There was a slightly more cautious tone surrounding risk appetite on Tuesday with markets monitoring global recovery prospects.

There was a slightly more cautious tone surrounding risk appetite on Tuesday with markets monitoring global recovery prospects. Equities edged lower, although selling was limited with US futures and Asian stocks making limited headway on Wednesday.


The dollar initially made significant gains, but then retreated and ended with net losses. EUR/USD recovered from lows below 1.1250 to trade above 1.1350 on Wednesday. Sterling was resilient after initial selling with GBP/USD trading above 1.2750 in early Europe on Wednesday.


French trade data recorded a decline in April exports of over 32% for the month.

The French and German trade data undermined confidence in the near-term German and Euro-zone outlook and the Euro moved lower in early European trading with a retreat to lows below 1.1250. There was a small upward revision to the first-quarter Euro-zone GDP data with a contraction of 3.6% compared with the figure of 3.8% reported previously with an annual decline of 3.1%. There was some caution ahead of Thursday’s Eurogroup meeting and rhetoric surrounding the recovery programme.


The US NFIB small-business confidence index recovered to 94.4 for May from 90.9 and above consensus forecasts of 92.0 with increased confidence that there would be a short-lived recession. Sales expectations have rebounded from record lows while investment intentions registered only a minor improvement.


After finding support below 1.1250, the EUR/USD recovered strongly in early US trading to push above 1.1350.


The US JOLTS data recorded a sharp decline in US job openings to 5.05mn at the end of April while separations eased to 9.9mn from 14.64mn the previous month, although this suggested net job losses of over 6.0mn on the month. The IBD consumer confidence index declined to 47.0 for June from 49.7 previously.

The dollar overall was unable to gain further support and EUR/USD secured fresh gains to the 1.1350 area. The Federal Reserve will announce its latest policy decision on Wednesday with markets monitoring comments on potential yield-curve control. There will also be a press conference from Chair Powell and fresh economic projections. The dollar will be vulnerable if there is a very dovish stance with EUR/USD just above 1.1350 in early Europe and the dollar index at 11-week lows.

Overall risk appetite remained slightly more vulnerable into the New York open with equity futures posting net losses. The yen was resilient on the crosses with a net advance against the Euro. With the US dollar also on the defensive USD/JPY retreated to lows around 107.65.

China’s CPI inflation rate declined to 2.4% for May from 3.3% previously and below expectations of 2.7% while producer prices declined 3.7% over the year, the sharpest decline since May 2016. The data maintained unease over economic weakness, although it could also trigger further monetary and fiscal stimulus. Japanese core machinery orders declined 12.0% in the year to April compared with expectations of a 7.5% decline.

US equity markets edged higher on Wednesday, but the yen resisted selling pressure with USD/JPY retreating to just 107.50 amid wider losses.

Sterling remained on the defensive in early Europe on Tuesday with a more vulnerable risk tone the primary influence as global risk factors tended to dominate. GBP/USD dipped to lows just below 1.2630 before finding fresh support and rebounding.

Bank of England Deputy Governor Cunliffe stated that another sharp re-pricing of risk is still possible and there is likely to be a great deal of pain for the financial sector, but the first stage of the crisis is over. He also stated that it was too early to determine the outlook for the second half of the year, although there had been evidence of a slight recovery in April and May. The economy was unlikely to reach pre-crisis levels until mid-2021. As far as negative interest rates are concerned, Cunliffe stated that it was one possible tool, but there are mixed views and the MPC would have to consider the negative impact on the financial sector.

Cunliffe did not sound enthusiastic over negative rates and Sterling edged higher into the European close with a fresh GBP/USD move towards 1.2750, although GBP/EUR held around 1.1250.

Economic Calendar

11:00OPEC Meeting--
13:30USD CPI Ex Food & Energy (M/M)(MAY)-0.10%-0.40%
13:30USD CPI Ex Food & Energy (Y/Y)(MAY)1.30%1.40%
13:30USD CPI (Y/Y)(MAY)0.40%0.30%
13:30USD CPI (M/M)(MAY)-0.10%-0.80%
14:30ECB Luis De Guindos Speaks--
19:00Monthly Budget Statement(MAY)--738.0B
19:00USD FOMC Projections of Economy--
19:00FOMC Interest Rate Decision0.25%0.25%
19:00USD FOMC Statement--
19:30FOMC Press Conference--
23:45NZD Electronic Card Retail Sales (Y/Y)(MAY 01)--47.50%
23:45NZD Electronic Card Retail Sales (M/M)(MAY 01)--46.80%

*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.