Macro economics

Analytics on 24/06/2019. Dollar remains on the back foot, gold at six-year highs ahead of G20 summit

European markets are trading in a mixed tone on Monday, as investors doubt that Trump and Xi Jinping will be able to de-escalate a trade war in trade talks at this week's G20 meeting, while fears grow of a confrontation with Iran, which caps the optimism in the global financial markets. However, US Vice President Mike Pence's decision on Friday to call off a planned China speech was considered a positive sign, while Chinese Vice Commerce Minister Wang Shouwen said on Monday China and the US should be willing to compromise in trade talks and not insist only on what each side wants.

Against this backdrop, the UK’s FTSE 100 adds just 0.06 per cent to 7412, Italy’s FTSE MIB sheds 0.39 per cent to 21,305, France’s CAC 40 loses 0.16 percent to 5,519, while German DAX 30 sheds 0.55 per cent to 12,272. US stock index futures turned modestly higher but investors remain cautious before the upcoming summit in Japan.

The dollar extends losses today, with EURUSD refreshed March highs just below the 1.14 handle. The rally is mostly due to a widespread weakness in the greenback amid rising probability of a rate cut by the Fed. Moreover, the chances of resuming easing will increase if the US-China trade talks fail to bring any progress towards the deal. German IFO data was mostly positive, which gave the additional lift to the common currency. On the other hand, Italian politics will likely remain a source of uncertainty for the euro, with the center of the debate is now around the country’s opposition to EU fiscal rules and somehow aggressive tone from LN’s M.Salvini. Technically, the euro needs a clear break above the 1.14 handle in order to proceed with the rally. Otherwise, the pair may witness some profit-taking at attractive levels.

Brent crude struggles for direction on Monday due to contradictory factors. After a brief jump to $65, prices retreated marginally and got back to the levels they closed on Friday around $64.50. As US-Iran tensions remain in focus, the overall sentiment in the market remains bullish, especially as Washington hinted at new sanctions on Tehran. On the other hand, lack of optimism over the widely expected trade talks between the US and China leaders, keep investors concerned over the outlook for the global economy and global oil demand. From the technical point of view, Brent needs to hold above $63.85 in the near term in order not to lose the upside potential. The immediate support comes around $64.30 and then at $64.

Gold prices are rallying for a fifth day in a row but the upside momentum starts to show signs of waning as the bullion struggles to extend the ascent above $1,410 since Friday. Anyway, demand for the precious metal persists so far, mainly due to a dovish shift by major global central banks last week. A weaker dollar also underpins the bullion as well as fears of a failure in the upcoming US-China trade talks. A daily close above $1,400 is needed for a confirmation of another bullish breakthrough. Otherwise, the yellow metal could see a partial profit-taking amid some sighs of overbought conditions as the prices are hovering around six-year highs.

Nathan Lambert, Head of Global FX Analytical Department

May
Mon Tue Wed Thu Fri Sat Sun
29 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2

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
This site uses cookies to store information on your computer. Some of these cookies are essential to make our site work and others help us to improve by giving us some insight info how the site is being used.