Macro economics

Analytics on 31/07/2020. Dollar pressure eases but risks persist

European stock markets opened higher on Friday, as regional investors shrugged off dismal economic data out of the United States that pointed to a record contraction in the country’s GDP during the second quarter. Instead, market participants focused on strong quarterly earnings and upbeat economic updates out of China.

China's official manufacturing purchasing managers' index rose to 51.1 in July from 50.9 in June versus the median forecast of 50.7. On the negative side, lockdown fallout pushed French gross domestic product to a record 13.8% drop in the second quarter and Spanish GDP plunged 18.5%. Europe’s technology stocks are on the rise amid a rally in the US tech sector after positive results from the majors like Apple and Amazon.

Against this backdrop, the UK’s FTSE 100 adds just 0.05 percent to 5,993. Italy’s FTSE MIB edges higher by 0.96 percent to 19,412, France’s CAC 40 gains 0.45 percent to 4,874, while German DAX 30 rises by 0.71 percent to 12,459. U.S. stock index futures rise after impressive earning from the tech giants.

In currencies, the dollar remains on the defensive on Friday. However, the selling pressure surrounding the greenback has eased somehow in recent trading, which is partly due to month-end flows. Besides, the dollar is strongly oversold and looks attractive for buyers at the current levels. At the same time, the recovery potential in the USD remains limited due to several factors, from the ongoing pandemic to dismal economic data.

As such, EURUSD retreated from fresh two-year highs above the 1.19 handle and turned flat on the intraday charts. Should the local correction continue any time soon, the pair may threaten the 1.18 handle by the end of the day. Of note, fresh economic data out of the United States could bring the greenback back under pressure if the figures disappoint again.

Meanwhile, oil prices continue to struggle below the $44 handle on Friday. The extremely weak US GDP report triggered an abrupt plunge in oil prices yesterday. After a recovery, Brent still needs to make a decisive break above the mentioned barrier in order to see a more sustainable ascent. Until then, the prices will remain in a consolidative mode, with bearish risks persisting further. On the downside, the $40 level continues to act as the key support.

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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