Forex Daily Market Analysis from ForexMart

GBP/USD. May 12, 2020 – Sterling shows growth despite many negative factors

The GBP/USD pair began the day with growth to the area of 1.2370. The British currency is growing, despite the deteriorating market sentiment and weak English statistics. Growing demand for defensive assets amid news of repeated outbreaks of coronavirus in Asia could put pressure on the British pound and support the US dollar.

An additional negative for sterling are disappointing forecasts regarding the dynamics of the English economy. The Bank of England said that by the end of 2020, the UK economy is expected to decline by 14%, which could be the worst indicator in almost 300 years.

Tomorrow you should pay attention to the data on the country's GDP for March. The economy is expected to decline by 7%. If the forecast is confirmed, the pressure on the pound will intensify, and the pair GBP/USD will return to the area of 1.2200.

Another driver of decline is the political uncertainty in the region. By the end of the year, the country's authorities have to agree with the EU on Brexit issues. Thus, in the current environment, the pound is unlikely to have enough strength to grow.

 

EUR/USD. May 13, 2020 – Euro has come under pressure from industrial production data

The euro failed to overcome the level of 1.0880 yesterday and made a decline to the level of 1.0830. Today, data on the volume of industrial production in annual terms were published in the eurozone. The rate of decline increased from -2.2% to -12.9%, which put pressure on the euro. During the day, the EUR/USD pair will continue to decline to 1.08.

Yesterday, the US provided April inflation data, according to which the consumer price index fell to 0.3%. The last time such low inflation was recorded in October 2015.

Today, attention should be paid to the speech of the head of the US Federal Reserve. It is expected that the head of the regulator will indicate the need to continue the program of quantitative easing and expand the balance of the Fed. In March, BlackRock, through which the bulk of FOMC operations go, announced that the Fed's balance sheet could be expanded to $9 trillion. Today, this figure is $6.72 trillion.

The expansion of the balance traditionally leads to a weakening dollar, since an increase in the money supply leads to a depreciation of the national currency.

 

EUR/USD. May 14, 2020 – Euro declines after J. Powell speech

On Thursday, the euro declines, continuing the dynamics of yesterday. The current quotation of the EUR/USD pair is 1.0775. Pressure was exerted by the speech of the head of the US Federal Reserve Jerome Powell. He noted that economic forecasts for the US are «extremely uncertain and subject to significant negative risks.» At the same time, the possibility of negative interest rates is not yet considered by the regulator.

Market participants reacted to Powell's performance with sales of risky assets.

Also, the tense situation between the US and China remains the focus of markets. The United States continues to accuse the PRC of spreading the coronavirus, while Beijing, in turn, is considering the possibility of retaliatory steps (in the case of the imposition of sanctions by America).

Today, attention should be paid to data on changes in the number of initial applications for unemployment benefits in the United States. Experts predict a decline to 2.500K.

 

EUR/USD. May 15, 2020 – Euro is stable at 1.08

The pair EUR/USD remains stable near the level of 1.08 at the end of the week, being influenced by multidirectional factors. On the one hand, American statistics are mixed, which puts pressure on the dollar. And on the other hand, the indicators of Europe are also not encouraging, and the region remains in quarantine.

Today it is worth paying attention to a whole block of interesting macroeconomic statistics. The eurozone presented its second estimate of GDP for the first quarter: the economy contracted at 3.8%. In annual terms, the region’s GDP decreased by 3.2%.

In the evening, the US will publish retail sales data for April – analysts expect a strong drop in the indicator (by 12.0% on a monthly basis). In March, the indicator fell by 8.7% m/m. The volume of industrial production in April will also arouse the interest of traders: the indicator may decline by 11.3 m/m.

Pending this data, the pair will continue to fluctuate near the level of 1.08.

 

EUR/USD. May 25, 2020 – Euro remains under pressure at the beginning of the week

The euro continues to weaken at the beginning of the new week. The current quotation of the EUR/USD pair is 1.0900, however, at the start of trading, the euro was located at 1.0860. The dollar is now being supported by its «safe haven» status amid the uncertainty surrounding China’s new national security bill.

Investors fear that a law prohibiting terrorist and separatist activities will complicate the observance of the rights and freedoms of the people of Hong Kong, which once already led to a wave of protests. At the same time, the United States may intervene in this matter, which will further aggravate relations between the two largest economies in the world and provoke an escape from risky assets.

Today in the US is a day off in honor of the celebration of National Memorial Day. The macroeconomic calendar is almost empty, you should pay attention only to data on German GDP for the I quarter. Statistics confirmed a 2.2% decline in the economy, which was the largest decline since the first quarter of 2009. In annual terms, the decline in GDP amounted to 2.3%. All results coincided with analysts' forecasts.

 

EUR/USD. May 26, 2020 – Euro rose sharply to 1.0970

On Tuesday, the euro started to rise sharply, reaching 1.0970. Support for the currency was provided by the statistics on the consumer climate index GfK in Germany in June: the figure recovered to -18.9 points after falling to -23.4 in May. The improvement of the index gave a signal about the consumer’s readiness to quit quarantine completely, which is not bad both for the German economy and for the economy of the entire eurozone.

In the afternoon, attention should be paid to the publication of the ECB's report on financial stability, but it is unlikely to bring any surprises, since all relevant information is constantly coming from the eurozone finance ministers in the process of agreeing on a stabilization fund of 500-600 billion euros.

In the evening hours data on sales of new homes in the United States in April will be published. Experts predict a sharp decline to 492 thousand against the March figure of 627 thousand. In addition, the May value of the Conference Board consumer confidence index, which could recover to 87.1 after the April decline to 86.9, will be of interest.

 

EUR/USD. May 27, 2020 – Euro updated two-month high

The euro has shown a sharp jump in prices to the level of 1.1030 amid a recovery in global economic activity due to the lifting of restrictions in many countries. Expectations that the economy will return to pre-crisis levels support risky assets.

At the same time, market participants are monitoring the situation around tensions between the United States and China. Also, pressure on the euro may increase if many EU countries oppose the creation of a fund of 500 billion euros. As it’s known, Germany and France have already agreed on the creation of a fund, but not all EU heads of state share their views.

Yesterday, statistics on new home sales in the United States were published – the indicator unexpectedly increased from 619 thousand in March to 623 thousand in April. Analysts predicted a serious drop in sales. Moreover, the Conference Board consumer confidence index for May rose to 86.6 points from 85.7 earlier. These data provided the dollar with short-term support, but today the growth of the European currency will continue. The main goal of the «bulls» is the level of 1.1050.

 

EUR/USD. May 28, 2020 – The pair is consolidating at 1.10

Yesterday, the euro showed significant appreciation, reaching the level of 1.1035. The European currency was supported by news that the European Commission was ready to agree on an additional package of assistance to the region’s economy in the amount of 750 billion euros. However, the optimism of market participants did not last long – the euro quotes began to decline after the speech of the ECB chairman Christine Lagarde.

The head of the regulator said that the eurozone economy could lose 8-12% on the negative consequences of the coronavirus pandemic. The «soft» scenario for the development of the region’s economy for 2020, which implies a 5% decline in GDP, has already become irrelevant. Thus, the pair fell to the level of 1.10.

Today is full of interesting statistics from the USA. The States will provide a preliminary estimate of GDP for the first quarter. The economic slowdown is expected to be 4.8%. Additional pressure on the US dollar today may have data on orders for durable goods: their volume should decrease by another 19.0%. Repeated applications for unemployment benefits can also set a new record - their growth is expected to reach 26.180. Thus, Thursday may turn out to be a black day for the US currency, which will allow EUR/USD quotes to return to the area above 1.10.

 

EUR/USD. May 29, 2020 – Euro continues its rally

The euro continues its rally, approaching the level of 1.1150. Support for the currency is provided by increased demand for risky assets, the general weakness of the US dollar in the Forex market and the expectation of the creation of the Fund in the amount of 750 billion euros to restore the European economy.

The US dollar came under pressure after the release of weak statistics. The economy in the first quarter of 2020 decreased by 5% in annual terms. The forecast assumed a decrease of 4.8%. Data on orders for durable goods also turned out to be far from optimistic. Today, attention should be paid to the April personal income and expenses report and the statement by J. Powell, during which the head of the Fed may hint at the regulator's further plans to support the US economy.

Eurostat today published data on inflation in the EU: consumer prices in the eurozone in May 2020 increased by 0.1% in annual terms, which provided additional support for the euro. During the day, the EUR/USD pair will continue to grow above the level of 1.1150.

 

GBP/USD. June 01, 2020 – Sterling grows steadily to an area above 1.24

The British sterling continues to show an upward trend, reaching a level of 1.24. The currency is supported by the general weakening of the US dollar after statistics released on Friday and D. Trump's speech at a press conference.

In particular, the Chicago PMI index in May fell from 35.4 to 32.3 points. The University of Michigan consumer confidence index fell from 73.7 to 72.3 points over the same period. Even more market participants were disappointed with the report on personal expenses in the USA: according to published data, personal expenses in the USA decreased by 13.6% against the forecast of a decrease of 12.6%.

Donald Trump during his speech said that he was stopping WHO funding, and also again accused China of hiding information about the dangers of coronavirus.

Today, Britain presented a report on business activity in the manufacturing sector for May. The index recovered to 40.7 points from multi-year lows in April, which provided additional support to sterling. This week, you should pay attention to the report on activity in the services sector in England, which will be released on Wednesday. If statistics disappoint markets, the Bank of England is likely to cut rates or expand the QE program at a meeting in June.

 

Brent. June 02, 2020 – Oil grows amid recovery in demand

The oil market continues to grow: Brent quotes on Tuesday reached $39.55 per barrel. Support for prices is provided by a recovery in demand amid a softening of quarantine measures, as well as a reduction in oil production by key oil-producing regions of the world under the OPEC+ deal.

OPEC+ video conference will take place on Thursday, in the framework of which the heads of countries will discuss the extension of previously reached agreements. Saudi Arabia is in favor of extending the terms of the agreement, however, some countries, including Russia, are not ready to extend the reduction in production after June.

The price of Brent is rising, despite the deterioration in relations between Beijing and Washington. The day before, China announced a temporary halt to imports of certain types of agricultural products from the United States, including soybeans. Such a move could further aggravate the contradictions between the two countries and call into question current and potential trade relations.

 

EUR/USD. June 03, 2020 – Euro overcomes 1.12 level for the first time since early March

An optimistic atmosphere prevails on global markets, and the euro has reached 1.1200. Demand for risky assets is growing as market participants focused on the prospects for business recovery after the coronavirus pandemic, despite ongoing riots in the United States.

In addition to the general weakening of the US dollar in the Forex market, the impact on the euro is expected by tomorrow's meeting of the ECB, according to which the regulator can increase the program for the purchase of financial assets by 500 billion euros and extend this program after 2020.

Today, you should pay attention to the ISM index of business activity in the US services sector for May and data on the labor market from ADP. Analysts predict an increase in the number of repeated applications for unemployment benefits after a sudden decrease last week. Moreover, a new record value is predicted - 26,690 thousand. These data can put further pressure on the exchange rate of the American currency.

 

GBP/USD. June 04, 2020 – Sterling rises from 1.25

In the morning hours, the British currency continued to recede paired with the dollar, but the «bears» failed to overcome the level of 1.25. The current quotation of the pair GBP/USD is 1.2535. The pressure on sterling was exerted by statements by the Bank of England that it was necessary to be ready for Brexit without a trade transaction in transition. The regulator intends to prepare the financial system in the country for probable risks and economic stresses.

Yesterday, the UK released data on business activity in the service sector: the indicator unexpectedly rose from 13.4 to 29.0 points. However, these data did not support the British pound.

The US dollar, on the contrary, strengthened after the release of data on the labor market from ADP: the number of people employed in the country fell by only 2.7 million people, while experts forecast that this figure would fall by 9 million people.

 

EUR/USD. 05.06. Euro keeps growing momentum

The euro strengthened at the end of the week, reaching 1.1390. However, in the morning hours, the pair shows a decline to the level of 1.13 as part of the correction. Yesterday, the European Central Bank announced that it intends to support the economy in all available ways, including increasing the volume of the PEPP program by 600 billion euros per month (about $ 1.35 trillion). The program was extended until June 2021.

The regulator also noted the risk of lowering core inflation in 2020 to 0.9%, which is too little for the European region. Therefore, stimulating the economy can last not only until the summer of next year.

Today, you should pay attention to statistics on the US labor market. The unemployment rate, at a record high of 14.7%, could rise to even more frightening levels – 19.5%. Last month, the number of jobs decreased by 20,500 thousand, now it can decrease by another 4,870 thousand. And this picture looks extremely pessimistic for the American currency.

 

EUR/USD. June 08, 2020 – US dollar gets support from labor market data

EUR/USD is falling at the beginning of a new trading week. The current quote of the instrument is 1.1275. The US dollar was supported by data on the US labor market: the unemployment rate in the country in May was 13.3% compared to 14.7% in April. These statistics turned out to be much better than the forecast suggesting an increase in the indicator to the level of 19.8%.

The number of jobs outside the agricultural sector increased during the reporting period by 2.5 million, the forecast assumed a decline of 8 million. The data for April were simultaneously revised to deteriorate to -20.687 million from -20.537 million. The average hourly wage in May fell by 1% m/m, which turned out to be worse than the forecast suggesting growth by the same amount.

Today is calm in terms of the release of important macroeconomic statistics. Of interest will only be the speech of the ECB President Christine Lagarde.

 

Brent. June 09, 2020 – Oil declines due to several factors

Oil quotes show a decrease from yesterday's highs above the level of $43 to $40 per barrel. The oil market is weakening, despite the extension of the OPEC+ deal until the end of July and the decision to increase production cuts by countries that have not fully fulfilled their obligations in the past months (Iraq, Nigeria, Kazakhstan). Analysts suggest that the pressure on oil prices was caused by doubts of market participants about the success of the new deal.

An additional negative impact on Brent quotes was made by statements by the Minister of Energy of Saudi Arabia that the Persian Gulf countries, which intended to reduce production by another 1.18 million barrels per day, no longer plan to extend this reduction after June.

Moreover, Mexico refused to reduce production in its country and, on the contrary, intends to resume production after five months of downtime due to the civil war in the country.

The current Brent quote is $40.11 per barrel. Analysts note that price reductions will continue in the near future, as the news on the extension of the OPEC+ deal has already been fully taken into account in quotes.

 

GBP/USD. June 10, 2020 – Sterling approaches 1.28

The British currency continues to grow, approaching the level of 1.2800. Sterling was supported by data from BRC, according to which retail sales in May increased by 7.9% year on year against 5.7% a month earlier.

Additional support for the British currency was provided by high demand for risky assets. Investors are increasing long positions in the stock markets, commodity market and the market for high-yield currencies, as the yield on US government bonds is below 1%.

Tonight you should pay attention to the outcome of the meeting of the US Federal Reserve, which is likely to confirm its intention to maintain low interest rates for a long period of time. And for risky assets, this will be another good signal.

Thus, the British currency will continue to grow to an area above 1.28. The RSI indicator rushed up, which confirms this scenario.

 

EUR/USD. June 11, 2020 – Euro weakly declining from 1.14

The EUR/USD pair is consolidating at 1.14. The dollar was supported by the results of the meeting of the Federal Reserve, according to which the regulator kept the rate in the target range of 0-0.25% per annum and gave fairly clear signals about maintaining full-scale stimulation for as long as required.

At the same time, the Fed shared forecasts for US GDP: experts expect a contraction of the economy by 6.5% this year, and the unemployment rate may reach 9.3%, rather than 3.5%, as previously expected. However, these data did not exert any visible pressure on the exchange rate of the American currency.

Today, you should pay attention to the producer price index in the US for May and the number of initial applications for unemployment benefits. Experts predict a gradual decrease in the number of calls – both primary and repeated. If these forecasts are confirmed, then it will be possible to speak not about improving the situation, but at least about the beginning of stabilization in the American labor market. And this can provide significant support to the dollar.

 

EUR/USD. June 15, 2020 – Euro moves away from highs

The euro remains under pressure after falling to 1.12 at the end of last week. The current quotation of the EUR/USD pair is 1.1240. Today, the macroeconomic calendar is almost empty, the main events of the United States and the eurozone will be held later this week.

Today, attention should be paid only to inflation data in Italy: consumer prices in the country in May fell by 0.2% after a zero change in April. This suggests that the third eurozone economy has already faced deflation, which could push the ECB to further soften the parameters of its monetary policy.

The dollar was supported by data on consumer confidence from the University of Michigan: the index rose in June to 78.9 points against the May mark of 72.3. The restoration of the indicator signals that the «bottom» of consumer sentiment has already been passed. However, fears of the second wave of the US epidemic continue to be a risk factor for the US currency.

 

EUR/USD. June 16, 2020 – Dollar resumes its growth

Yesterday, the EUR/USD pair appreciably strengthened, reaching the level of 1.1350. However, on Tuesday, the euro began to decline to 1.1300. Before the US dollar was under pressure amid a fall in the levels of ten-year government bond yields and a general improvement in investor risk appetite.

However, the decline was replaced by strengthening after the publication of data on business activity in the manufacturing sector of New York in June: the index was -0.2 points against the May value of -48.5. This means that business and production are gradually returning to life.

Today you should pay attention to the statistics block from Europe. Germany and the eurozone will present reports on the business sentiment index from ZEW in June, experts predict a noticeable improvement in both cases. The day will end, most likely, with a weakening dollar after the publication of the report on retail sales: the rate of decline should accelerate from -21.6% to -32.6%.