The overnight session carried on in a similar vein to the end of the US session with major indices rising across the board. The Aussie benefitted from good Chinese data, but market internals will weigh on the Australian dollar as CoVID-19 disruptions are set to continue. With German CPI coming in as expected all eyes turn to the US CPI reading later today.
The overnight Asia-Pac session carried on from the US close with the major indices continuing to rise. The Hang Seng is up 1.75% into the London open with the Australia ASX rising 0.83% even though Australian Business sentiment dropped to a 6-month low. Parts of Australia like NSW and Victoria are likely to have to extend their lockdown measures by another 4-6 weeks which analysts predict will severely dampen economic activity.
Despite the woes from Australia around their COVID-19 situation, the markets are looking decisively risk-on today with the Australian dollar the strongest currency going into the London open.
Today traders will be focusing on the US CPI that is released before the US session opens. However, this morning starts well for risk-on as the Chinese trade data beat expectations in the overnight session. China’s trade balance grew to $51.53 billion as exports rose faster than expected to 32.2% and imports decreased from the previous reading of 51.1%.
German CPI Final reading came in as expected with the headline figure printing 2.3% and the month-on-month printing 0.4%. The EURUSD is still clinging to the 1.8500 level but is in a mini down trending channel. A break below the swing low from last week would be a very bearish signal and a break of a major support level.
Last night Prime Minister Boris Johnson told the UK that the lifting of restrictions will go ahead on Monday the 19th July as planned. Though the caveat was we as a nation will have to use our common sense to determine whether or not we should wear a mask in certain situations and when to socially distance. There is going to be a spike in infections and next Monday is the cleanest of the dirty shirts in terms of when to go ahead with the easing. The summer holidays, warmer weather, and feeling of impending doom will probably be in our favor, but the lack of direct enforcement will no doubt lead to confusion and worry for a lot of people. As the restrictions can be re-implemented at any sign of things getting out of control it will be interesting to see if the economy comes before public health.
The GBPUSD is currently in a consolidation period, with the daily 20 exponential moving average acting as resistance along with the 1.3880 level. The major support is at the daily 200 ema. The US dollar index has stalled due to traders waiting to see what the US CPI brings and whether or not the Fed Chair’s testimony to Congress this week adds any new light to the current and coming monetary policy decisions. For the GBPUSD there is no real direction to be determined from looking at the EURGBP as that is also stuck in a consolidatory range. The slightly weaker pound is allowing the UK FTSE to rise and this morning’s London session open has seen the FTSE rise above yesterday’s high and looks likely to test last week’s highs.
Later today there will be commentary from Fed’s Bostic and Rosenberg both of who have a vote and as it is the start of earning season JP Morgan, Goldman Sachs, and Pepsi Co will deliver their reports which may have an effect on the markets.