Macro economics

Analytics on 16/06/2020. Fed and Trump lift markets, Powell’s speech up next

European stock markets rallied on Tuesday after the US Federal Reserve decided to step up its efforts to backstop the US corporate debt market through buying individual corporate bonds. The lending program, which will offer up to $600bn in loans to US businesses with revenues up to $5 billion, could help to bolster the domestic economy as it contends with the coronavirus pandemic. The supportive measures from the central bank helped to calm down investors after a sell-off witnessed yesterday amid the resurgent concerns over a rise in coronavirus cases in the United States in Asia.

Elsewhere, North Korea has blown up the inter-Korean liaison office in Kaesong. South Korea officially responded to the action, warning of a strong response in case of more action. Despite the rising geopolitical tensions, risk sentiment remained on the optimistic side in Europe.

On the data front, Germany June ZEW survey current situation came in at -83.1 versus -82.0 expected. In the Eurozone, the expectations arrived at 58.6 versus 46.0 previously. In general, the updates reveal that sentiment in the region remains weak amid the coronavirus pandemic.

Against this backdrop, the UK’s FTSE 100 gains 2.41% to 6,210. Italy’s FTSE MIB edges higher by 3.27 percent to 19,589, France’s CAC 40 adds 2.73 percent to 4,946, while German DAX 30 rises by 3.30 percent to 12,304. U.S. stock index futures are rising amid the reports that President Donald Trump’s administration is preparing a $1 trillion infrastructure proposal. Also, investors are preparing for the key event of the day - Fed chair Powell to appear before the Senate Banking Committee later today.

In currencies, EURUSD erased earlier gains and turned flat on the day after a rejection from daily highs around 1.1350. Now, the pair needs to hold above the 1.13 handle in order to avoid a surge in the selling interest. In part, the common currency retreated due to mixed economic data out of the Eurozone. Rising geopolitical tensions might have also curbed investor optimism somehow. Later today, the US retail sales data could set a fresh tone for the pair that is yet to reclaim the 1.13 level as support.

In the oil market, Brent crude managed to get back above the $40 handle after a recovery above the 100-DMA. The market is supported by a better risk sentiment in general, as stimulus measures from the Fed fueled demand for high-yielding assets including oil. Later today, the weekly API report could affect market sentiment, and further rise in crude oil inventories in the US may put Brent under some pressure ahead of the official report from the EIA due on Wednesday.

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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