1. Reports
  2. Daily FX Report
Non-independent Research

Daily FX Report

Read disclaimer

EUR / USD

The Euro-zone PMI services-sector index was revised significantly higher to 48.3 in the final June reading from the flash reading of 47.3 and May’s reading of 29.0 which suggests that conditions continued to improve late in the month. The two-month gain was by far the strongest in the survey’s history. The reading for all countries was at a 4-month high as confidence continued to recover, but there was still a further decline in new business. The French index returned to expansion territory for the month.

In comments on Friday, ECB council member Knot stated that the balance of risks in the economy has become more favourable with recent data solidifying confidence in the bank’s baseline economic scenario. Overall confidence in the Euro-zone recovery remained intact.

German Chancellor Merkel stated that negotiations on the EU recovery fund are ‘rocky’ and that time is pressing to reach a deal. The next EU Summit is due on July 17-18th and leaders will attempt to reach a compromise, although Dutch Prime Minister Rutte commented that there was no need to reach an agreement at this meeting.

There were also reports of a developing split within the ECB over the amount of flexibility within the PEPP bond-buying programme and the weighting of support towards weaker countries such as Italy. The Euro was unable to gain any significant traction as narrow ranges prevailed but edged higher to the 1.1240 area at the market close. ECB council member Villeroy stated that the exceptional policy response will be long-lasting. Latest CFTC data will be released on Monday given that the US Independence Day holiday delayed the normal Friday release schedule. German factory orders increased 10.4% for May, below consensus forecasts of 15.0%. The dollar, however, lost ground on Monday amid expectations of a recovery in the global economy and the Euro strengthened to the 1.1290 area. 

JPY

The dollar and yen were again confined to narrow ranges on Friday with trading volumes sapped by the US market holiday. US equity futures lost ground which also hampered the dollar and it was held around 107.50 as markets also fretted over the increase in US coronavirus cases.

Coronavirus concerns remained a significant factor with reports that the border between Australian states of New South Wales and Victoria would be closed.

US developments remained the principal focus with further increases in new cases, especially in Florida which reported over 10,000 new cases on Sunday. The overall number of new US cases slowed on Sunday, although this is likely to have been related to reporting delays during the holiday period.

US equity futures, however, posted strong gains on Monday and Asian equity markets also posted strong gains which underpinned risk appetite. In this environment, the yen lost potential defensive support and the dollar edged higher to near 107.70 area while the Euro strengthened to around 121.50 against the Japanese currency.

GBP

The final UK PMI services-sector index was unchanged from the flash reading of 47.1 from 29.0 the previous month. The data reinforced a recovery in the services sector, but there will be some concern that there was no evidence of further momentum towards the end of the month. 

Prime Minister Johnson stated that he was more optimistic than EU Chief Negotiator Barnier over the prospects of a trade deal, but here will be other options if a deal cannot be reached. Sterling overall was held in narrow ranges with the Euro hitting selling interest close to 0.9030 and eventually retreating to around 0.9010 while the UK currency settled around 1.2480 against the dollar. Markets will be on alert for briefings and leaks ahead of Chancellor Sunak’s economic statement on Wednesday with reports that there would be a VAT cut for the hospitality sector and a substantial increase in the threshold for paying tax on house purchases.

The debate surrounding negative interest rates won’t go away with media reports that the Bank of England was preparing the City to make necessary changes to make operational changes, although there were also warnings that it would take up to a year to make necessary changes. Sterling edged higher to test 1.2500 against a weaker dollar while the Euro strengthened to the 0.9030 area as the firm tone in global risk appetite provided only limited support. 

CHF

The Euro found an element of support near 1.0620 against the Euro on Friday and edged higher to the 1.0635 area, although overall ranges were limited amid lacklustre activity. The dollar was held just above the 0.9750 area and retreated to 0.9430 on Monday amid wider losses.

Markets will continue to monitor developments surrounding the EU recovery fund with the Euro vulnerable to some selling if there is further political resistance to the Franco/German proposals. Markets will also monitor the latest data on sight deposits to assess whether the National Bank had been intervening to curb gains.

Contents

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

Sign-up to get the latest Non-independent research

We will email you each time a new report has been published.

You might also be interested in...

Daily Report Base Metals

Daily market commentary on LME aluminium, copper, lead, nickel, tin and zinc.

Weekly Report FX Options

Commentary and analysis covering OTC currency option pricing, volatility and positioning.

Daily Report Softs Technical Charts

Technical analysis and charts for the key sugar, cocoa and coffee contracts.

FX Monthly Report September 2021

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs. The report includes a macroeconomic overview as well as desk comments and technical analysis on key currency pairs.

Quarterly Metals Report – Q3 2021

COVID cases are rising across the globe as the delta variant spreads, this is causing some nervousness in financial markets, especially with the higher inflation rhetoric. Commodity prices have fallen since the Fed changed their tune inflation, the dollar has stabilised which has also been a headwind to prices. The summer months are traditionally quieter for metals demand which could prompt metals to consolidate. If the delta variant continues to spread, we may see higher levels of stimulus for longer. As things stand stimulus levels are set to be tapered and this could be brought forward if inflation remains high. We expect markets to remain volatile but on lower volume through the summer months.