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20
Jul

US Building Permits, API Data, Netflix Earnings

calendar 20/07/2021 - 07:19 UTC

The US dollar traded stronger against most other major and emerging market currencies on Monday, with rather few exceptions, like the USD/JPY rate, which hit a new seven week low. Even pairs with a clear downside last week, like the USD/TRY moved higher on the dollar-strength.

The carnage in the crypto markets continued with the Bitcoin price dipping below $30k by Tuesday morning, while the total crypto market cap is estimated at around $1.2-1.3 trillion with the BTC dominance around 45 %. Given the relatively moderate decline by around 10 % over the past 7 days compared to other cryptos including Ethereum, Ripple and others, the Bitcoin/Ethereum rate stood by Tuesday morning at the highest level in three weeks.

After the once again steep losses in most major equity market indices across the US and Europe, at least a partial recovery was seen by Tuesday morning. The China A50 index on the other hand traded relatively stable over the past days, however this market saw significant losses over the past weeks and is trading year-to-date (YTD) still down by more than 5 %, whereas the US 500 index gained around 15 % YTD.

On Tuesday building permits and housing starts data from the United States can be expected. Later in the Asian-Pacific trading session PPI statistics from South Korea, trade balance and prices from Japan as well as retail sales statistics from Australia can be expected.

EUR/USD

The strength of the dollar pushed the EUR/USD rate intraday on Monday down to the lowest level since early April. Against other major currencies the performance was quite mixed. While the Japanese yen (JPY) continued improving against the common European currency, the EUR/CAD, EUR/AUD and EUR/GBP rates all extended the gains further with the EUR/CAD pair reaching for the first time since April levels above 1.50.

Markets were relatively calm around the time of the release of the German producer price index (PPI), which for June further exceeded expectations at 8.5 % annualised inflation compared to 7.2 % in the previous month.

One of the key events this week could be the monetary policy decision by the European Central Bank (ECB) on Thursday. Give the recently changed inflation target, it remains to be seen how the central bank responds to the rising rate of price increases.

EUR/USD

Gold

After an intraday dip on Monday, from which gold quickly recovered, prices seem to be relatively stable this week with multiple forces potentially affecting the market. On one hand the strong dollar could in theory negatively affect the price move as in theory the precious metal becomes more expensive in other currencies. However the fast-declining rates, such as the benchmark 10-year US Treasury Note rate, which for the first time since February fell below 1.2 % could also affect prices by reducing the opportunity cost of holding gold, which by itself does not yield anything.

Other precious metals like platinum, palladium and especially silver traded however deep in the red on Monday, with silver prices falling to a new low since April with the price declining over the past two trading days by more than 4 %.

Gold

WTI Oil

After the brief consolidation at the end of the week, oil prices extended the move to the downside on Monday, with the daily loss being the biggest in absolute numbers since March. At the current level, oil prices are where they were back at the beginning of June as oil prices fell by around ten per cent over the course of the past week ending on Monday.

Markets were said to be reacting to the new OPEC+ agreement that would continue bringing the capacity of 0.4 million barrels per day for each month starting August until all of the held-back capacity of 5.8 million barrels per day returns online. With this agreement the impasse following the demands of the UAE of higher quotas seems to be resolved and fears of crumbling oil prices as was the case in early 2020 after a major disagreement between Saudi Arabia and Russia seem to be resolving.

On Tuesday the American Petroleum Institute (API) publishes its weekly statistical bulletin, that includes data on the weekly changes in oil and its derivatives stockpiles. Then on Wednesday as usual the Energy Information Administration (EIA) follows up with its weekly numbers on crude oil, gasoline and distillate inventories.

WTI Oil

US 500

Major US stock market indices like the US 500 continued to move lower, with the index reaching the lowest point in more than three weeks on Monday. Still, in the later trading hours a sizable part of the daily losses was recovered, while by Tuesday morning with the overall again somewhat positive market sentiment the index started moving higher.

While most sectors were trading at the end of the day clearly in the red, following the negative market sentiment, at least two other sectors were overall positive. One was the biotech (US Biotech ETF +0.56%) sector, while a number of companies involved in fighting the novel coronavirus like Novavax (+12.61%) or Moderna (+9.48%) closed significantly higher. Chip-sector (US Semiconductors ETF +0.07%) stocks were also not following the negative sentiment with Nvidia (+3.30%) ending the series of losses and closing the day as third-best performing component of the NASDAQ Composite index that day.

The earnings season continues with companies including Philip Morris, Halliburton, United Airlines and Netflix releasing their results on Tuesday.

US 500

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