Macro economics

Analytics on 11/06/2020. Stocks losing ground, dollar mixed after the Fed meeting

European stock markets tumbled on Thursday, losing ground for the fourth session in a row as investors digested the outcome of the latest U.S. Federal Reserve policy meeting. The central bank said it expects the U.S. economy to contract by 6.5% in 2020 before expanding by 5% in 2021 and confirmed its readiness to provide additional support for the economy. Fed officials indicated that they expected the unemployment rate to end 2020 at 9.3% and remain elevated for years.

Elsewhere, the European Commission highlighted that no formal work is underway for an EU 'bad bank'. UK's Gove reaffirmed ruling out extending the Brexit transition period. Meanwhile, China noted that it is not easy for Chinese, US economies to decouple, and BOJ's Kuroda said the central bank was ready to take all necessary steps to combat the fallout from the coronavirus crisis without hesitation.

Against this backdrop, the UK’s FTSE 100 sheds 1.99% to 6,203. Italy’s FTSE MIB edges lower by 2.76 percent to 19,213, France’s CAC 40 loses 2.18 percent to 4,943, while German DAX 30 declines by 2.10 percent to 12,267. U.S. stock index futures are trading lower, extending the decline witnessed yesterday.

In currencies, the dollar is trading in a mixed manner on Thursday. EURUSD managed to bounce from intraday lows around 1.1325 and turned marginally positive on the day but still struggles to overcome the 1.14 barrier. Despite the current hesitation, the fact that the common currency meets demand on dips, suggests that another bullish breakout could be expected. A decisive break above the mentioned resistance will act as confirmation of an upward continuation. Later today, the pair may be affected by the US jobless claims data. If the release points to improving numbers, dollar demand could pick up and send EURUSD lower.

In commodities, Brent crude is on the defensive today but still manages to hold above the $40 handle, suggesting the prices could resume the ascent after the current corrective attempts. Oil traders were disappointed by gloomy predictions from the Federal Reserve that stoke the renewed concerns over the outlook for global oil demand. Besides, the EIA report showed that US crude oil inventories rose to an all-time high. A widespread risk aversion adds to the negative pressure surrounding oil prices as well. As such, Brent will likely remain on the defensive in the short term.

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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