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22
Jul

ECB Rate Decision, US Jobless Claims, Leading Indicators

calendar 22/07/2021 - 07:32 UTC

The weakness of the dollar could easily be observed also in emerging markets, where pairs like the USD/TRY or USD/ZAR continued moving lower, while a strong break lower from the recent trend could be observed in the USD/INR pair. The USD/MXN pair however reached the highest level in almost four weeks.

The recovery in crypto markets persisted with the total market cap estimated at around $1.35 trillion. On a weekly basis however most major non-stablecoins appear to be still in the red, except for Ethereum, which at levels around $2k is more or less where it was a week ago.

As many key equity market indices continued recovering, by Thursday morning a clear recovery on a weekly basis took place, with losses from Monday fully recovered by now in many indices like the Germany 30, US 500 or Japan 225 (JPY). The Chinese market however still seems to some extend decoupled from other equity markets as the China A50 index for example continues trading side-ways.

On Thursday data on existing home sales, leading indicators and weekly new jobless claims will be released in the US.

EUR/USD

The weaker dollar allowed the EUR/USD pair also to move higher but the resistance just above 1.18 seems to remain in place. Also a trend reversal among different EUR FX pairs seemed to take place. After a series of losses in the EUR/JPY pair, the euro rebounded there. On the other hand the common European currency lost ground against other majors where it gained over the past week, such as the CHF, GBP and AUD.

A key event on Thursday will likely be the monetary policy announcement by the European Central Bank (ECB). Clearly practically no one is expecting the central bank to raise rates now immediately at this point. It remains to be seen how the new goal for inflation of 2 %, instead of the previous target of close but below 2 % will affect the monetary policy and the ongoing asset purchase program.

EUR/USD

Gold

Silver, palladium and platinum prices moved higher on Wednesday with a further upside seen by Thursday morning in the latter two. Gold on the other hand turned red and traded just around the $1,800 level in the spot markets.

On one hand the dollar weakness could affect the markets, but also other implications need to be taken into account, such as the strong recovery in the 10-year US T-Note benchmark yield, which recovered from levels below 1.15 % on Tuesday, towards almost 1.3 % on Wednesday afternoon.

Gold

WTI Oil

Oil prices started surging higher just before the US trading session started and even the rise in crude oil inventories according to weekly statistics by the Energy Information Administration (EIA), which reported a build of 2.1 million barrels compared to the previous week was not enough to stop the positive sentiment in the markets.

Different factors could be affecting the markets including the protracted nuclear deal talks between Iran and other countries, where the US are now threatening new sanctions if Iran does not agree to the deal. Other factors could also affect the markets, such as the again rising cases of new COVID infections in different areas, which is to some extent attributed to the ‘Delta’ variant. US data on air travel, the TSA checkpoint travel number however still shows a recovery as for Sunday the number of travellers surpassed for the first time since the start of the pandemic 2.2 million per day.

WTI Oil

US 500

Stock market indices rallied for the second day in a row with the US 500 index trading up by more than 2 % over the past two trading days.

One of the weakest performing large cap stocks was Netflix (-3.22%) after somewhat disappointing in its quarterly results released on Tuesday. For the second trading day in a row travel industry stocks strongly outperformed with Norwegian Cruise Line and Carnival gaining a cumulative 19 % and 17.7 % respectively.

While the earnings season is still capturing some investors’ attention, moderately positive surprises are sometimes still not enough to move the stock significantly higher such as seen for example with Johnson & Johnson (+0.31%). While the company reported $12.59 billion generated from its COVID vaccine and adjusted earnings per share of $2.48, which was better than expected this did not significantly move the stock price. The company however stated that most of its segments are operating at “pre-COVID levels”, while the total revenue for this year from its COVID vaccine is expected to reach only $2.5 billion.

Verizon (+0.72 %) stocks closed also only moderately higher just following the positive market sentiment, despite the company reporting in its results a better than expected net addition of post-paid subscribers and a customer adaptation of 5G technology by around 20 %.

On Thursday American Airlines, Domino’s Pizza, AT&T, Twitter and Snap are due to release their results.

US 500

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