22-Jun-2020

1) Crude Oil Price Inches Higher As US Oil Rigs Fall
2) Dollar Rises on Continued Safe-Haven Buying
3) Aussie Tapers Off As Second-Wave Concerns Grip the Market

1) Crude Oil Price Inches Higher As US Oil Rigs Fall

Asian stocks and American futures rose slightly as investors attempted to move on past second coronavirus wave fears. In Japan, the Nikkei 225 was up by 60 points while the Shanghai composite rose by 10 points. In the United States, futures tied to the Dow Jones and Nasdaq rose by 180 and 67 points respectively. The gains come after US stocks paused on Friday after Apple said it would close some of its stores as new coronavirus cases continued to rise. Analysts fear that other companies will follow these footsteps as more cases rise.

The price of crude oil rose slightly during the Asian session as traders reflected on falling US rigs. In a report on Friday, Baker Hughes said that the number of oil rigs dropped by 10 to 189 in the previous week. These rigs have been on a downward trend since the year started, which is a good thing for oil markets at a time when demand is slowing. Later this week, we will receive the inventories data from the American Petroleum Institute (API) and Energy Information Administration (EIA).

The US dollar declined slightly during the Asian session. Later today, the National Realtors Association (NRA) will release existing home sales numbers for May. This data measures the number of preowned homes that were sold during the month. As with new home sales data, it is an important measure of the health of economy. Analysts expect the number to show that sales declined from the previous 4.33 million to 4.10 million. Other important numbers we expect today are the eurozone consumer confidence data, industrial trends orders from the UK, and monthly report from the German central bank.

2) Dollar Rises on Continued Safe-Haven Buying

The greenback continued its recent winning streak and ended higher against its G5 peers to a 2-week peak, except safe-haven Japanese yen on safe-haven buying of usd. Cable tumbled to a near 3-week trough as Brexit concern continued to weigh on sterling.

In other news, Reuters reported European Central Bank head, Christine Lagarde, told European Union leaders on Friday that their economy was in a “dramatic fall” and called on the bloc to act to spearhead revival, diplomatic sources and officials said.    She said the euro zone economy was headed for a “sharp decline” of some 13% in the second quarter and reiterated the bank’s forecasts for a GDP drop of 8.7% in 2020 and a rebound of 5.2% in 2021.

Versus the Japanese yen, although dollar retreated from 107.05 in Australia to 106.80 in Asia on active safe-haven jpy buying due to geopolitical tensions between China/India and U.S./China, price rebounded to 106.99 at European open but only to weaken to 106.77 at New York open on usd’s weakness. The pair then recovered to 107.03 on rise in U.S. stocks before easing of renewed yen buying.

The single currency rebounded from 1.1200 at Asian open to 1.1221 at European open and despite falling to 1.1195, the pair briefly rallied to 1.1254 at New York open on usd long liquidation. However, price quicked erased intra-day gaiin and later hit dropped to a 2-1/2 week low of 1.1169 on usd’s strength before swinging sideways. Price last traded at 1.1177 near the close.

Reuters reported EU leaders remain divided on how to structure a proposed COVID-19 recovery fund for European economies, the head of the European Commission said on Friday, with the balance of loans and grants still to be agreed.

Although the British pound rose from 1.2405 at Asian open to session highs of 1.2456 at European open due to robust UK retail sales, cable erased intra-day gains and easily penetrated Thursday’s 1.2403 low and tumbled to 1.2361 on cross-selling in sterling before rebounding in tandem with euro to 1.2412 at New York open but only to fall again to a 2-1/2 week low of 1.2344 in late New York.

Reuters reported sales volumes in May jumped by a record 12.0% after a historic 18.0% slump in April – a rise at the top end of economist forecasts in a Reuters poll but which still leaves retail sales 13.1% down on a year ago.    And the European Union is committed to clinching an agreement with Britain on its future relationship with the bloc it left at the end of January, but not at any cost, European Council President Charles Michel said on Friday after a meeting of EU leaders.

3) Aussie Tapers Off As Second-Wave Concerns Grip the Market

The Australian Dollar enjoyed a day of two halves, first capitalising on risk-on flows early on Friday before reversing course during the American session. Ultimately, the Aussie rose to a daily high of 0.6912 before falling about 0.12% for the day to close at 0.6835. Opening this morning at 0.6818, the Aussie opens slightly lower on a weekly basis.

With little on the economic calendar to drive direction markets continued to trade on global risk sentiment with currency markets noticeably souring as the day progressed. Spurred on by fears of a second wave of COVID-19 infections, particularly in China, the US and Brazil, markets swiftly lost their appetite for risk assets and commodity linked currencies such as the Aussie. With this latest dose of uncertainty, the US Dollar strengthened across the board to force the Aussie into bear territory.

Moving into a new week, the Aussie kicks things off early with RBA Governor Lowe set to speak at the Australian National University on COVID-19 and the global economy.

The US Dollar Index (US DXY) extended its recent winning streak into a fourth day, appreciating 0.25% to take it to its highest point since early June. Opening this morning at 97.66 the Greenback, a safe-haven currency, benefited from global risk sentiment souring in the face of a potential second wave of COVID-19 infections.

Across the pond, the Great British Pound hit a fresh three-week low to open this morning at 1.2348. Falling around 0.59% on Friday, the Sterling continues to remain under pressure after the Bank of England announced its intent to increase its bond-buying program by £100 billion. The result comes despite a better than expected Retail Sales reading and reports that Brexit negotiations are not nearly as bad as once thought. Nevertheless, a resurgent US Dollar, coupled with further monetary policy easing was too much for the Pound to overcome.