EUR/USD and GBP/USD Rally on Positive Market Sentiment

By: Miguel A. Rodriguez

10:55, 12 October 2020

1602488216.jpg
US fiscal stimulus updates, market sentiment, Brexit updates, and more.

The Japanese Producers Price Index (PPI) year on year of -0.8% came in lower than expected of -0.5% and even lower than the prior read of -0.6%. The PPI measures inflation in terms of costs for producers’ products, therefore it gives a hint about the consumer price index or inflation figures progress in the country. 

Equities 
Asian stock market edged higher on Monday as the Chinese president Xi could unveil in his visit this week to Shenzhen plans to further open of the economy to foreign investment, while the US stock market closed last week in the green as traders were optimistic about a possible fiscal stimulus deal could be achieved this week. 

The US administration suggested a makeshift solution of using some leftover funds from the unused Paycheck protection program. Talks between the two main parties in the US have failed so far to secure a fiscal stimulus deal to help the US economy to recover from the shutdowns caused by the surge in coronavirus infections. Meanwhile, Federal reserve’s members pointed out the need for federal aid as the economic recovery is losing momentum. 

  Stock Market

Change %

S&P 500

+0.5%

Dow Jones

+0.1%

NASDQ

+1.2%

Japan 225

-0.5%

DAX 30

-0.3%

FTSE 100

-0.1%

CAC 40

-0.01%

 

Currencies

Investors' optimism of a possible stimulus agreement led the US Dollar index to invalidate the inverted head and shoulders signal and to trade on Friday below the neckline hinting towards 91.78. A daily close below that level could send the price even lower towards 90.36.

The EUR/USD closed on Friday above the 50-day moving average, signaling that the price may continue to rally towards 1.1909.

The British pound benefited from a weaker US dollar on Friday and the GBP/USD hit a near five-week high at 1.3049. Investors ignored the UK government threats of leaving the trade deal talks this week if there are no deal signs on the horizon. The UK PM insisted that a deal would be beneficial for both sides however, the UK is also prepared to end the transition period on Australia style terms. A lack of trust between both started after the UK parliament approved the internal market bill that allows the UK government to break some of its commitments in the Brexit treaty.  

Commodities

The oil price opened this week’s session with a downward gap on news of ending the Norway strike and restoring the US production after Hurricane Delta. The Brent oil hit a three-week high on Friday $43.54 then retreated and closed in the red. A daily close below $42.50 may send the price even lower towards $39.60. While the US Crude could be on the way for a test of $38.37.

The Gold benefited also from a weaker US dollar and traded above $1,921 for the first time in over two weeks. The price could rally toward $2,015 while above $1,921.

Looking Ahead

Nothing much on the economic calendar today, the market will tune in the ECB Lagarde’s speech at 1:00 PM (GMT) and her Deputy Mr. Guindos at 4:00 PM. 

Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.