Thursday June 18th, 2020

The market sentiment remains somewhat pessimistic as rising coronavirus concerns are outweighing the economic recovery optimism. China and the US are both experiencing a rise in covid-19, with analysts projecting that the US death toll could rise to 200,000 by October. US/Sino tensions remain high as the US President is scheduled to sign a bi-partisan law condemning China the treatment of the Uyghurs (Muslim minority), which Beijing has vowed to retaliate. Both AUD & NZD are under pressure after weak domestic data, while JPY strengthened from covid-related safe haven buying. Other currency markets remain sideline, the US$ index is flat and currency markets appear to be treading water awaiting further direction. Intraday we see the BoE rate decision, US Initial Jobless Claims and Canada’s ADP’s jobs report. 

Oil prices rose cautiously on after positive US retail sales and loosening of lockdown restrictions. Caution remains within the market as China cancels flights and shuts down schools after a surge in covid-19 cases. C$ is benefiting from stronger oil prices, edging to the lower end of its recent trading range. Canadian Wholesale sales, ADP employment, and New housing price index data are out this morning. This evening BoC’s Schembri is speaking. Support remains at 1.3500 with resistance at 1.3635. 

Euro continues within a tight trading band as rising coronavirus cases in the US & China outweigh the EU’s re-opening progress. Euro has slipped 1% in the last week vs US$ as investors are concerned that the EU will not be able to pass its aggressive stimulus plans set by the EU Commission. Coronavirus updates and US initial jobless claims will dictate intraday direction. Initial support is holding at 1.1225, a break could see a move back to 1.1050, with resistance remaining at 1.1350.

GBP is under pressure vs the US$ ahead of BoE’s rate decision today. UK Interest rates are expected to be on hold, but fears over the prospect of future negative interest are weighing on the pound. The BoE is projected to boost its bond-buying scheme by around GBP 100 bln, which would be viewed as positive stimulus measure, supporting the GBP. Investors will be focused on the voting pattern of the nine MPC votes to see if any voted for negative rates, this could be negative for GBP. A break of 1.2450 sees 1.2320 next support, while resistance remains at1.2685.