Asia Roundup: Sterling at 5-month peak as BoE stands pat, dollar eases as investors fret over U.S. recovery, Asian shares subdued – Thursday, August 6th, 2020

Market Roundup

  • Oil prices gains on lower U.S. crude stocks
  • Gold holds near record high growth outlook dims

Economic Data Ahead

  • (0400 ET/0800 GMT) Italy Industrial Output s.a. (MoM)(Jun)
  • (0400 ET/0800 GMT) Italy Industrial Output w.d.a (YoY)(Jun)
  • (0430 ET/0830 GMT) UK Markit Construction PMI(Jul)

Key Events Ahead

  • No Significant Events Scheduled

FX Beat

DXY: The dollar slumped to an over 2-year trough on rising perception that the U.S. economic recovery could be hobbled by the country’s poor performance in containing the COVID-19 outbreak. Top congressional Democrats and White House officials negotiations headed toward an end-of-week deadline with no sign of an agreement. The greenback against a basket of currencies traded 0.1 percent down at 92.69, having touched a low of 92.52 earlier, its lowest since May 2018.

EUR/USD: The euro rallied to an over 2-year high as investors continued to cheer on yesterday’s data showing Eurozone business activity returned to modest growth in July as some curbs imposed to stop the spread of the coronavirus were lifted. The European currency traded 0.3 percent higher at 1.1895, having touched a high of 1.1915 earlier, its highest since May 2018. Investors’ attention will remain on a series of data from Eurozone economies, ahead of the U.S. unemployment benefit claims. Immediate resistance is located at 1.1930, a break above targets 1.1957. On the downside, support is seen at 1.1809 (5-DMA), a break below could drag it below 1.1755 (10-DMA).

USD/JPY: The dollar declined, extending losses for the third straight session, after data showed U.S. private payrolls growth slowed sharply in July, indicating the labour market recovery was faltering. Investors now await weekly data due later in the day, which is expected to show a slight decline in initial claims to 1.415 million last week from 1.434 million in the preceding week. On Friday government data is likely to show U.S. payroll growth slowing to 1.6 million in July from 4.8 million in June. The major was trading 0.1 percent down at 105.46, having hit a high of 106.47 on Monday, its highest since July 24. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. ADP unemployment benefit claims. Immediate resistance is located at 105.94, a break above targets 106.19. On the downside, support is seen at 105.09, a break below could take it near at 104.77.

GBP/USD: Sterling advanced to a 5-month peak after the Bank of England kept its benchmark interest rate at 0.1 percent and also left unchanged the size of its bond-buying programme at 745 billion pounds. The major traded 0.4 percent higher at 1.3164, having hit a high of 1.3183 earlier, it’s highest since March 9. Investors’ attention will remain on the geopolitical developments, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3210, a break above could take it near 1.3230. On the downside, support is seen at 1.3074, a break below targets 1.3020. Against the euro, the pound was trading 0.2 percent up at 90.25 pence, having hit a high of 89.80 on Friday, it’s highest since July 13.

AUD/USD: The Australian dollar rose, hovering towards a 1-1/2 year high hit in the prior session, as the greenback weakened as top congressional Democrats and White House officials appeared to harden their stances on new coronavirus relief legislation. The Aussie trades 0.1 percent higher at 0.7195, having hit a low of 0.7076 on Monday, it’s lowest since July 24. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate resistance is located at 0.7230, a break above could take it near 0.7254. On the downside, support is seen at 0.7161 (5-DMA), a break below targets 0.7120.

Equities Recap

Asian shares traded within narrow ranges as investor focused on negotiations over a new U.S. stimulus package.

Tokyo’s Nikkei fell 0.4 percent to 22,418.15 points, Australia’s S&P/ASX 200 index surged 0.7 percent to 6,042.20 points. South Korea’s KOSPI gained 1.3 percent to 2,342.61 points.

Shanghai composite index rose 0.3 percent to 3,386.46 points, while CSI 300 index traded 0.3 percent down at 4,762.76 points.

Hong Kong’s Hang Seng traded 1.05 percent lower at 24,832.79 points. Taiwan shares added 0.9 percent to 12,913.50 points.

Commodities Recap

Crude oil prices surged, hovering towards a 5-month high recorded in the previous session after the Energy Information Administration reported a much bigger than expected drop in U.S. crude stockpiles. International benchmark Brent crude was trading 0.7 percent up at $45.50 per barrel by 0606 GMT, having hit a high of $46.21 on Wednesday, its highest since March 6. U.S. West Texas Intermediate was trading 0.6 percent higher at $42.41 a barrel, after rising as high as $43.50 on Wednesday, its highest since March 6.

Gold prices rallied towards an record peak scaled in the previous session as dismal U.S. jobs data hammered the dollar, while increasing worries about a recovery in the pandemic-ravaged global economy boosted the safe-haven metal’s appeal. Spot gold was up 0.5 percent at $2,047.36 per ounce by 0614 GMT, having hit an all-time high of $2,055.92 on Wednesday. U.S. gold futures rose 0.4 percent to $2,056.60.

Treasuries Recap

The U.S. Treasury yields edged lower, with the benchmark 10-year note yield trading at 0.545 percent.

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