Macro economics

Analytics on 09/06/2020. Market sentiment turns sour, yen demand surges

Despite a still upbeat tone in Asia, European stocks edged lower on Tuesday. In part, this is due to the fact that the World Bank said it expects the global economy to shrink by 5.2%, representing the deepest recession since World War II. This warning curbed optimism over the economic recovery from the coronavirus pandemic. Also on the negative side, German exports plummeted much more than expected by economists in April, down 24% in their steepest decline in 30 years.

Against this backdrop, the UK’s FTSE 100 sheds 1.67% to 6,364. Italy’s FTSE MIB edges lower by 2.16 percent to 19,793, France’s CAC 40 loses 2.05 percent to 5,069, while German DAX 30 declines by 1.99 percent to 12,564. U.S. stock index futures are also on the defensive ahead of the official opening on Wall Street as investors are proceeding to profit-taking after a strong rally that pushed the S&P 500 into positive territory for the year.

Meanwhile, the dollar is extending its decline against the Japanese yen amid the resurgent risk-off tone. Safe-haven demand for the yen sent USDJPY to the 20-DMA around 107.80, from where the prices bounced in recent trading and trimmed intraday losses to 108.00. At this stage, it looks like the downside potential is limited but if risk aversion intensifies any time soon, the dollar could challenge the above-mentioned moving average and thus confirm a local breakdown.

EURUSD registered intraday lows around 1.1240 but managed to bounce afterwards as the data showed that the Eurozone economy contracted less dramatically than expected during the first quarter. However, a plunge in German exports prevented the common currency from a more robust recovery. Nevertheless, during the recent bounce, the pair managed to exceed the 1.1250 area and may retarget the 1.13 handle if risk sentiment improves any time soon.

In the oil market, Brent crude remains under the selling pressure after yesterday’s rejection from highs above $43. In recent trading, the futures saw a short-lived dip below the $40 psychological handle which is a bearish sign for the short-term technical picture. The negative sentiment in the market is due to a combination of the resurgent risk aversion coupled with the fact that Saudi Arabia said that the additional voluntary supply cuts by around 1.2 million barrels a day would only take effect in June as planned, and won’t be extended to July.

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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