CFD Markets News and Forecasts — 22-06-2020

• We will continually evaluate whether size, duration and composition of PEPP remain appropriate
• Rebound in activity is expected in the second half of the year
• Speed and scale of the rebound is uncertain

FXStreet reports that according to Strategists at UOB Group’s Quarterly Global Outlook 3Q 2020, the Chinese currency is expected to gather further buying interest in the medium term.

“Despite the renewed elevated political risk between the US and China, CNY is flat on the quarter (2Q) at about 7.09 /USD. While it is inevitable that US-China relationship would remain tense heading till into the US elections in November, the fact that both sides are still honoring the Phase 1 trade deal probably soothes nerves about the CNY. At the same time, the “world’s factory” is showing tentative signs that it has probably bottomed in the 1Q (-6.8%). Exports have stabilized to a modest growth (1.4% in May) while industrial production have flipped back to 4.4% y/y in May from an unprecedented 1.1% contraction in March. Manufacturing PMIs, both official and Caixin have both rebounded into expansionary territory above 50.”

“With the Chinese economy is on track for a firmer recovery in the 2H and assuming the US-China relations do not deteriorate beyond the current war of words, our previous view of a recovery in CNY in 2H remains intact. Our USD/CNY forecasts are updated to 7.12 in 3Q20, 7.09 in 4Q20, 7.05 in 1Q21 and 7.00 in 2Q21.”

The European Commission (EC) said on Monday its flash estimate showed the consumer confidence indicator for the Eurozone recovered by 4.1 points to -14.7 in June from an unrevised -18.8 in the previous month. Economists had expected the index to improve to -15.0.

Considering the European Union (EU) as a whole, consumer sentiment improved by 3.9 points to -15.6.

Despite this month’s gains, both indicators remained well below their long-term averages of -11.1 (Eurozone) and -10.5 (EU).

The National Association of Realtors (NAR) announced on Monday that the U.S. existing home sales plunged 9.7 percent m-o-m to a seasonally adjusted rate of 3.91 million in May from a 4.33 million in April, impacted by COVID-19. That was the lowest rate since October 2010.

Economists had forecast home resales decreasing to a 4.20 million-unit pace last month.

In y-o-y terms, however, existing-home sales slumped 26.6 percent in May, the biggest drop since 1982.

According to the report, each of the four major regions recorded declines in m-o-m and y-o-y sales, with the Northeast experiencing the greatest m-o-m drop. Single-family home sales stood at 3.57 million in May, down 9.4 percent from 3.94 million in April, and down 24.8 percent from one year ago. The median existing single-family home price was $287,700 in May, up 2.4 percent from May 2019. Meanwhile, existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 340,000 units in May, down 12.8 percent from April and down 41.4 percent from a year ago. The median existing condo price was $252,300 in May, a drop of 1.6 percent from a year ago.

“Sales completed in May reflect contract signings in March and April - during the strictest times of the pandemic lockdown and hence the cyclical low point,” noted Lawrence Yun, NAR’s chief economist. “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

FXStreet reports that the official launch of China's central bank digital currency may be closer than ever but this event is unlikely to affect the RMB, according to economists at HSBC who believe the sentiment towards renminbi should get better regarding improved US-China relations.

“In April, there were media reports about the PBoC conducting trials on a digital currency in certain cities and a screenshot of the user interface of a beta version of a mobile app developed by one commercial bank was even leaked. We believe the official launch of 'e-RMB' is probably close.”

“Since 'e-RMB' seems to be currently only aimed at partially digitalising currency in circulation and considering China's present capital account restrictions, we believe a launch is unlikely to have much implications for the direction of the RMB exchange rate in the near-term. However,  'e-RMB'  could facilitate RMB internationalisation and the diversification of the current USD-centric international monetary system in the long run.”

“One of the near-term key drivers for the RMB will remain the development of US-China relations. The meeting between US State Secretary Pompeo and Chinese official Yang Jiechi on 17 June is read by the market as a sign of a near-term improvement in the US-China relationship. The northbound Stock Connect registered inflows on 18 June, after a couple of days of outflows amid concerns over a COVID-19 second wave. This should also have helped sentiment towards the RMB in the near-term.”

U.S. stock-index futures rose on Monday, as the report about a record number of new daily coronavirus cases by the World Health Organization (WHO) was not enough to dampen investors’ hopes of stimulus-fueled economic recovery.

Global Stocks:

• It is up to local officials if any more targeted measures needed with coronavirus outbreaks
• There is no second wave of U.S. coronavirus cases, there are some hot spots

FXStreet notes that AUD/USD rebounds swiftly from the 21-day exponential average at 0.6815 and as the pair is trading at 0.6875, and the Credit Suisse analyst team points again to the 0.7032 level while support at 0.6777/75 holds the upside.

“AUD/USD has seen weakness come to a halt at the 21-day exponential average at 0.6815 once again for a rebound to the upside, maintaining the market’s bullish ‘reversal day’.”

“Resistance is now seen initially at 0.6912/23, then .6957/77, ahead of 0.7005, removal of which would see a renewed test of 0.7032/41 and 0.7063 in due course. An eventual break above here would see a large base established and add weight to the view of a broader change in trend to the upside, with resistance seen thereafter at the July 2019 high and 78.6% retracement of the 2019/2020 fall at 0.7082/92, where we would expect to see another initial pause.” 

“Near-term support is initially seen at 0.6805/6795, removal of which would see a move back to 0.6777/75, which ideally holds to keep the immediate upside bias intact. Removal of here though would negate the ‘reversal day’ and should see a deeper corrective move back to 0.6696/66, where we would expect to see a more concerted effort to hold.”

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

Apple (AAPL) target raised to $400 from $335 at Cowen 

Twitter (TWTR) target raised to $36 from $30 at Citigroup

Home Depot (HD) target raised to $260 from $245 at Morgan Stanley 

American Express (AXP) downgraded to Sell from Neutral at UBS

Walmart (WMT) upgraded to Buy at UBS; tgt raised to $135

The Chicago Federal Reserve announced on Monday the Chicago Fed national activity index (CFNAI), a weighted average of 85 different economic indicators, came in at 2.61 in May, up from a downwardly revised record-low -17.89 in April (originally -16.74), pointing to a substantial increase in economic growth.

At the same time, the index’s three-month moving average jumped to -6.65 in May from -7.50 in April.

According to the report, all four broad categories of indicators used to construct the index made positive contributions in May, and all four categories rebounded from April, led by gains in production- and employment-related indicators.

Production-related indicators made a positive contribution of 0.89 to the CFNAI in May, up from -5.94 in April. Employment-related indicators contributed +1.53 to the CFNAI in May, up from -9.06 in April. The contribution of the sales, orders, and inventories category to the CFNAI increased to +0.02 in May from -1.59 in April. The contribution of the personal consumption and housing category to the CFNAI improved increased to +0.17 in May from -1.30 in April.

• The level of economic uncertainty is "exceptionally high"
• PEPP is guided by inflation objective, will be temporary
• PEPP should be flexible but not unbound
• Capital key could be a useful benchmark
• Shouldn't assume that ECB will keep yields low forever
• German economy probably bottomed out in April
• Germany has fiscal space for more measures if needed

Safe-haven USD, JPY and CHF traded lower against their counterparts in the European session on Monday as the report about a record number of new daily coronavirus cases by the World Health Organization (WHO) was not enough to dampen investors’ risk appetite. USD fell against JPY and CHF. JPY weakened against CHF.

The WHO reported that global coronavirus cases rose by a record 183,020 on Sunday. This took the total worldwide caseload past 8.7 million. The biggest rise in cases was recorded in North and South America. The previous record for new cases was set on June 18.

The spike in global coronavirus cases added to investors' worries about the so-called “second wave” of the damaging disease and renewed concerns about economic recovery. However, hopes of additional stimulus from central banks and governments to support the coronavirus-hit economies continued to fuel the broader market optimism. 

S&P 500: Lengthy corrective phase underway with support seen at 3076 – Credit Suisse

FXStreet notes that S&P 500 strength has been rejected and with an ‘island top’ in place beside daily MACD momentum having turned lower strategists at Credit Suisse continue to look for a lengthier consolidation/corrective phase to emerge with support seen at 3076/66.

“With an ‘island top’ in place and with daily MACD momentum having turned lower this is seen adding weight to our core view that the market is now in a consolidation/corrective phase, which we look to extend further.”

“Immediate support is seen at 3083 then the price gap from the beginning of last week at 3076/66. Beneath here remains needed to ease the immediate upside bias to reinforce the broader ranging scenario, with support then seen next at 3044 ahead of the 200-day average at 3019/18. A weekly close below here remains needed to suggest a more concerted correction lower can emerge, with the 38.2% retracement of the entire rally from March at 2835.” 

“Resistance is seen at 3116 initially, then 3140, with a break above 3153/56 needed to clear the way for strength to extend back to the top of the price gap from last week at 3181/90, which we continue to look to cap. Above 3190 though can see the risk stay higher for a test of the potential downtrend from the February peak, today seen at 3213.”

• UK government would have struggled to fund itself if not for QE expansion 
• The prospects would have been very bad

FXStreet notes that from January 1st, 2010 through May 1st of this year, the euro has lost almost a quarter of its value against the USD and the performance of European equities, relatives stocks in the US, roughly halved. However, Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley, notes three encouraging developments to change the narrative.

“The region has been relatively successful in containing the spread of COVID-19, with case counts in sharp decline. EU 27, which has a total population of about 445 million people, has been seeing daily fatalities from this terrible disease in the low 300s. In the United States, which has a lower population of about 330 million, daily fatalities are roughly three times as high.”

“The ECB has been moving aggressively and last week voted to expand its bond purchases by a further 600 billion euros. I'd note that the idea of a highly supportive central bank has not always been the case for the Eurozone over the last 20 years. The ECB raised interest rates twice in 2011 and also did so in 2008, just a few months before Lehman Brothers failed.”

“For the first time, France and Germany, the two largest economies in the eurozone, proposed a regional recovery fund paid for by joint borrowing, backed by the entire region. And it's asking that this economic assistance be largely in the form of grants rather than loans. Meanwhile, the funding for this aid would be through jointly backed issuance that creates a new safe asset for the region, much more similar to a US Treasury.”

“We think these proposals are a significant moment for the eurozone. For currency markets, we think they'll cause the euro to strengthen. In bond markets, we think they'll help narrow the spreads between other countries and Germany. And for equity markets, we think they'll help encourage a rotation towards companies in the periphery and out of the high-quality defensive stocks that have previously been driving Europe's market.”

• Bundesbank: Germany's economy to contract by nearly 10% in Q2 2020 - monthly report
• German government stimulus package should bolster economic recovery
• It should also help improve consumer, business sentiment
• But that is unlikely to see much effect in Q2
• Construction boom withstood the pandemic for the most part
• Inflation to be "markedly negative" from July until year-end
• Should turn positive again in 2021, with base effects boosting 2H 2021 readings

FXStreet notes that GBP/USD broke below the uptrend from March and 55-day average at 1.2423 last week and analysts at Credit Suisse look for a more important turn lower with the next meaningful support seen at 1.2278.

“Last week may prove to be decisive for GBP/USD with key supports from the uptrend from March broken and 55-day average removed and with daily MACD momentum having turned lower. With the cross having also essentially rejected its 200-day average in early June we believe this sharply increases the likelihood we are seeing the beginning of an important turn lower.” 

“Below 1.2336 and we see support next at 1.2292/91, then 1.2278 – the 38.2% retracement of the entire rally from March – which we would look to hold at first. Beneath here in due course though should reinforce the downturn with support seen next at 1.2164/62 and then the 50% retracement of the rally from March at 1.2112.”

“Immediate resistance is seen at the 55-day average at 1.2423, then price resistance and Friday’s high at 1.2455/56, with the back of the broken uptrend now ideally capping any rebound, currently placed at 1.2481.”

The latest survey by the Confederation of British Industry (CBI) revealed on Monday the UK manufacturers' order books improved slightly in May but remained poor by historical standards.

According to the report, the CBI's monthly factory order book balance increased to -58 in May from -62 in the previous month. However, the reading remained well below a long-run average of -14. Export order books dropped to their lowest on record since April 1977 (to -79 from -55 in April).

The CBI also reported that output in the quarter to June fell at the fastest rate on record since July 1975 (to -57 from -54 in May), but is expected to decline at a slower pace in the next three months (-30). Meanwhile, average selling prices for the next three months are expected to fall at a slower pace (to -10 from -20 in May).

Anna Leach, CBI Deputy Chief Economist, noted: “The UK manufacturing sector remained in a deep downturn in June due to the ongoing COVID-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping that this will ease somewhat in the next three months.”

eFXdata reports that Barclays Research discusses NZD outlook and adopts a bearish bias over the medium term targeting NZD/USD around 0.62 by year-end.

"We expect recent NZD strength to reverse, and forecast further weakness into 2021. NZD gains versus the AUD and risk sentiment appear exaggerated and we think risk premia is too low given the still uncertain macro outlook and risks of more RBNZ measures. The RBNZ has already hinted that it could include foreign bonds under its LSAP program and has mentioned that negative rates are also under consideration, albeit in 2021. These policy choices could potentially weaken the NZD sharply and cannot be ignored, especially as the RBNZ forecasts also incorporate a sizable drop in the NZD TWI," Barclays notes. 

"We think foreign investors could continue to unwind their NZGB holdings as RBNZ purchases crowd out other holders. The NZD will likely cheapen to help finance an already negative basic balance and portfolio outflows. While the domestic economy could recover faster with the elimination of COVID-19 cases, the external demand shock is likely to weigh heavily given the high dependency on exports, and tourism will likely remain a drag as borders remain closed to international visitors. We expect NZDUSD to weaken through our forecast horizon and expect NZD to underperform the AUD," Barclays adds. 

Reuters reports that the coronavirus will push debt levels in the world’s richest nations up by almost 20 percentage points on average this year, credit rating agency Moody’s said on Monday, almost double the damage seen during the financial crash.

A new report by Moody’s looked at 14 countries from the United States and Japan to Italy and Britain and assessed how coronavirus-induced economic slowdowns would scar their finances.

“We estimate that on average in this group, government debt/GDP ratios will rise by around 19 percentage points, nearly twice as much as in 2009 during the Great Financial Crisis”.

“Compared with the GFC, the rise in debt burdens will be more immediate and pervasive, reflecting the acuteness and breadth of the shock posed by the coronavirus”.

Italy, Japan and Britain are expected to suffer the biggest debt increases at around 25 percentage points of their respective GDPs, while the United States, France, Spain, Canada and New Zealand will all see theirs jump roughly 20 ppts.

Data from the UK last week showed public borrowing hitting a record high in May and a measure of public sector debt passing 100% of economic output.

A failure to bring debt levels back down would leave countries with weaker credit profiles more vulnerable to future economic or financial shocks, and sovereign credit rating downgrades, Moody’s added.

“Rating implications will depend on government's’ ability to reverse debt trajectories ahead of potential future shocks,” the report said.

“Italy and Japan will be particularly dependent on growth trends since scope to narrow and sustain materially stronger financial balances than before the shock is limited”.

FXStreet reports that strategists at UOB Group’s Quarterly Global Outlook 3Q 2020 believe the greenback could shed further ground as global recovery advances in the second half of the year.

“It would appear that USD has peaked in March. Within the Majors, risk currencies such as AUD and NZD rebounded ferociously against the USD in the 2Q and completed the V-shaped recovery from March’s lows. EUR/USD mustered enough momentum from hopes of a euro-area recovery fund to push above its key resistance at 1.10 in end-May. Overall, across the 2Q, we have seen the mighty USD lose its shine and the US Dollar Index (DXY) appears to have topped out in March at 103 as it pulled back towards 96 as of mid-June. Except for the IDR and THB, gains in the Asian FX against the USD in 2Q were more measured compared to the Majors. Concerns of the increasingly strained US-China relationship prevented a bigger recovery in most Asia emerging FX which otherwise would be sensitive to any pickup in global risk appetite. Also, most of emerging Asia are still nursing quarter- and year-to-date investor outflows in their respective stock and bond markets.”

“Going forward, we continue to see this gradual pullback in the USD. FX Majors like the EUR and AUD, are expected to consolidate recent gains against USD in the second half, amidst an on-going bumpy global recovery. Asian FX is expected to make further gains against the USD, but at a more sustainable pace with the CNY and South East Asian currencies leading the way to a firmer recovery in the second half. The key caveat to our broad view of gradual USD weakness from here on is a resurgent 2nd wave of infections could easily upend the relative stability financial markets are enjoying now and bring about a fresh bout of volatility leading to renewed USD strength yet again. We continue to urge investors to practice prudent risk management decisions in this brave new COVID-19 world.”

CNBC reports that the currency markets are currently facing “multiple cross-currents” amid fears over a potential second wave of coronavirus cases in the world, said Deutsche Bank’s Sameer Goel, who is chief Asia macro strategist.

A “big question” for investors right now over the U.S. dollar is whether it should be trading at a safe-haven risk premium as concerns rise over a potential second wave of virus infections, Goel told CNBC’s “Street Signs” on Monday.

He said that in a potential resurgence of cases, the U.S. dollar could weaken against most of its peers in developed markets, and to an extent, possibly China too.

Since March, investors have been favoring the greenback over its peers in the Group of 10 countries, in part due to “emergency dollar demand” as the world went into a synchronized shutdown to stem the spread of the coronavirus outbreak, Goel said. Investors typically flock to the U.S. dollar in times of uncertainty, in part due to its position as the world’s reserve currency.

“That emergency dollar demand seems to be waning,” he said.

Furthermore, “the exit strategy for the U.S., if anything, looks poorer than it is for the rest of the world,” he said referring to the lifting of lockdown measures and reopening of the economy. “Our mobility tracker suggests that, bulk of Europe, for example, is opening up faster than (the) U.S. is.”

Reuters reports that the European Central Bank is ready to cooperate with German "institutions" to resolve a legal dispute that jeopardises the participation of the euro zone's biggest economy in the ECB's hallmark stimulus programme, the bank's vice president said.

The ECB is ready to provide the German central bank the necessary information to resolve the issue and the ECB it is willing to engage German institutions if this did not threaten its independence, Germany's Der Spiegel quoted Luis de Guindos as saying on Monday.

Germany's Constitutional Court ruled last month that the ECB failed to demonstrate the proportionality of its asset purchases so the Bundesbank must quite the scheme unless the ECB provides a sufficient justification within three months.

FXStreet reports that Lee Sue Ann, Economist at UOB Group, assesses the latest BoE event and the prospects of extra easing in the next months.

“As expected, the Bank of England (BOE) announced, at its June meeting, a boost to its quantitiave easing (QE) programme by GBP100bn. The additional bond purchases will take the total value of the Asset Purchase Facility (APF) to GBP745bn.”

“Meanwhile, all nine MPC members agreed to keep its key benchmark interest rate at the historic low of 0.10%. There is increasing speculation that the BOE might cut interest rates to below zero for the first time as policymakers appear to have become less resistant to this option. However, there was nothing in the accompanying minutes that gave any clues about the MPC’s latest thinking. Whilst tempting, it remains unclear as to how negative rates would aid the recovery, given the negative impact on bank profitability. The decision to introduce negative interest rates will not be taken lightly, although we do not rule out this option should the economic outlook deteriorate further.”

“In all, although the decision to increase the asset purchase target by GBP100bn was within our expectations, the slower pace of purchases came as a surprise. We were expecting the current rate of bond buying to be maintained until August, at which point the MPC would top up its QE program again. Nonetheless, we think the latest move by the BOE is unlikely to mark the end of its efforts to counter the economic slump, and we forecast a further extension of GBP100bn by the November meeting. A further option is for the BOE to make changes to the Term Funding Scheme (TFS). This could give lenders access to funding below the Bank rate, assuming they increase lending to businesses (specifically SMEs).”

• Europe needs to move closer towards fiscal union

The US dollar fell slightly, but remained near the highs of last week on the background of increased demand for safe-haven currencies due to the danger of a second wave of coronavirus.

The Australian dollar rose slightly in price after the head of the country's Central Bank, Philip Lowe, made it clear that he was not concerned about the recent strengthening of the currency, and said that the consequences of the COVID-19 pandemic will not be as serious as the Central Bank initially feared.

However, there is more negative news at the moment. In particular, the World health organization on Sunday reported a record increase in the incidence of diseases in the world. The total number of cases of coronavirus infection worldwide currently exceeds 8.8 million, and the focus is now on whether this will lead to new bans and restrictions from the US authorities. Although this seems unlikely, local restrictions have been re-introduced in Beijing and the Australian state of Victoria.

Barclays Bank said that the growth of the euro is possible if the data on PMI indices, which will be released on Tuesday, exceeds the expectations of economists. In addition to the PMI data on Tuesday and surveys of investor sentiment in Germany, market participants will also expect data on consumer sentiment in the US.

The pound held just above a three-week low, weighed down by the prospect of a no-deal Brexit, as little progress was made in trade discussions between the UK and the European Union.

FXStreet reports that FX Strategists at UOB Group noted USD/CNH is predicted to stick to the consolidation theme in the next weeks.

24-hour view: “USD traded between 7.0645 and 7.0838 last Friday (narrower than our expected 7.0650/7.0910 range) before ending the day little changed at 7.0777 (-0.06%). Momentum indicators are mostly neutral and further range trading would not be surprising. Expected range for today, 7.0650/7.0900.”

Next 1-3 weeks: “USD traded in a quiet manner for the past few days and there is not much to add to our update from Monday (15 Jun, spot at 7.0880). As highlighted, the current movement in USD is deemed as part of consolidation phase and USD is expected to trade between 7.0500 and 7.1250 for a period.”

• Massive programme of asset purchases has been the right thing to do.

• Central bank independence should not be called into question by COVID-19.

• Financial system mustn’t become reliant on these extraordinary levels of central bank reserves.

• Current scale of central bank reserves mustn’t become a permanent feature.

• Elevated balance sheets could limit the room for manoeuvre in future emergencies.

• As economies recover, it’s likely that some of the exceptional monetary stimulus will need to be withdrawn, including by reducing reserves.

Reuters reports that Italy's budget deficit, currently projected to reach 10.4% of domestic output this year, is likely to expand further as the country tries to prop up the economy amid the coronavirus pandemic, Prime Minister Giuseppe Conte said on Sunday.

Measures to avoid layoffs as well as to help struggling sectors such as tourism could not wait until September, when the government would present a comprehensive plan to relaunch the economy after the coronavirus crisis, he said.

"A further increase in the budget deficit is likely," Conte told a press conference.

He said the government was worried about weak consumer spending and had discussed a possible sales tax reduction, but no decision had been taken on such a costly measure.

The government was working instead to reduce the gap between a worker's gross and net salary, commonly known as the "tax wedge", he said.

Conte said a single ultra-fast broadband network, a push towards digital payments and the transition to renewable energy sources would be the planks of the September plan.

FXStreet reports that FX Strategists at UOB Group noted EUR/USD could accelerate losses if 1.1170 is cleared.

24-hour view: “Last Friday, we highlighted that EUR ‘could test the 1.1170 support but prospect for a sustained decline below this level is not high’. EUR subsequently popped to a high of 1.1254, dropped quickly to 1.1167 before ending the day on a soft note at 1.1175 (-0.24%). While downward momentum appears patchy, the weakness in EUR is not showing sign of stabilizing just yet. From here, EUR could drift lower to 1.1145 first before stabilization can be expected. Resistance is at 1.1210 followed by 1.1235.”

Next 1-3 weeks: “We highlighted yesterday (18 Jun. spot at 1.1245) that ‘downward pressure has ticked up but EUR is still likely in a 1.1170/1.1380 consolidation range’. We added, EUR ‘has to close below 1.1170 before a deeper pullback can be expected’. EUR closed on a relatively soft note at 1.1202 yesterday (-0.36%) and downward pressure has picked up further. From here, if EUR closes below 1.1170, it could weaken further to 1.1100. The odds for such a scenario are not high for now but would increase quickly unless EUR can move above 1.1280 within these 1 to 2 days.”

RTTNews reports that China left its benchmark lending rates unchanged for the second straight month despite the economy struggling to recover from the impact of the coronavirus crisis.

The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.

The one-year and five-year loan prime rates were last reduced in April. The one-year loan prime rate was lowered by 20 basis points and five-year rate by 10 basis points in April.

The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This new lending rate replaced the central bank's traditional benchmark lending rate in August 2019.

Last week, the People's Bank of China injected CNY 200 billion funds into the financial system via medium-term lending facility at a rate of 2.95 percent, unchanged from the previous operation.

With fiscal stimulus ramping up and economic recovery well underway, the PBoC appears to see less of a need to encourage stronger private borrowing, Julian Evans-Pritchard, an economist at Capital Economics, said.

Broad credit growth still looks set to accelerate further in the coming quarters. But short-term interest rates are unlikely to decline much further, the economist noted.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1327 (2087)

$1.1293 (1282)

$1.1265 (1178)

Price at time of writing this review: $1.1199

Support levels (open interest**, contracts):

$1.1142 (665)

$1.1113 (1052)

$1.1077 (1710)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date July, 2 is 50294 contracts (according to data from June, 19) with the maximum number of contracts with strike price $1,1700 (2279);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2615 (558)

$1.2536 (499)

$1.2472 (499)

Price at time of writing this review: $1.2392

Support levels (open interest**, contracts):

$1.2309 (1411)

$1.2263 (825)

$1.2199 (1292)

Comments:

- Overall open interest on the CALL options with the expiration date July, 2 is 15171 contracts, with the maximum number of contracts with strike price $1,2800 (1693);

- Overall open interest on the PUT options with the expiration date July, 2 is 18306 contracts, with the maximum number of contracts with strike price $1,2550 (1487);

- The ratio of PUT/CALL was 1.21 versus 1.21 from the previous trading day according to data from June, 19

* - 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.