CFD Markets News and Forecasts — 03-08-2020

The Commerce Department announced on Monday that construction spending declined 0.7 percent m-o-m in June after a revised 1.7 percent m-o-m drop in May (originally a 2.1 percent m-o-m fall). This marked the fourth consecutive month of decrease in construction spending.

Economists had forecast construction spending increasing 1.0 percent m-o-m in June.

According to the report, spending on both private and public construction fell 0.7 percent m-o-m. 

A report from the Institute for Supply Management (ISM) showed on Monday the U.S. manufacturing sector’s activity expanded in July.

The ISM's index of manufacturing activity came in at 54.2 percent last month, up 1.6 percentage points from the June reading of 52.6 percent. The reading pointed to the biggest expansion in factory activity since March 2019.

Economists' had forecast the indicator to increase to 53.6 percent.

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

According to the report, the New Orders Index stood at 61.5 percent, an increase of 5.1 percentage points from the June reading, while the Production Index registered 62.1 percent, up 4.8 percentage points compared to the June reading, the Backlog of Orders Index posted 51.8 percent, an advance of 6.5 percentage points compared to the June reading, and the Employment Index came in at 44.3 percent, an increase of 2.2 percentage points from the June reading. Meanwhile, the Supplier Deliveries Index registered 55.8 percent, down 1.1 percentage points from the June figure.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that growth cycle continued for the second straight month after three prior months of COVID-19 disruptions, with demand and consumption driving expansion. “Among the six biggest industry sectors, Food, Beverage & Tobacco Products remains the best-performing industry sector, with Chemical Products, Computer & Electronic Products and Petroleum & Coal Products growing respectably. Transportation Equipment and Fabricated Metal Products continue to contract, but at soft levels,” says Fiore,” said Fiore. He also added that the past relationship between the PMI and the overall economy indicates that the PMI for July (54.2 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 Monday the seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) stood at 50.9 in July, up from June’s reading of 49.8 but lower than the earlier released “flash” reading of 51.3. The reading signaled a marginal improvement in the performance of the U.S. manufacturing sector, the first since February.

Economists had forecast the index to stay unrevised at 51.3.

According to the report, overall growth was marginal but stemmed from the first upturns in output and new orders for five months, as client demand picked up. Meanwhile, the contraction in employment softened despite further evidence of spare capacity as new sales rose. On the price front, input prices rose solidly amid increased demand for inputs, whilst firms partially passed on higher costs to clients through an uptick in charges.

Chris Williamson, Chief Business Economist at IHS Markit noted: “Although indicating the strongest expansion of the manufacturing sector since January, the IHS Markit PMI remains worryingly weak. Much of the recent improvement in output appears to be driven merely by factories restarting work rather than reflecting an upswing in demand. Growth of new orders remains lacklustre and backlogs of work continue to fall, hinting strongly at the build-up of excess capacity. Many firms and their customers remain cautious in relation to spending in the face of re-imposed lockdowns in some states and worries about further disruptions from the pandemic.”

• Trump's priorities are eviction, jobless provisions 
• Wants enhanced short-term unemployment package passed in the next couple of days

U.S. stock-index futures rose on Monday, as tech shares gained despite lack of progress in talks on a new fiscal coronavirus relief plan and pestering U.S.-China tensions.

Global Stocks:

• Japan's foreign minister is visiting Britain this week

(company / ticker / price / change ($/%) / volume)

Caterpillar (CAT) upgraded to Neutral from Underweight at Atlantic Equities; target $140

Merck (MRK) upgraded to Buy from Neutral at Goldman; target raised to $105

• Sees a muted rebound from here
• Expects unemployment rate at 9-10% at year-end unless they can manage the virus better

Steven Trypsteen, an economist at ING, notes that easing the lockdown measures allowed Spain's manufacturing sector to return to growth in July, after four months of contraction.

"The PMI for manufacturing rose from 49 in June to 53.5 in July. The survey shows that output and new orders grew, as the reopening of the economy generated demand. Foreign sales also recovered for similar reasons."

"Manufacturers upped their purchasing activity, although they still report delays in delivery due to transportations problems. As a result inventories, raw materials and semi-manufactured goods are run down."

"The upswing in activity, however, was not strong enough to stop the decline of employment and the backlog of work. Firms are still operating well below capacity. This indicates that the collapse of activity due to the lockdown measures is not being undone completely by removing them. Indeed, it will take time to see a full recovery, not least because of the uncertainty surrounding the future evolution of the pandemic. "

"The current upswing of the pandemic certainly is another hit for the tourism sector. And the recovery of the number of international arrivals was already slow. In June there were 657,000 international arrivals, compared to 0 in April and May, but compared to June 2019 this implies a drop of 94%. In  June 2019 there were more than 10.5 million international arrivals."

"All in all, the recovery in the manufacturing sector is good news, but a further decline in employment will hamper the overall recovery of the economy."

GBP fell against most other major currencies in the European session on Monday as investors weighed the latest UK PMI data, while awaiting the outcomes of the Bank of England’s (BoE) policy meeting on Thursday.

IHS Markit reported that activity in the UK’s manufacturing sector improved solidly in July, as output growth hit a 32-month high supported by the sharpest rise in new order volumes since the end of 2018. According to the report, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to a 16-month high of 53.3 in July, up from 50.1 in June but below the earlier flash estimate of 53.6. The latest PMI pointed to the strongest pace of expansion in the UK’s manufacturing sector since March 2019. Economists had forecast the reading to remain unrevised at 53.6.

The Bank of England (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.

Market participants also continued to monitor how work the UK government’s strategy of local lockdowns, targeting areas which have suffered outbreaks. Last week, the UK's PM Boris Johnson ordered swathes of the north of England back into partial lockdown, banning people in Greater Manchester, Bradford, Blackburn from holding indoor meetings with different households. 

FXStreet notes that the S&P 500 moved strongly higher on Friday and closed the week at 3271 but only above 3279/81 would be seen bringing the high-level consolidation phase to an end. Key support remains seen at 3200, economists at Credit Suisse apprise.

“S&P 500 moved sharply higher on Friday as the market once again held above key price support at 3200, as well as its rising 13-day average, currently at 3232. Despite this strength though, above the recent ‘reversal day’ high and price resistance at 3279/81 remains needed to bring this high-level consolidation phase to an end with resistance then seen next at 3288 and then more importantly at the top of the February price gap at 3328/38, which we expect to remain a major barrier.”

“Support is seen at 3246 initially, then 3232 and then 3220. Only below 3200 though would be seen establishing a near-term top and a more concerted turn lower within the broader sideways range, with support then seen next and initially at 3173.”

• We will actively and steadily push forward with yuan internationalisation

FXStreet notes that the dollar fell by about 5% in trade-weighted terms in July. Some argues that a stronger euro or massive money-printing by the Fed are behind this move lower but Neil Shearing from Capital Economics believes the prospect of higher inflation in the US compared to its peers is the explanation which stands out for the greenback’s weakness. 

“What is going on? Several theories have been advanced. One is that the weakness of the dollar is the flip side of a stronger euro, which has benefitted from signs that European policymakers are finally getting their act together. Yet the dollar has not just weakened against the euro – it has weakened against other currencies too.” 

“Another explanation that has been put forward is that massive money-printing by the Fed, combined with deepening political dysfunction at home and a growing strategic rivalry with China abroad, has reduced the allure of the dollar and hastened its demise as the world’s reserve currency. Yet this is wildly overdone – there is currently no credible alternative to the dollar as a reserve currency.” 

“A more intriguing explanation for the recent dip in the dollar lies in what’s been happening to the inflation expectations that are baked into bond markets. Inflation expectations in most countries have risen over the past month or so, but the rise has been particularly marked in the US. Furthermore, since nominal yields on US Treasuries have remained steady, the rise in inflation expectations has caused a corresponding drop in US real yields. This drop in real yields may in turn have weighed on the dollar.” 

“The rise in inflation expectations could reflect speculation about a regime shift in the US that tolerates – or indeed targets – higher inflation. Admittedly, Jerome Powell made no mention of this in his remarks following last week’s FOMC meeting. But this hasn’t stopped other officials at the Fed from talking regularly about something akin to an average inflation targeting regime – allowing inflation to rise above its target a bit before tightening. We suspect that the Fed’s year-long review of monetary policy, which has been delayed by the pandemic but should conclude soon, could lay the groundwork for such a shift.”

FXStreet reports that economist at UOB Group Lee Sue Ann has ruled out any changes of the RBA’s monetary conditions at the upcoming meeting.

“The RBA has effectively exhausted conventional monetary policy by cutting the OCR to its self-imposed floor of 0.25%. Hence, we do not see further reductions in the policy rate, with negative rates ruled out by RBA Governor Phillip Lowe (for now).”

“The focus will remain firmly on end-users rates via the yield curve target, as well as ensuring sufficient liquidity in bond markets and the free flow of credit to households and business”.

FXStreet notes that EUR/USD has reversed its brief move above 1.1900 with the market seeing a weekly close back below its downtrend from 2008 at 1.1797. This adds weight to the view for a temporary pullback, with support seen at 1.1734/31 and then at 1.1655, per Credit Suisse.

“Even though EUR/USD managed to move briefly above 1.1900 on Friday strength was not sustained and the subsequent sharp retreat has seen the market close the week back below the long-term downtrend from the 2008 peak at 1.1797. This suggests the rally has become exhausted near-term and although our core outlook stays bullish, we now look for a consolidation/correction to emerge.” 

“Support is seen at 1.1734/31 initially – the 23.6% retracement of the rally from the late June low – below which should see weakness extend back to the 13 -day average at 1.1655, potentially the 38.2% retracement at 1.1627/22, but with this latter support then ideally holding.” 

“Post a pullback we would look for the uptrend to resume with resistance seen at 1.1797 initially and with 1.852/63 needing to be cleared for a direct move back to 1.1904/09. Above here in due course should see strength extend to our first major flagged resistance at 1.2145/55.”

FXStreet reports that senior Economist at UOB Group Alvin Liew assessed the latest FOMC event.

“The Federal Reserve’s July 2020 FOMC in a unanimous and widely expected decision, kept its policy Fed Funds Target rate (FFTR) at the range of 0.0% and 0.25% while the Fed Board of Governors also unanimously maintained the interest paid on excess reserves (IOER) at 0.1%.”

“One of the main changes in the July FOMC statement is the new statement ‘Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.’… The other new addition is the statement that ‘The path of the economy will depend significantly on the course of the virus’ which puts the US economic recovery squarely dependent on the COVID-19. Other than these changes, the rest of the FOMC statement was unchanged from June.”

“In a separate announcement on Wednesday (29 Jul), the Fed extended its dollar liquidity swap lines and the temporary repurchase agreement facility for foreign and international monetary authorities through 31 March 2021. Earlier on Tuesday (28 Jul), the Fed announced its board of governors decided to extend several emergency loan programs which were set to expire on 30 September 2020 until the end of the year.”

“The message from the latest FOMC remains clear that the Fed is committed to do whatever it takes to maintain financial market stability, and safe-guard the economic recovery. This is further reinforced by the extension of swap lines (till March 2021) and several emergency loan programs (till end-2020). We expect the Fed to keep its near zero percent policy rate until at least 2022. That said, we continue to hold the view the Fed will not want to push rates beyond zero, into negative territory, a view affirmed by the June FOMC Dotplot.”

“While we expect the Fed to maintain status quo for its policy interest rate, we believe the Fed will still ease monetary policy further especially when the expectation of an ‘unprecedented’ 2Q comes to pass. The protracted review of yield curve caps/targets (YCT) ongoing since the June FOMC… We expect the Fed to implement YCT as a means to make monetary policy even more accommodative, to be announced possibly by the next FOMC on 15/16 September 2020…”.

The global economic recovery will continue to be the driver of movements in the kiwi. Furthermore, RBNZ's upcoming monetary policy meeting on 12 August is likely to provide a check on the near-term strength in the NZD, according to economists at HSBC. 

“For the NZD specifically, the low virus transmission numbers are a mixed blessing for the economy. While it does allow the domestic economy to get back on track faster, it also means that international borders look set to remain closed for a prolonged period of time, likely longer than those countries hit harder by the virus. Faced with these complex trade offs and significant uncertainty over the future path of the virus, the FX market has chosen to largely ignore local developments and focus on global.”

“Our near-term caution on the NZD also reflects dovish risks around the RBNZ policy going into the 12 August meeting. Unlike the RBA, which appears happy to sit tight, the RBNZ has signalled that NZD strength is unwelcome and that all aspects of its policy are up for review. A wide range of options are kept open including further expansion to QE, a negative official cash rate, and even debt monetization. All of these options would be negative for the NZD.”

Bloomberg reports that there’s a risk of a modest equity-market correction in the next couple of weeks if economic data miss expectations, according to JPMorgan Chase & Co.

A large stock-market tumble is unlikely given pent-up demand and an assumption that further fiscal relief will eventually pass Congress, keeping the economy “well above trend,” strategists including John Normand wrote in a note. However, there are moderate risks from payrolls and retail sales data undershooting expectations in the early part of the month, they warned.

“Some misgivings are justified given a macro backdrop that is becoming muddied, but not muddied enough to justify bearish targets or a defensive investment strategy,” the strategists wrote. “The intersection of a U.S. growth downshift with expiring income supports preserves the risk of a market correction in August, but drawdown should be limited due to investor positioning.”

The S&P 500 has risen 46% from its March low on the back of unprecedented fiscal and monetary stimulus to combat the impact of Covid-19. As the benchmark climbed, numerous market watchers have warned that a pullback is likely, and corporate insiders have started to sell stocks.

Normand -- who not long after the March trough said that the worst was likely over -- maintains that conditions aren’t in place for much of a drawdown right now.

“A large correction (about 10%) would be tough to generate when positioning measures in equities are below average for most hedge funds” as well as for balanced bond/equity mutual funds,” the JPMorgan strategists said.

FXStreet reports that FX Strategists at UOB Group noted USD/CNH risks further retracements if/when 6.9645 is cleared.

24-hour view: “USD traded in a choppy manner last Friday as it dropped to 6.9755 before rebounding quickly to close at 6.9920 (-0.13%). The soft price action after opening this morning suggests USD could dip below the 6.9755 low. However, downward momentum is lackluster at best and the next support at 6.9650 is unlikely to come into the picture. On the upside, only a break of 7.0020 (minor resistance is at 6.9930) would indicate the current mild downward pressure has eased.”

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 IHS Markit/CIPS, July saw a solid improvement in the operating conditions faced by UK manufacturers, as output growth hit a 32-month high supported by the sharpest rise in new order volumes since the end of 2018. Business sentiment also recovered to its highest level in 28 months. 

The seasonally adjusted UK PMI rose to a 16-month high of 53.3 in July, up from 50.1 in June and below the earlier flash estimate of 53.6. Economists had expected an increase to 53.6. The headline PMI – calculated as a weighted-average of five sub-indices – has posted above the neutral 50.0 mark separating improvement from deterioration in each of the past two months.

Manufacturers linked the expansion to a further loosening of the lockdown conditions in place due to the coronavirus disease 2019 (COVID-19). This allowed manufacturers to restart, or raise, production in response to clients reopening. It should be noted that, while a positive start to the recovery, it will take several months of growth to fully recoup the output lost since the start of the pandemic.

Manufacturing production was raised for the second successive month and to the greatest extent since November 2017. Growth was especially marked in the consumer and intermediate goods industries. Investment goods production also rose for the first time in 15 months. In all three subsectors higher production was underpinned by improved inflows of new work received.

New orders expanded for the first time since February, mainly reflecting a strengthening of domestic demand. In contrast, new export business fell for the ninth straight month, albeit to the weakest extent since February. 

Signs of economic recovery and expectations of client confidence strengthening led to improved sentiment among manufacturers during July. Confidence rose to its highest since March 2018, with 62% of companies expecting production to be higher one year from now. Only 12% of firms forecast a contraction. Sentiment strengthened across the consumer, intermediate and investment goods industries.

According to the report from IHS Markit, the euro area’s manufacturing economy recorded its first growth in a year-and-a-half during July as output and demand continued to recover in line with the further easing of restrictions on activity related to the global coronavirus disease (COVID-19). 

After accounting for seasonality, the Eurozone Manufacturing PMI registered 51.8, up from 47.4 in the previous month and an improvement on the earlier flash reading. Economists had expected an increase to 51.1. Whilst modest, the overall improvement in operating conditions signalled by the PMI was the first such occurrence recorded by the survey since February 2019. Moreover, growth was widespread, with all market groups registering PMI readings above 50.0 during July. Consumer goods was the best performing, registering is strongest expansion for over a year-and-a-half. 

Driving the overall upturn in the euro area manufacturing economy during July were returns to growth in both production and new orders. For output, the marked expansion was the first registered by the survey since the start of 2019 whilst the gain seen for new orders was the first in nearly two years and the strongest since early-2018. Latest data pointed to improved demand from both domestic and international markets. New export orders rose for the first time since September 2018,  although growth was modest and notably lagged that of overall new work.

On the price front, input prices remained inside deflationary territory for a fourteenth successive month, although the degree to which costs fell was the lowest in over a year. Competitive pressures and still weak demand meant that output charges were again cut. The decline was, however, marginal and the weakest recorded since August 2019.

Finally, looking ahead to the coming 12 months, business confidence continued to recover in July, rising since June to its highest level since January. Firms are hoping that the recent positive trends in activity and new work will continue with a broader recovery from the pandemic. Sentiment was at its highest amongst firms in Italy. Greek and French manufacturers were the least optimistic. 

Reuters reports that remittances across the world could decline by $108.6 billion this year as job losses mount and employers trim payrolls amid a COVID-19 pandemic that has devastated economies, according to a report by the Asian Development Bank.

Money sent to Asia, where about a third of migrant workers worldwide come from, could fall by $54.3 billion, or about a fifth of baseline remittances, the Manila-based lender said in the report released on Monday.

Remittances to Asia and the Pacific, which amounted to $315 billion in 2019, help fuel the consumption-led growth for some of the region’s developing economies, including the Philippines.

“The COVID-19 pandemic is expected to hit remittances hard in Asia and the Pacific,” the ADB report said.

The countries facing “more severe” effects are those where the share of remittances to the gross domestic product and per capita remittances are high, such as Tonga, Samoa and other Pacific nations, it said.

Georgia, Kyrgyzstan and Tajikistan, which send a large number of seasonal and long-term migrants mainly to Russia and Europe, will also be hard-hit, along with Nepal and the Philippines, the report said.

“The worst-case scenario assumes that the domestic outbreak control and resumption of economic activities take a year’s time,” it said. “Uncertainty looms about the timing of full recovery, even as lockdowns are lifted.”

Developing Asia, a group of 45 countries in the Asia-Pacific region, is forecast to clock up its weakest growth in nearly six decades this year, the lender said in its Asian Development Outlook report issued in June.

During today's Asian trading, the US dollar rose against the euro, yen and pound. Overall, the US dollar index is in the black after the highest drop in almost 10 years in July.

Demand for the US currency increased sharply in March this year, when the global economy faced a crisis as a result of lockdowns imposed around the world to curb the spread of the coronavirus. Measures taken by state governments, as well as Central banks, to support the economy, supported stock markets and contributed to the weakening of the dollar. In recent weeks, the trend to weaken the dollar has increased against the background of an increase in the incidence of coronavirus infection in the United States, with signals of recovery in economic activity in other regions of the world.

"What people are desperately waiting for is good news regarding the control of coronavirus infection. This, I think, is the most important thing. When buying or selling a particular currency, traders take into account the degree of control of the coronavirus, rather than the fundamental stability of the respective economies," said the chief executive of Eurizon SLJ Capital Ltd. Steven Jen.

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) rose by 0.31%. In July, the index fell 4.4%, its worst monthly performance since September 2010. On Friday, its value increased by 0.4%.

FXStreet reports that AUD/USD could have charted a near-term peak if it breaks below the 0.7100 mark, in opinion of FX Strategists at UOB Group.

24-hour view: “Last Friday, AUD rose to a fresh high of 0.7227 before staging a sharp sell-off to close lower by -0.74% (0.7143), its biggest 1-day decline in more than 5 weeks. Downward momentum has ticked up and from here; AUD could dip below the ‘strong support’ at 0.7100 but for today, a sustained decline below this level is unlikely (next support is at 0.7075). Resistance is at 0.7155 but only a move above 0.7180 would indicate the current build-up in downward momentum has dissipated.”

Next 1-3 weeks: “While we have held a positive view in AUD since mid-July, in our latest update from last Thursday (30 Jul, spot at 0.7175), we indicated that ‘UD could edge above 0.7200 but in view of the lackluster momentum, it will probably struggle to extend its gain towards 0.7235’. AUD subsequently rose to 0.7227 on Friday before dropping back down sharply. Upward momentum has deteriorated further and from here, a breach of 0.7100 (no change in ‘strong support’ level) would indicate that 0.7227 is a short-term top. Overall, unless AUD moves and stays above 0.7180 within these 1 to 2 days, a breach of 0.7100 would not be surprising.”

According to the report from Federal Statistical Office (FSO), the consumer price index (CPI) fell by 0.2% in July 2020 compared with the previous month, reaching 101.2 points (December 2015 = 100). Inflation was –0.9% compared with the same month of the previ-ous year.

The decrease of 0.2% compared with the previous month can be explained by several factors including falling prices for clothing and footwear due to seasonal sales. The prices of mobile communication also declined, along with the prices for melons and grapes (“other fruits“). In contrast, prices for international package holidays and air transport increased.

In July 2020, the Swiss Harmonised Index of Consumer Prices (HICP) stood at 100.63 points (base 2015 = 100). This corresponds to a rate of change of +0.1% compared with the previous month and of –1.2% compared with the same month the previous year. Due to the effects of the pandemic, the same missing price imputation techniques used for the CPI were introduced for the HICP. The HICP is a supplementary indicator for inflation based on a harmonised method across EU member countries. It enables inflation in Switzerland to be compared with that of European countries.

FXStreet reports that cable’s rally is predicted to have ended on a breakdown of the 1.2970 level, according to FX Strategists at UOB Group.

24-hour view: “GBP surged to 1.3170 last Friday before giving up most of its gains as it closed little changed at 1.3084 (-0.09%). The sharp pull-back is viewed as part of an on-going correction phase. From here, barring a move above 1.3130 (minor resistance is at 1.3100), the pull-back in GBP could extend towards 1.3025. The next support at 1.2990 is unlikely to come into the picture.”

Next 1-3 weeks: “While we have expected GBP to strengthen since 21 Jul (spot at 1.2670); in our latest narrative from last Thursday (30 Jul, spot at 1.2980), we held the view that GBP ‘could continue to advance but any potential gain is likely to be relatively modest. Next resistance is at 1.3080’. However, GBP blast past 1.3080 and surged to a high of 1.3170 last Friday. The subsequent sharp and rapid pullback has dented the upward momentum considerably and this coupled with overbought conditions suggest the rally in GBP could be coming to an end soon. From here, unless GBP moves and stays above 1.3170 within these few days, a breach of 1.2970 (‘strong support’ level previously at 1.2850) would indicate that the current positive phase in GBP has run its course.”

RTTNews reports that China's manufacturing sector expanded at the fastest pace since early 2011 as market conditions continued to recover from the coronavirus outbreak, survey results from IHS Markit showed Monday.

The Caixin manufacturing Purchasing Managers' Index rose to 52.8 in July from 51.2 in June. A score above 50 indicates expansion.

Companies registered the fastest expansions of output and new orders since January 2011 amid reports of firmer customer demand. New business grew at the steepest rate since the start of 2011.

At the same time, new orders from overseas fell at the slowest rate for six months. Increased production led to the strongest rise in purchasing activity since January 2013.

Further, firms maintained a cautious approach to hiring, with staff numbers falling moderately despite an increase in backlogs of work.

Inflationary pressures picked up, with firms reporting steeper increases in both input prices and output charges.

Companies were generally confident that output would be higher than current levels in 12 months' time.

Wang Zhe, senior economist at Caixin Insight Group, said "Overall, flare-ups of the epidemic in some regions did not hurt the improving trend of the manufacturing economy, which continued to recover as more epidemic control measures were lifted."

"The supply and demand sides both improved, with relevant indicators maintaining strong momentum. However, we still need to pay attention to the weakness in both employment and overseas demand," the economist said.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1888 (659)

$1.1858 (2717)

$1.1836 (1079)

Price at time of writing this review: $1.1771

Support levels (open interest**, contracts):

$1.1713 (349)

$1.1678 (494)

$1.1638 (534)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 7 is 65037 contracts (according to data from July, 31) with the maximum number of contracts with strike price $1,1400 (4028);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3201 (391)

$1.3174 (1386)

$1.3138 (2449)

Price at time of writing this review: $1.3056

Support levels (open interest**, contracts):

$1.2970 (1091)

$1.2931 (252)

$1.2843 (137)

Comments:

- Overall open interest on the CALL options with the expiration date August, 7 is 21978 contracts, with the maximum number of contracts with strike price $1,3250 (2547);

- Overall open interest on the PUT options with the expiration date August, 7 is 20061  contracts, with the maximum number of contracts with strike price $1,2400 (1526);

- The ratio of PUT/CALL was 0.91 versus 0.97 from the previous trading day according to data from July, 31

* - 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.