Virtually all major currencies moved higher heading into the weekend. The Canadian dollar (+0.86%) recorded the largest gains against the US currency. The euro (+0.49%), the Swiss franc (+0.41%), the British pound (+0.23%) and the Australian dollar (+0.18%) saw smaller gains. Only the Japanese yen (-0.60%) and the New Zealand dollar (-0.87%) underperformed the broader FX market.
Recent market highlights can be summed up as follows:
- US industrial manufacturing rose in line with forecasts in July.
- US retail sales increased 1.2% in July and returned to pre-crisis levels.
- The US Senate went into summer recess at the end of Thursday’s session until the end of the month, without reaching an agreement on the coronavirus relief package.
- The videoconference between the US and China has been rescheduled indefinitely.
The EURUSD pair traded to the upside at the end of the week, advancing 0.23% to 1.1841 and up 0.49% on the week. The single currency momentarily came under pressure as investors steered clear of the dollar, looking to other currencies whose economies are currently outperforming that of the the US in terms of managing the coronavirus pandemic. Friday’s macro releases exerted hardly any impact on the market.
US manufacturing output rose 3.0% in July, compared with a revised 5.7% increase in June. This number was on par with the market’s expectations.
US retail sales jumped 1.2% in July and returned to pre-crisis levels, according to the US Commerce Department. However, the reading fell short of the 2% consensus forecast.
The August University of Michigan consumer sentiment index rose in line with the flash estimate of 72.8, up from 72.5 in July.
Today’s macro agenda (GMT +3)
- 13:00 Germany: Bundesbank monthly report
- 15:30 Canada: foreign securities purchases (June)
- 15:30 US: New York empire manufacturing index (August). The Eurogroup is also scheduled to hold a meeting on Monday
- 17:00 US: NAHB housing market index (August)
- 23:00 US foreign bond investment (June)
The weekend brought no surprises. A videoconference between the United States and China, scheduled for Saturday to review the phase-one trade deal, was postponed due to scheduling issues and no new date has been set. The US Senate went into summer recess at the end of Thursday’s session until the end of the month, without reaching an agreement on the coronavirus relief package.
Trading opened on Monday, August 17 with a decline in the dollar index as equity benchmarks traded broadly higher.
The euro climbed to 1.1868 against the dollar in Asian trading. The bulls drew strong support from rising euro crosses, as well as a decrease in 10-year US bond yields. Despite the positive morning outlook, we expect to see a downward correction to the 45th Gann level at 1.1814. Going forward, Tuesday/Wednesday looks like the right time for a leg higher. We do not rule out that EURUSD could retrace to a new high at that time.