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The US Dollar rebounded, the Euro fell

17 Jul, 2020

European Central Bank stabilized interest rates

Data and news released yesterday:

Global coronavirus pneumonia has been diagnosed by 13 million 920 thousand cases, reaching 13,920,405 cases, and accumulative death cases over 591 thousand cases, reaching 591,640 cases.

In June, retail sales in the United States increased by 7.5% month on month, and core retail sales increased by 7.3% month on month. Although they were lower than the previous value, they were better than expected, but still fell 26% year on year.

The U.S. report on initial claims for unemployment benefits last week showed 1.3 million people, a drop less than the expected 1.25 million. Once again, it reveals the continuous pressure on the labor market.

Mr. Williams: with the surge in the number of infected people, the United States is at a serious turning point. It is not the time to consider raising interest rates.

The European Central Bank maintained the stability of the anti-epidemic stimulus policy on the eve of the EU 750 billion euro recovery fund consultation meeting, and the interest rate and asset purchase scale remained unchanged.

The UK expects inflation to be sustained and substantially lower than the Bank of England's inflation target; therefore, the Bank of England is expected to further relax its policy.


Market Volatility:

The dollar index rose 0.27% to around 96.30, with a drop of 0.2% in the session. Concerns about the rise in the number of coronavirus infections triggered widespread risk aversion operations.

The euro weakened slightly, falling 0.25% in the end to close at 1.1384, up 0.3% at one time in the session; the focus was still around 1.1495 since the beginning of the year; the support was at 1.1350 below 1.1380.

The UK pound fell 0.27% to around 1.2553 and remained below 1.26, showing a weak overall. The market expects inflation to continue and significantly lower than the Bank of England's inflation target.

The USD/JPY rose 0.31% to around 107.27, stopping two consecutive falls; market research shows that the US dollar against the yen has been supported by short covering and option related buying.

The spot gold fell below the $1800 level, breaking the nearly two-day lowest position to $1794.98/oz. The sharp rise in the US dollar index has put pressure on gold prices. The central bank will not act for a while, and there will be more stimulus measures.

The WTI August crude oil futures fell by US $0.45, or 1.09%, to US $40.75/barrel; Brent's September crude oil futures closed down US $0.42, or 0.96%, to settle at US $43.37 per barrel.


Future forecast of CWG:

The sub session data of this trading day was light; in the European session, the final monthly and annual CPI rates of the euro zone in June were released, and the governor of the Bank of England Bailey made a speech. However, the market focus was on the EU summit. In the US session, the annualized total number of construction permits and new housing starts in June in the United States and the initial value of the consumer confidence index of the University of Michigan will be released.

Institutional Analysis: Credit Suisse research discussed the expectations for the upcoming EU summit; the direction of the euro this week will be driven by macro news, especially the EU leaders' summit to be held on July 17-18. Our basic expectation is that the resistance of the industrious and thrifty countries will be nominal and ultimately fruitless. It is expected that the euro / dollar target of 1.15 is only preliminary. It can be seen that the euro / dollar will rise to 1.20 and move higher after some scenarios are realized in the late 2020.


Financial calendar:

17:00 Monthly and annual CPI rates of euro zone in June

18:00 Bank of England governor Bailey delivered a speech

20: 30 monthly wholesale sales rate of Canada in May

20: 30 annualisation of construction permits and new housing starts in June

22:00 U.S. initial value of consumer confidence index of University of Michigan in July


CWG financial knowledge:

Annualisation of the total number of construction permits and new housing starts in the United States: the U.S. Department of Commerce announced that the commencement of new housing provided the prosperity degree of private housing construction in the United States, which could reflect the market's view on the economic prosperity prospects and the expectation of the demand for means of production. It reflects the level of activity in the U.S. housing market, which would be good for the dollar if the data were released at a high level, and it would be bad for the dollar if it were not.