Sentiment in the markets did not improve last week, so investors remained cautious, which led to the U.S. dollar remaining at its highest level in June. The growing number of new cases of the virus in the United States and the volatile economic data in the country do not allow market participants to expect a Form V recovery.
U.S. economic indicators remained highly volatile and supported concerns among market participants about future prospects. The preliminary manufacturing PMI index reached 49.6 points and recorded a marked recovery in sentiment among business participants, which was one of the most positive signs in recent weeks. Meanwhile, real estate secondary market sales fell -9.7% in May from a month earlier, but new home sales showed recovery and recorded a 16.6% rise from April. With the number of unemployed remaining high in the country, access to credit is likely to decline, which will reduce liquidity in the market while negatively affecting the number of transactions. The number of new jobless claims remained unchanged at 1.5 million per week.
The coronavirus news did not promise anything positive. In the U.S., the number of new cases has grown rapidly above the level of 40,000 per day. Florida and Texas are once again introducing strict requirements and closing bars to reduce the spread of the virus. In Brazil, the number of new cases remained high at 40,000, while in India, further growth was recorded at the level of 20,000, the highest point to date. In Russia, the number has fallen moderately to 7 thousand a day and the trend in recent weeks is positive.
The main currency pair EUR/USD reflected the trends of the U.S. dollar and the pair appreciated at the beginning of the week and later depreciated. Economic data in Europe showed positive signs, with the manufacturing PMI index rising to 44.6 points in Germany and 46.9 points in Europe. During a press conference for European Central Bank President Christine Lagarde, she said the worst is expected to show signs of improvement in the economy in the past and in the coming months. EUR/USD pair has ended the week appreciating 0.4%.
The main Asian pair, USD/JPY depreciated at the beginning of the week, but later recovered and the overall result for the week was positive. Among the economic data was preliminary manufacturing PMI index, which remained in the negative territory and was 37.8 points. The inflation rate calculated by the central bank, which eliminates energy and food prices, was 0.0% and was at the deflationary threshold. USD/JPY ended the week appreciating +0.3%.
The British pound depreciated against the U.S. dollar, despite relatively good business sentiment, according to survey data. The preliminary manufacturing PMI rose from 40.7 to 50.1 points and returned to a positive growth area. However, the pair fell to 1-month lows. GBP/USD has ended the week depreciating -0.1%.
This week will start with preliminary inflation data for Spain and Germany in June and preliminary real estate transaction data in the U.S. Industry changes in South Korean and Japan will be monitored on Tuesday, since both countries are significant exporters, and the data should reflect overall global sentiment. Preliminary European inflation and U.S. consumer confidence data will also be expected on Tuesday. South Korea's export volumes and key economies manufacturing PMI index data will be monitored on Wednesday. The minutes of the last meeting of the U.S. Federal Reserve will be announced on Wednesday evening, where investors will look for clues about the bank's next steps. On Friday, the focus will be on the results of the U.S. labour market, which will show how the number of jobs has changed and what the unemployment rate is in the country.
According to Admiral Markets market sentiment data, 51% of investors have long positions in the EUR/USD pair (increased +2 percentage points from last week's data). In the main Asian pair USD/JPY, 62% of investors have long positions (decreased -7 percentage points). In the GBP/USD pair, 58% of participants expect a rise (down -2 percentage points). Such market data are interpreted as contraindicative, therefore GBP/USD and USD/JPY are expected to depreciate and the EUR/USD position remains neutral. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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