Macro economics

Analytics on 05/06/2020. Equities are back on the rise, dollar remains on the defensive

European markets shifted into a recovery mode on Friday following a downside correction witnessed yesterday. Stocks fell on Thursday despite the European Central Bank expanded its pandemic emergency purchase program by a bigger-than-expected amount. Investors were disappointed by the fact that President Christine Lagarde lowered growth and inflation forecasts. Elsewhere, according to the latest reports, German chancellor Merkel and Chinese premier Li to hold video conference next week. On the negative side, China said that it will take countermeasures against the US list on 33 entities, and US' abuse of export restrictions benefits no one.

Against this backdrop, the UK’s FTSE 100 adds 0.94% to 6,401. Italy’s FTSE MIB edges higher by 1.96 percent to 20,019, France’s CAC 40 rallies by 2.07 percent to 5,115, while German DAX 30 gains 1.68 percent to 12,641. U.S. stock index futures are climbing on Friday, with Dow futures up over 300 points amid the reports that Trump administration may spend up to $1 trillion in the next round of economic stimulus. Now, the market focus shifts to the U.S. nonfarm-payroll report. The data may show that 7.25 million jobs were lost last month. As a reminder, 20 million jobs were lost in April due to the coronavirus pandemic. The two officials will be discussing the coronavirus, economic policy, and other international issues.

In currencies, the greenback remains on the back foot on the last trading day of the week. As such, the euro extended gains to fresh two-month highs marginally below the 1.14 handle but was rejected since then. During the retreat, the pair received support around 1.1315 and switched into a consolidative mode. As long as the common currency remains above the 1.13 figure, downside risks are limited. Later today, traders will focus on the US jobs data that could set further direction for the pair. The prices need to make a decisive break above the 1.14 barrier in order to extend its bullish trend.

In commodities, oil prices broke above the 100-DMA and exceeded the $41 handle in recent trading. Oil traders bet on a potential prolongation of the output cut deal by the OPEC+ countries during the virtual meeting that may take place tomorrow. Brent crude rallied to $41.26 and remains elevated, with the $41 handle turning into support. A daily and weekly close above this level will act as confirmation of the latest breakout. Positive risk sentiment may add to the upbeat tone in the oil market. On the downside, the key support arrives at the $40 psychological handle. As long as the futures remain above this level, the short-term bullish trend stays intact.

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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