a rise. On a more positive note, business expectations rose further in July, with optimism reaching a five-month high amid hopes that easing lockdown measures would deliver a sustained boost to business activity.

According to the report from IHS Markit, the Eurozone PMI Composite Output Index maintained its recent upward trend during July, rising by over six points on the month to a reach a level of 54.9. That compared to June’s 48.5 and slightly higher than the earlier flash reading (54.8). Moreover, it was the first time that the index has posted above the 50.0 no-change mark since February and represented the fastest rate of growth since June 2018. Both the goods-producing and service sectors recorded marked rates of growth during July, with manufacturing registering the slightly stronger pace of expansion. Whilst the increase in service sector activity was the first in five months, July data represented the first increase in manufacturing production since the start of 2019.

Overall activity rose at a considerably quicker rate than volumes of incoming new business during July. Whilst the continued easing of lockdown restrictions helped to support a first increase in new business for five months, demand was undermined by continued weakness in international trade.  Latest data showed that new export business declined for a twenty-second successive month in July, although the rate of contraction was only marginal.

Despite the upturns in activity and new business, companies continue to operate with a considerable degree of spare capacity. Backlogs of work were again reduced during July, falling for a seventeenth successive month (albeit relatively modestly). Subsequently, firms made further cuts to their workforce numbers, with staffing levels reduced for a fifth month in succession. 

Looking ahead to the coming 12 months, private sector companies on average expect activity to rise from present levels. Sentiment was also the highest recorded since February.

FXStreet reports that analysts at Scotiabank offer a sneak peek at what to expect from Thursday’s Bank of England (BOE) monetary policy decision.

“No change to the 0.1% Bank Rate is expected. 

Forecasts will be updated and could showcase the MPC's bias toward downside risks. 

Expect further jawboning on the negative rate option, but it's unlikely that the results of the BOE's review of this option will be disclosed just yet. 

At present, markets are pricing a marginally negative policy rate commencing in early 2021.” 

During today's Asian trading, the US dollar fell against most of the world's major currencies on expectations of further policy easing by the Federal Reserve in the absence of new fiscal stimulus.

Traders continue to evaluate information about the progress of lawmakers ' discussion of a new package of measures to support the economy in the crisis caused by the coronavirus pandemic. In the absence of a consensus on this issue among lawmakers, the Fed may have to resort to further policy easing.

"While the differences between Democrats and Republicans regarding the terms of the new package of measures to support the economy are quite large and may slow down progress in the negotiations, expectations of new stimulus from the Federal reserve are growing, and this contributes to the weakening of the us dollar," analysts at Mizuho Bank note.

The pressure on lawmakers is growing, with the Senate going into recess on Friday. The leader of the democratic majority in the Senate, Charles Schumer, said on Tuesday that the US Congress is moving in the right direction, and he hopes that lawmakers can reach an agreement.

The ICE index, which tracks the dynamics of the us dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell by 0.33%.

Meanwhile, the Chinese yuan against the dollar rose on Wednesday to its highest since March 11 on expectations that the US-China relations will not deteriorate in the near future, as the countries agreed on August 15 to hold high-level talks to assess Beijing's compliance with the terms of a bilateral trade agreement signed in January this year.

FXStreet reports that Brent Crude Oil is trading around $44.60 as the black gold struggles to extend the rally. Strategists at Credit Suisse are still tilted to the upside with next resistance seen at $45.18/50. On the flip side, a loss of the $41.32 support would imply the end of the uptrend. 

“Brent Crude rally continues to struggle with trend resistance from June still capping. We continue to give the upside the benefit of the doubt for now though with resistance seen next at $45.18/50 and then more importantly at the 200-day average at $47.47, which we look to then cap. A direct and closing break can see resistance next at the 61.8% retracement of the Q1 fall at $50.45.” 

“Support at $41.32 ideally still holds to keep the immediate risk higher. Below would warn of a fall back to $37.01, potentially $33.62.”

“Weekly RSI momentum stays crucially placed at key support, below which would mark an important top.”

CNBC reports that equity markets could be stuck in a “fat and flat” range characterized by weaker returns and greater volatility, according to Christian Mueller-Glissmann, head of asset allocation at Goldman Sachs.

Stock markets have broadly returned to the levels seen before the late-March sell-off, when the coronavirus pandemic spread across the world. This was preceded by a decade of historically strong equity returns with below-average volatility.

However, speaking to CNBC, Mueller-Glissmann suggested that in recent months, declining bond yields and real yields (bond yields minus inflation) had boosted equity valuations, meaning flatter returns for investors.

“At the same time, you still have very high uncertainty on the growth outlook, both in the near term but also in the long term. And on top of that you have increasing uncertainty on inflation, so in all, that makes us, in the medium term, a bit less excited about risk-adjusted returns for equities,” Mueller-Glissmann told CNBC.

Growth and defensive stocks have generally appreciated more over recent months than their value counterparts, such as autos and banks.

Growth stocks are those of companies with significant and sustainable positive cash flow with greater future earnings and revenue expected to grow faster than that of industry peers, whereas defensive names typically offer stable cash flow and consistent dividends to shareholders regardless of overall market conditions. A value stock is a company trading at a discount relative to the strength of its fundamentals, whether that be a strong balance sheet, sales or dividends.

However Mueller-Glissmann highlighted that the key driver of markets in recent months had not been optimism on growth, but rather optimism on inflation. As such, he said there was a “tactical opportunity” for investors in certain sectors.

“You have break-even inflation at incredibly depressed levels, to some extent giving a pretty high probability of deflation in the near term. But even over a 10-year horizon, inflation expectations were low, and those have gotten repriced,” he said.

Reuters reports that Switzerland’s health minister said on Wednesday that new country-wide measures to check the recent spike in coronavirus cases are “unlikely” at present.

The number of cases has quadrupled in recent days compared to June’s figures, sparking concerns that restrictions may have to be tightened again to tackle a second wave of COVID-19.

A senior adviser to the government has recommended that mask wearing be compulsory indoors and that the size of events, currently restricted to 1,000 people, be limited to 100.

“In such an uncertain situation, nothing is impossible,” Alain Berset told newspaper Tages-Anzeiger. “But it seems unlikely to me,” he said when asked if he was considering national restrictions.

“Drastic” national steps, which included closing shops and schools, were launched in March after Switzerland saw how the pandemic had hit other countries, the minister said in the interview.

While this made sense for some parts of the country like Zurich and Geneva, in hindsight other regions might not have needed such steps, Berset said.

“Fortunately, we have learned so much in the meantime that we can take a more differentiated approach to a possible second wave.”

People needed to maintain social distancing rules to check a rise the recent rise in cases, he added.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1912 (597)

$1.1872 (717)

$1.1839 (983)

Price at time of writing this review: $1.1805

Support levels (open interest**, contracts):

$1.1753 (410)

$1.1725 (916)

$1.1688 (577)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 7 is 63475 contracts (according to data from August, 4) with the maximum number of contracts with strike price $1,1400 (4028);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3214 (89)

$1.3172 (516)

$1.3136 (1574)

Price at time of writing this review: $1.3076

Support levels (open interest**, contracts):

$1.2971 (1345)

$1.2933 (267)

$1.2845 (141)

Comments:

- Overall open interest on the CALL options with the expiration date August, 7 is 22128 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 20457 contracts, with the maximum number of contracts with strike price $1,2400 (1511);

- The ratio of PUT/CALL was 0.92 versus 0.94 from the previous trading day according to data from August, 4

* - 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.

RTTNews reports that the services sector in China continued to expand in July, albeit at a slower pace, the latest survey from Caixin revealed on Wednesday with a PMI score of 54.1.

That's down from the 10-year high of 58.4 in June, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

Mild capacity pressures were signaled by the latest data, as backlogs of work increased for a second month in succession. Growth was linked by panelists to the latest gains in incoming new work.

Also, the composite PMI came in at 54.5, down from 55.7 in the previous month.

eFXdata reports that Bank of America Global Research discusses its expectations for the BoE's August policy meeting. 

"Aside from an already implied cut to the QE purchase pace, we expect no policy changes at next week's BoE policy meeting. The BoE will likely moderate the sharp 'V' recovery it previously expected. Watch out for any update on the review of negative interest rates...In November, we expect the BoE to cut the lower bound negative, cut Bank Rate to 0, cut the TFS rate below Bank Rate and authorize another £100bn QE," BofA notes. 

"The August meeting is likely to be a placeholder, bar some technical modifications to the QE program. As such, we do not see this as an important milestone for GBP through August. It will, however, reinforce a bearish dynamic that we think will increasingly take hold in the final months of the year both from a policy perspective and a political one," BofA adds.