Monday July 6th, 2020

Equity, Oil and Currency markets strengthen as investors turn to China to boost global growth, amid growing COVID-19 cases stalling re-opening efforts within the US. Global equity markets “All-Country world index” hit a 4-week high up 0.7%, while Chinese blue chips jumped almost 6% as investors revert back to a “Risk-on” sentiment. Chinese CNY strengthened 0.6% helping boost commodity currencies with AUD 0.3%, NOK 0.6% and RUB up 0.85% vs US$. Risk-On rallies remain vulnerable to reversal as the Coronavirus continues to increase across the US cases approach 3mio, with global cases at 11.6mio. Today US equity markets are expected to open stronger, US$ Index is starting down and investors will focus on US Non-Manufacturing PMI and related data for direction.

Oil prices start the week firmer supported by global economic recovery expectations and tighter oil supply. Markets appear to be ignoring the surge in Covid-19 within the US noting that several affected cities did not show any reduction in road traffic week over week. C$ strengthens slightly testing the lower end of its recent range. Alongside US data, investors will focus on the Bank of Canada Business Outlook Survey for direction. Support at 1.3540, if breached look for 1.3480 (June 23rd low) next, with resistance holding at 1.3635.

Euro starts the week on a positive note encouraged by China’s bull sentiment and a weaker US$. Better-than-expected Eur retail sales offset the weak Sentix investor confidence report. Several analysis reports expressed satisfaction for the bounce in economic activity across the EU and its response to COVID-19. US Data and the impact of 4th of July celebrations on new coronavirus cases within the US will be the markets main focus today. Support holds 1.1190 with resistance remaining at 1.1350.

GBP retests 1.25 level vs US$ being swept along in the global risk-on mood and stronger than expected UK construction PMI data. The pound still faces a number of head winds and its longer-term strength seems limited. The BoE Governor has reportedly sent a letter to commercial banks, preparing them for negative interest rates. Also weighing on the pound is the ongoing Brexit negations which still appears to be at loggerheads. UK opened the next phase of recovery opening bars, restaurants and other businesses, which is positive for the economy. Support holds at 1.2350 with resistance at 1.2585 (Jun17 high).