EUR / USD
The Euro was unable to make headway ahead of the New York open with pressure for a correction after recent gains. The US dollar was also able to an element of support and the single currency dipped to just below 1.1550 as commodity currencies faltered.
US initial jobless claims increased to 1.42mn in the latest week from 1.31mn the previous month and above consensus forecasts of 1.30mn. Continuing claims, however, declined to 16.2mn from 17.3mn previously. When including Federal assistance, the latest data for the week ending July 4th recorded a decline in the total number of people receiving benefits to 31.8mn from 32.0mn the previous week. Fiscal policy was also a significant focus with further Republican bickering within the Senate over the next stimulus plan and little chance that legislation will be in place before the end of July when some unemployment benefits are due to expire.
Euro-zone consumer confidence edged lower to -15.0 for July from -14.7 previously and below consensus forecasts of -12.0 which will create some uncertainty over the outlook for consumer spending. The latest PMI business confidence data will be released on Friday which will be important for the sentiment.
Overall risk appetite was weaker in New York, but the dollar struggled to gain significant support despite the decline inequities. The Euro strengthened to 18-month highs around 1.1625 before a limited correction. The US currency gained slight protection from the weaker risk tone with the Euro around 1.1600 on Friday.
The yen was able to hold steady into the New York open with narrow ranges prevailing as the US currency consolidated around the 107.10 area. As risk appetite dipped in US trading, the Japanese currency secured renewed support with the dollar retreating to around 106.80 as the yen regained some support.
Markets remained uneasy over US coronavirus developments with the US reporting over 1,100 deaths for the third successive day and a daily increase in cases of over 70,000. Treasury Secretary Mnuchin stated that the dollar is the world’s global currency and we’re going to protect it by keeping the currency stable, but there was no significant recovery after the comments as underlying dollar confidence remained weak.
There were further concerns over US-China relations with tensions increasing further following comments from Secretary of State Pompeo that China is a threat to the economy and liberty. China also confirmed that the US consulate in Chengdu would be ordered to close. Risk appetite was more vulnerable in Asian trading with the Chinese market close to 3% lower and the dollar dipped to 1-month lows below 106.50 with Tokyo markets still closed for a holiday and the Euro around 123.50.
The CBI industrial orders index recovered to -46 for July from -58 previously, although this was below consensus forecasts of -37. Overall orders in the past three months declined at the fastest pace since October 1980, but companies expect order flows to improve over the next three months and the decline in export orders has slowed. Bank of England external member Haskel stated that he was concerned about the economy getting stuck and recovering only slowly with a further risk of undershooting the inflation target. The recovery path will also depend on unemployment trends and he also warned that re-opening too quickly won’t help the economy.
Following the latest round of EU/UK trade negotiations, EU Chief Negotiator Barnier repeated his criticism of the UK government, again claiming that it was unwilling to engage on key issues. He also stated that there no progress had been made on key issues such as fishing and state aid, although there had been some progress in other areas. Barnier added that the UK stance made a trade agreement at this point unlikely, but a deal was still possible and talks will continue.
Sterling reacted relatively calmly to the comments given no significant expectations of a breakthrough The UK currency traded above 1.2700 against the dollar with the Euro edging lower to 0.9110 from 0.9120 despite the dip in risk appetite. UK retail sales increased 13.9% for June, above consensus forecasts of 8.0% with the year-on-year decline held to 1.6% and core sales increased 13.5% for a 1.7% annual increase, although there was only a marginal Sterling reaction.
The Euro briefly made headway against the franc during Thursday, but was unable to sustain the gains and weakened to lows around 1.0720 before finding some support while the dollar dipped to fresh 4-month lows below 0.9250.
The Swiss franc gained an element of support from the dip in global risk appetite in US trading with on-going demand for gold also a significant positive factor, especially with all major currencies suffering from a lack of support. The franc held firm on Friday as equity markets declined again with the dollar around 0.9250.