Risk conditions were more fragile on Thursday amid global coronavirus unease with a particular focus on US developments with new cases again above 60,000.

Risk conditions were more fragile on Thursday amid global coronavirus unease with a particular focus on US developments with new cases again above 60,000.

US equity markets were mixed with Nasdaq posting a fresh record high despite losses elsewhere. US futures dipped significantly on Friday with Chinese equities also losing ground. Despite unease over fundamentals, the dollar regained some support on defensive grounds given risk vulnerability.

The Euro failed to convince with EUR/USD below 1.1300 amid no positive influences. Sterling held a firm tone during the day, but retreated against the firm dollar. Commodity currencies retreated amid the more cautious tone after AUD/USD hit selling pressure at 0.7000.

The Euro was unable to secure further gains ahead of the New York open and EUR/USD retreated back below the 1.1350 level with some further disappointment over the German export data. There was no evidence of a progress towards agreement on the EU recovery fund which limited overall Euro support.

Overall confidence in the Euro-area coronavirus management, however, continued to underpin overall single-currency confidence, although uncertainty dominated.

US initial jobless claims declined to 1.31mn in the latest week from 1.41mn previously which was below consensus forecasts of 1.40mn and the lowest reading for 15 weeks. Continuing claims also declined sharply, but there was an increase in both metrics when the number of employees on emergency Federal programmes is added in. The data maintained underlying market uncertainty over underlying labour-market trends and contributed to overall uncertainty surrounding overall dollar sentiment.

Overall risk conditions were less confident in New York which triggered an element of defensive demand for the dollar and EUR/USD dipped to below the 1.1300 level as commodity currencies also lost traction. The Chinese yuan held firm, however, which limited potential Euro selling as overall uncertainty increased. There was a similar pattern on Friday with a more defensive global risk tone protecting the US dollar as EUR/USD retreated to the 1.1270 area amid pre-weekend position adjustment.

The dollar and yen again tended to drift in tight ranges ahead of the Wall Street open. Equities moved lower as US coronavirus concerns increased again and the yen secured some support with USD/JPY weakening to July lows near 107.10. Markets, however, were still unable to secure a decisive break and the pair settled around 107.25 at the European close with mixed trends on Wall Street.

Florida reported a slowdown in the number of new cases, but the number of deaths increased and underlying confidence in the situation remained very fragile, especially with Texas reporting a record increase in deaths. Overall US cases also increased over 60,000 on the day for the second time this week. White House coronavirus taskforce member Fauci, was optimistic that there would be a vaccine by the end of 2020 or early 2021 which provided some relief.

The US Supreme Court ruled that a New York grand jury can access Trump’s financial records, but they will not be released to the House of Representatives, maintaining political uncertainty. There was further debate over unemployment benefits with Treasury Secretary Mnuchin stating that benefits would be reduced from the end of July to provide incentives.

Asian equities moved lower amid a more cautious tone and risk appetite was more fragile with the yen gaining fresh support. Chinese equities moved lower with reports that large funds were selling and USD/JPY dipped below the 107.00 level as the yen made gains on the crosses.

Sterling secured fresh gains on Thursday with markets assuming the Chancellor’s economic support package would lessen the risks of a fresh downturn in the UK economy. Overall risk appetite initially held firm with GBP/USD strengthening to 3-week highs near 1.2670 while EUR/GBP also moved lower to the 0.8950 area.

Following the latest round of EU/UK talks, EU chief negotiator Barnier stated that there were still significant divergences between the two sides. He stated that he would continue to work with patience, respect and determination. The overall impact was limited with markets taking note of recent evidence which suggested that there was scope for compromise. Talks will continue next week in Brussels with rhetoric monitored very closely.

Sterling edged lower as risk appetite dipped and the dollar regained ground, although Sterling was supported on valuation grounds.

The government announced that there would be a further easing of lockdown restrictions in the leisure sector in England and the easing of quarantine rules will come into effect on Friday.

Economic Calendar

07:45Industrial Output MM(MAY)-20.00%-20.10%
09:00Industrial Output MM SA(MAY)-24.00%-19.10%
09:00Industrial Output YY WDA(MAY)--42.50%
13:30USD PPI Ex Food & Energy (Y/Y)(JUN)0.40%0.30%
13:30USD PPI Ex Food & Energy (M/M)(JUN)0.10%-0.10%
13:30USD PPI (Y/Y)(JUN)-1.20%-0.80%
13:30USD PPI (M/M)(JUN)0.40%0.40%
13:30CAD Full Employment Change(JUN)-219.4K
13:30CAD Employment Change (M/M)(JUN)-289.6K
13:30CAD Unemployment Rate (M/M)(JUN)-13.70%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.