Global “risk on” mood sours as investors focus on weak Chinese retail sales and as pandemic concerns rise. Mixed data out of China this morning with better than expected GDP results but investors focused on weaker-than-expected Chinese retail sales data, highlighting that consumers remain hesitant. Coronavirus remains the primary concern for markets as a number of US states continue to show record new virus cases, raising fears of further lockdowns – global cases are approaching 13.8mio and virus deaths top 588k. Sino/US tensions continue over HK and the South China Seas but China said it would stick to the Phase 1 trade agreement. US$ index strengthened vs a basket of major currencies with trade related currencies feeling the biggest impact weakening over 1/2% vs US$. A flurry of US data out to this morning will provide intraday direction including US Initial Jobless Claims, Phili Fed Manufacturing Survey, but the primary focus will be on US Retail Sales for signs of US economic recovery.
Oil holds steady after OPEC+ announced a tapering off of output cuts from 9.7m bpd to 7.7m bpd starting from August and lasting through to December. OPEC+ said in documents that “a second strong wave” could deepen the hit to demand. C$ weakened from yesterday’s highs as risk sentiment wanes, oil prices ease and US$ rebounds. The rising US Covid19 cases and the potential of further lockdown restrictions in the US will likely have negative implications on C$. Bias remains to buy US$ at these current levels. Support 1.3490, with minor resistance 1.3565 then 1.3690 (Jun30th).
Euro tested 1.1452, its highest point since March but failed to advance as the “Vaccine” rally stalls and investors return to US$. The ECB is expected to keep rates on hold, but investors are looking beyond the ECB to the EU leaders’ summit which begins on Friday. The Frugal four lead by the Netherlands continue to dispute the mutually funded grants worth Eur 500 bln. The focus today will primarily be on the US Retail Sales for signs of US economic recovery. Support at 1.1350 with resistance sits 1.1450 if breached next 1.1492 (2020 highs)
GBP was amongst the weakest performers today vs US$ despite reporting better-than-expected jobs data showing jobless claims fell by 28k and unemployment holding at 3.9%. BoE Governor told MP’s that UK interest rates will remain depressed until 2022 and that setting negative interest rates is still “under review”. Risk off sentiment returns and focus shifts back to the reality of possible negative interest rates, struggling Brexit negotiations and ongoing Covid-19 2nd wave fears. Support should hold at 1.2460 if breached then a retest of 1.2250 (Jun29) as resistance lowers to 1.2595 (1.2670 is a triple top and is now a significant resistance).