Market Update:

Recovering Global Economy — Commodity Currencies rising as risk appetite grows

(06 July 2020)

The world is now separated into two vastly different risk sentiment. The recovering global economy is opening up more space for risk sentiment, this causes an appreciation of risk-sensitive currency such as AUD, NZD, and the depreciation of safe-haven JPY. 

On the other hand, the alarming rate of new coronavirus cases in the US had dampened on risk sentiment and sends investors leaving the stock market. Following investors’ risk aversion movement, stocks may drop and the safe-haven USD will be in demand.

USD

Despite last week’s data showing positive signs in US economy, the high jobless claims number and rising virus cases in numerous states (especially Florida and Texas) hints that this recovery is not as good as people thinks. Plus, protests for racial equality in the US did not see any signs of stopping, which escalates instead to the state where protestors torching US national flags during the Independence Day long weekend.

All these lead to the surge of USD currency as a safe-haven currency against another weaker safe-haven currency, yet the momentum is not big enough to make USD win against the other basket of currencies due to promising global economy recovery.

This week’s event:

Mon – ISM Non-Manufacturing PMI

Tue – JOLTs Job Openings

Wed – Crude Oil Inventories

Thu – Initial Jobless Claims

Fri – US Producer Price Index (PPI)

 
GBP

The GBP benefited from the global economic recovery, showing huge gains on Monday morning against USD. However, the concern on UK-EU trade deals is still a potential impact.

This week’s event:

Mon –Construction PMI 

Wed – Bank of England MPC Treasury Committee Hearings

EUR

Economic data from Germany had given EUR a boost into narrow range against the USD last week. Today’s morning sees EUR gaining as USD weakens; however, EUR need more solid positive news to avoid being weight down by weaker EU countries such as Italy, Spain and Greece.

This week’s event:

Mon – Retail Sales, German Factory Order

Tue – German Industrial Production

Wed – EU Economic Forecast

Thu – German Trade Balance

AUD

Last week Australian Reserve bank stated that the interest rate will be not be changed, keeping it at 0.25% to continue boosting the country’s economy. Gradual economy recovery in the global scale especially China and Asian countries are pushing AUD up on Monday morning.

This week’s event:

Tue – RBA Interest Rate Decision

Wed – Home Loans

The Market Today Morning

USD Dollar Index (DXY) slumped to 96.93 from last week’s highest of 97.80

USD/CNY dropped to 7.048 from last week’s highest of 7.081

USD/JPY recovered to 107.694 from last week’s lowest of 107.040

EUR/USD recovered to 1.1290 from last week’s lowest of 1.1185

AUD/USD recovered to 0.6949 from last week’s lowest of 0.6841

GBP/USD recovered to 1.23740 from last week’s lowest of 1.23143

XAU/USD shot to 1773.225 from last week’s lowest of 1785.26

Data from Tradingview.com

Sources:　　

<http://forex.cnfol.com/jingjiyaowen/20200705/28253641.shtml>
<http://forex.cnfol.com/jingjiyaowen/20200704/28253327.shtml>
<https://www.dailyfx.com/forex/fundamental/forecast/weekly/eur/2020/07/04/Euro-Forecast-Outlook-for-EURUSD-Negative-Longer-Term.html>
<https://www.investing.com/news/forex-news/dollar-in-tight-range-ahead-of-us-services-sector-data-2220631>