GBP>EUR – 1.0990
GBP>USD – 1.2590
EUR>USD – 1.1454
GBP>CAD – 1.7083
GBP>AUD – 1.7998
GBP>SEK – 11.333
GBP>AED – 4.6237
GBP>HKD – 9.7600
GBP>ZAR – 20.980
|This Week’s Calendar
· CNY PBoC Interest Rate Decision
· AUD RBA Meeting Minutes
· AUD RBA’s Governor Lowe speech
· CAD Retail Sales (MoM)(May)
· CAD BoC Consumer Price Index Core (YoY)(Jun)
· GER Markit Manufacturing PMI(Jul) PREL
· GER Markit PMI Composite(Jul) PREL
· EUR Markit PMI Composite(Jul) PREL
· GBP Markit Services PMI(Jul) PREL
- The Week Ahead Vaccine enthusiasm V faltering recovery
- EURO EU stalemate weighs heavy
- GBP Bears attack amid a risk-off mode
- S&P 500 Index Weekly forecast: Nothing but blue sky from now on?
Cable recouped to levels near 1.2550 after ebbing to a 1.2519 low, lacking clear direction overall with the pair near to midway levels of the range that has been persisting since April. EUR-GBP pegged a three-week high at 0.9140 (1.0941), underpinned by broader firmness in the euro as EU leaders draw closer to green-lighting the EU recovery fund. Analysts have been noting downside risk for the pound, given the risk that trade discussions between the UK and EU continue without a breakthrough. Officials have continued to report that they remain deadlocked over key issues. While there have been reports of “landing zones” on difficult issues coming into view, there have also been reports that the UK government is planning free ports and competitive tax cuts, which would rule out any chance of a broad trade deal being made with the EU. Negotiations are scheduled to continue through to the end of the month before resuming on August 17th. October is being touted as the deadline, ahead of the UK’s scheduled year-end departure from the single market. On the coronavirus front, despite continued socio-psychological-political hysteria, the graphs of the key metrics (new cases, deaths, all-cause-mortality) tell a tale of quite bad respiratory illness season that has come and now largely gone, which fits the broad picture in Europe (including Sweden, which didn’t go lockdown and has not mandated the use of face masks). Aside from the trade negotiations, the focus over the coming week will be on the preliminary July PMI survey data (due Friday), which is likely to show a further plateauing in the rebound from the lockdown lows. June retail sales data is also up. Data have been showing that the UK recovery has been lagging peers. The relatively large size of the leisure and hospitality sectors, which have been hardest hit by the pandemic, accounts for this.
The euro has been in the outperforming lane amid signs that EU leaders are heading for a compromise on the EU recovery fund. The EU leaders’ summit has been dragging on since Friday and will resume today at 14:00 GMT (10:00 ET). EUR-USD pegged a fresh four-and-a-half-month high at 1.1467, drawing nearer to the early March peak at 1.1494, which is the loftiest level seen since January 2019. EUR-JPY lifted by over 0.5% on route to a six-week high at 122.98, and EUR-GBP lifted to a three-week high at 0.9140 (1.0941). Elsewhere, Cable recouped to levels near 1.2550 after ebbing to a 1.2519 low. Yen underperformance floated USD-JPY to a 12-day high at 107.51, and AUD-JPY posted a five-day high at 15.14. AUD-USD traded modestly softer, making a low at 0.6974. The pair has been lacking direction since making a six-week high at 0.7039 last week. USD-CAD edged out a five-day high at 1.3600. Front-month WTI crude futures have been holding a narrow range near $40.50, lacking direction after last week posting a four-week high at $41.26. Stock markets in Asia have mostly traded lower, and S&P 500 futures are showing a decline of over 0.6%, more than wiping out the gains seen during the regular session on Wall Street on Friday. Concerns about the coronavirus remain, though daily new cases in some recent hot spots, including Brazil, are now coming down notably. A non-hysterical, agenda-free look at the data continues to show, especially considering that many asymptomatic and mild symptom cases don’t get tested (estimated to be the vast majority), that 99%-plus will recover fully, with the median of Covid-19 cases who succumb being over 80. The all case mortality curve in Europe is now below the long- term trend. Regardless of the not-anywhere-near-as-bad-as-initially-feared data on the coronavirus, the impact of lockdowns and persisting shifts in consumer behaviour will restrict the potential for economies to recover to pre-pandemic activity levels.
XE Market Analysis Europe – 20th Jul 2020
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