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Severe epidemic situation continues to rebound

20 Jul, 2020

The U.S. dollar fell sharply, the Market was waiting for EU’s consensus

Data and news released yesterday:

As of July 19th, the coronavirus pneumonia cases reaching 14 million 400 thousand, 217,386 new cases and 14,407,772 cases in total. From the WHO region, the Americas still have the most confirmed cases of the coronavirus, and the total number of confirmed cases is over 7 million 300 thousand.

The EU leaders still failed to reach a consensus on the economic rescue plan as scheduled. The EU leaders decided to postpone the summit for one day and continue to discuss relevant issues on the 19th. As of the end of the dinner, there was no sign of reaching a consensus.

The U.S. consumer confidence index dropped unexpectedly, and the country's coronavirus infection cases exceeded the 3.6 million mark. The market said the consumer confidence data was significantly lower than expected, putting pressure on previous market optimism.

The consumer confidence index released by the University of Michigan on Friday showed that consumer confidence suffered in mid-July, threatening the nascent housing market and economic recovery.

The IMF: the US Federal Reserve has room to increase asset purchases and forward-looking guidance. The US economy is expected to plummet by 37% in the second quarter and shrink by 6.6% in 2020.

Yellen and Ben Bernanke: the speed of economic recovery may be slow and uneven. The Fed is likely to give forward-looking guidance on when to raise interest rates.


Market Volatility:

The U.S. dollar index fell 0.31% to 96.01 on Friday, closing down for the fourth consecutive week and falling 0.70% in the final session. It hit a new low of 95.770 since June 10, and the latest data showed signs of market anxiety.

The euro strengthened for the fourth consecutive week, ending up 1.12% near 1.1426, reaching a new high since March 10 to about 1.1452. Expectations of an agreement on stimulus measures at the EU summit supported the euro.

The pound fell 0.44% to around 1.2567, maintaining a range volatility pattern in recent weeks. The UK economy is beginning to recover from the coronavirus blockade, but some employment intensive industries are still weak and the longer-term outlook is uncertain.

The USD/JPY closed slightly higher by 0.12% to around 107.022, and the overall trend of gradually narrowing since April has continued. The Bank of Japan maintained its monetary policy unchanged and still believed that the economy would gradually recover from the impact of the new epidemic.

The spot gold rose by more than US $16 to US $1812.03/oz on Friday. Although it was unable to continue to change the line last week to nearly nine-year highs, the international gold price remained positive for six consecutive weeks and ended up 0.65% higher at US $1810.42/oz.

The international oil price continued to fluctuate at a high level in the past few weeks, and the fluctuation range narrowed to slightly higher than US $2. Weighed down by concerns that a sharp rise in new cases will weaken fuel demand.


Future forecast of CWG:

This week, we need to focus on the minutes of the meeting of the Bank of Japan in June and the Australian Federal Reserve in July. In terms of data, we need to focus on Japan's CPI, API and EIA crude oil inventories in June, the number of us initial and continuing claims for unemployment benefits, and the July Markit manufacturing PMI of the United States and euro zone countries. In the event, attention should be paid to the EU's discussions on the economic recovery fund and stimulus plan, the global epidemic situation, and the Brexit negotiation process between the UK and the EU.

Institutional Analysis: Credit Suisse said it remained bullish on the euro against the dollar, with an initial top of 1.1596. Credit Suisse discussed the technical outlook for the euro against the dollar, saying it would remain bullish in the near future. In the near future, our overall view remains bullish, and we believe that the pivot resistance level in the near term starts from the year high of 1.1495. Although we expect this resistance level to remain strong, breakthroughs at any stage will complete a significant medium-term bottom, marking a more sustained upward trend, with the next resistance level at 1.1571.


Financial calendar:

06:30 New Zealand June BNZ service performance index

07:50 Japan's commodity trade account not seasonally adjusted in June (100 million yen)

Minutes of June monetary policy meeting released by the Bank of Japan

14:00 Annual PPI rate in Germany in June

16:00 Euro zone current account not seasonally adjusted in May (100 million euro)

18:00 CBI industrial order margin in July

22:00 European Central Bank chief economist Ian attended a panel discussion at an online meeting

23:10 Bank of England chief economists Haldane and Tenreyro answer questions from members on the economic outlook

Pending EU summit and EU recovery fund


CWG financial knowledge:

German producer price index: according to the German Federal Bureau of statistics, the producer price index (PPI) is used to evaluate the price changes of commodity producers in various stages of German initial market production. Producer price index (PPI) is an important index to measure commodity inflation pressure. If the index is high, it will be good for the euro, and if the data is lower than expected, it will be negative for the euro.