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The German IFO business confidence index retreated to 88.6 for July from a revised 92.2 previously which was lower than consensus forecasts of 90.2 and also the lowest reading since June 2020. The current assessment index declined to 97.7 from 99.4 in June while the expectations index dipped sharply to 80.3 from 85.5 with both readings below market expectations.

The IFO commented that uncertainty among companies has increased significantly and recession is knocking at the door with the risk continuing to increase if current developments continue. In this context, developments in the energy sector remained an important element during the day.

Although the data reinforced reservations surrounding the German and Euro-Zone economy, the Euro quickly reversed an initial dip and posted significant gains on hopes that Russian gas supplies through the Nord-Stream pipeline would increase. The Euro jumped to highs just above 1.0250 before stalling ahead of the New York open. Expectations of further ECB rate hikes also provided an element of Euro support.

After the US open, however, Gazprom announced that there would be a net reduction in supplies to around 20% of capacity from 25% seen since last week’s restart. Supplies at this level would make it extremely difficult for Germany to build up sufficient supplies to meet demand during the winter with expectations that emergency programmes will be put into effect to curb demand which will have an important negative impact on the economy.

The Euro dipped sharply following the announcement, but did find some support close to 1.0200 into the European close. Narrow ranges prevailed on Tuesday with the dollar edging lower and the Euro trading around 1.0220 amid further caution ahead of Wednesday’s Federal Reserve policy decision.




New Bank of Japan member Takata stated that the central bank is able to keep an easy monetary policy and the current yield curve control is sustainable, but there are challenges ahead. There had been some speculation over a more hawkish stance and the overall rhetoric was slightly yen bearish.

Another new member Tamura stated that rapid FX volatility is undesirable and rates must move stably to reflect fundamentals, but the impact was limited.

The Chicago Fed national activity index was unchanged at -0.19 for June with little impact. US Treasuries edged lower ahead of the New York open with the 10-year yield back above 2.80%. Markets expect a 75 basis-point increase in interest rates at this week’s meeting with forward guidance very important.

The Dallas Fed manufacturing index dipped further to -22.6 for July from -17.7 previously, maintaining concerns surrounding the manufacturing sector.

The dollar managed to recover some ground after the New York open and traded around 136.70 against the yen.

There were further reservations over the Chinese outlook with businesses in Shenzhen ordering to adopt ‘closed-loop’ operations to curb the spread of coronavirus.

Overall risk appetite was fragile during the Asian session with the dollar trading around 136.65 against the dollar and the Euro just above 139.50.




The UK CBI industrial orders index declined to 8 for July from 18 previously and below consensus forecasts of 13. Output increased at a slower rate in the quarter and business confidence deteriorated again while there was a slight easing of cost pressures and investment intentions were slightly stronger.

The data had little impact with Sterling able to secure net gains on the day. Although confidence in the UK outlook remained weak, Friday’s business confidence data indicated some resilience and there was a reluctance to sell the currency ahead of next week’s Bank of England policy decision.

Sterling advanced to highs around 1.2085 against the dollar before fading to below 1.2050 as the US dollar regained ground while the Euro retreated to around 0.8475 before stabilising. Sterling edged higher on Tuesday with further limited short covering as it traded just above the 1.2050 level against the dollar.




Total Swiss sight deposits increased to CHF746.6bn in the latest week from CHF745.4bn the previous week, but domestic deposits declined and there was little evidence of significant National Bank intervention to weaken the franc.

The Swiss franc lost ground during the day with the Euro recovering to the 0.9860 area while the dollar recovered to 0.9650. There was little change on Tuesday with reservations surrounding the Euro-Zone outlook continuing to provide an element of support for the Swiss currency.


Technical Levels 




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