Midday Analysis – 17th July 2020

Today’s Market Outlook

It’s been a rather surmising market open amongst investors as tech, banks and travel stocks seemed to have lost ground today, as 6 out of 11 sectors traded in negatives. Initial jobless claims came in worse than expected, though these economic news were partially offset by rising retail sales. The most significant drop is of Dow at more than 100 points floor-wards for a loss of approximately 0.5%, after a greater-than-expected number of Americans filed for unemployment benefits, and as the Big Tech trade continued to falter. 

In today’s session the main highlight will be the upcoming EU Summit where negotiations and discussion will take place regarding the PEPP budget and the compromise proposal of the EU Recovery Fund. We also have continuation of Brexit negotiations taking place. 

In the currencies market, the Euro is currently well supported so far, as expectations grow of the possibility of a breakthrough at the meeting this weekend, with some positive remarks coming out from certain states about the possibility of striking a deal. At the moment, the markets have been running ahead on a deal being reached, but it’s also important to remember that key differences remain right now, so even though we’ve heard positive noises recently, the big question is what the frugal four says. 

Additionally, we are expecting RISK-OFF sentiment to support the safe havens like the JPY, CHF and USD and to pressure the high-beta currencies like the AUD, NZD and CAD.  In terms of RISK-ON sentiment, pressure is expected onto the safe havens like the JPY, CHF & USD and to support the high-beta currencies like the AUD, NZD and CAD. 

Today’s High Impact Events

The times below are GMT+3

13.00 – BOE Governor Bailey’s Speech 

The pound has had a slightly more negative week over concerns that weaker data will prompt further action on the rates front from the Bank of England at its September meeting. Currently, the GBP is the worst performing G10 currency especially this week, after weaker economic data raised concerns over the possibility the Bank of England will introduce negative interest rates. 

Potential instruments to Trade: GBP crosses.

17.00 – US Michigan Consumer Sentiment Index 

The University of Michigan’s Consumer Sentiment Index for July is projected to remain stable. US COVID-19 cases picked up only in mid-June and recent data has been unable to capture the shift. Investors seemed to shrug off June’s retail sales figures and are likely to react to this figure. The last publication of the week may set the tone for the S&P 500’s close. 

Potential instruments to Trade: USD crosses.

Coronavirus Status Update 

The number of confirmed cases of the coronavirus illness COVID-19 world-wide rose to 13.6 million on Thursday, after a record of about 230,400 new infections were counted on Wednesday, according to data aggregated by Johns Hopkins University. 

US COVID-19 cases rose 67,404 (Prev. +60,971) and the death toll +947 (Prev. +773). AFP later tweeted that US cases rose by a record 68,428 in 24 hours citing the Johns Hopkins tracker, while a major newswire tally showed US cases rose by at least 70,727 on Thursday which is a record single-day increase and deaths rose by 969 to 138,284 which was the largest increase since June 10th (Newswires/Twitter).

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