Macro economics

Analytics on 27/06/2018. Dollar rules but lacks impetus, oil continues to rise

Global investors grow increasingly concerned over the full-scale trade war, which has translated into another selloff in the European stocks during the early hours on Wednesday. The additional pressure came from the Bank of England’s Financial Stability Report as the regulator highlighted the downside risks for the economy stemming from global trade tensions. The upcoming EU summit adds to nervousness as well. However, the major indices managed to recoup losses recently as the peak of the panic has gone, and tensions have eased. As such, Britain’s FTSE 100 adds 0.78 per cent to 7,602, France’s CAC 40 gains 0.69 per cent to 5,317, while German DAX 30 rises by 0.94 per cent to 12,348. US stock index futures turned positive in the early pre-market trade.

The greenback continues to rise against the European currencies, with EURUSD fails to get back above the key 1.17 level today. The pair dropped to this week’s lows marginally above the 1.16 threshold and could challenge this level should the dollar accelerates its ascent during the New-York hours later today. The euro looks vulnerable ahead of tomorrow’s German CPI report which could point to slower inflation growth in June. Technically, the pair’s short-term outlook remains bearish as long as the price stays below the 1.17 mark. In a wider picture, EURUSD needs to make a clear break above the 1.1850 area to challenge the ongoing bearish trend.

GBPUSD losses further ground below the 1.32 figure. Apart from USD demand, the negative sentiment around the sterling came from the BoE’s Financial Stability Report and Carney’s comments on Brexit risks as well as on the threat from global trade woes. The price dropped to six-day lows around 1.3165 and set for further losses in the short term. Nevertheless, the risk а losing the 1.31 mark is rather low at this stage as the USD index lacks the bullish impetus either. The dollar needs additional catalysts to send the pound to fresh 2018 lows.

USDJPY jumped higher quickly after Trump decided against the harshest measures on China investments. As a result, the risk sentiment has improved and sent the Japanese yen south. The pair has recovered from lows around 109.70 and got back above the 110.00 threshold, to six-day highs at 110.34. Despite the recent spike, the USD’s bullish impetus remains limited due to a technical hurdle in the form of key moving averages in the daily charts. The pair needs a daily close above the 110.20 area in order to confirm the rebound. Otherwise, the price will quickly correct below the 110.00 figure.

Crude oil prices continue the bullish attempts, with Brent has been changing hands above the $76.50 area in Europe. The recent rally was fuelled by a tougher US stance on future Iranian oil exports. In particular, Washington threatened to slap sanctions on countries that don’t cut oil imports from Iran to “zero” by November 4. This has triggered demand and lifted prices to mid-June highs. The immediate upside target for Brent now comes at $77, and should the asset receive the additional bullish signal in the short term, the barrier will likely be challenged. But further direction will depend on the general sentiment in the global markets as well.

Gold prices refreshed 2018 lows once again on Wednesday. The yellow metal touched levels just above $1,253, and has trimmed its intraday losses afterwards. Despite the price came back close to $1,260, the recovery potential looks quite limited within the deep bearish trend. The precious metal looks very attractive for opening long positions, but investors still refrain from buying as the USD index remains robust due to Fed tightening. Meanwhile, the safe haven status doesn’t help the metal any longer, so trade war fears fail to fuel demand for gold. In the short-term, the asset needs to stage a recovery above the $1,1260 area to target the $1,265 resistance. However, the risks of another selloff still persist.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates
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