Following a return of optimism in the markets last week, the U.S. dollar underwent a correction. Generally investors have increased their risk appetite, leading to a withdrawal of capital from safer assets, including the global reserve currency.
Economic data from the U.S. was mostly positive. The ISM manufacturing PMI index rose to a positive level of 52.6 points, indicating an expansion. Interestingly, the real estate market is showing resistance to the virus and activity is returning - the number of pending home sales increased by 44% in May compared to April. The consumer confidence index rose from 85.9 to 98.1 points, indicating a recovering consumer willingness to consume. 4.8 million new jobs have been created in the labor market, causing the unemployment rate to fall to 11.1%, but there is still a great deal of uncertainty in the market about these figures as new job applications remain positive and more people apply for unemployment benefits every week.
Coronavirus data remained consistent with last week's trends. Market participants focused on the situation in the U.S., where the number of new cases reached new heights and 57,000 new patients were recorded per day. In the main states of the country, the requirements for social activity are being tightened again in order to control the spread of the virus. In Brazil, the number of new cases has not changed and has remained at an altitude of 40,000. In India, the spread of the virus is gaining momentum and the number of new cases is growing every day and has almost reached the level of 25 thousand per day. In Russia, the pressure is slowly easing and the number of cases has fallen to 6.5 thousand a day.
The main currency pair EUR/USD changed insignificantly and fluctuated at the level of 1,125. Among the economic data was the manufacturing PMI index, which rose from 39.4 to 47.4 points, while the services sector index also recovered and rose from 30.5 to 48.3 points, indicating that sentiment in Europe is recovering rapidly. Preliminary inflation in Europe in June was 0.3% and exceeded expectations. Unemployment rose slightly in both Europe and Germany, reaching 7.4% and 6.4% respectively. EUR/USD has ended the week appreciating 0.2%.
The most important Asian pair USD/JPY showed a bullish sentiment. Among the economic indicators was the manufacturing sector PMI index, which stood at 40.1 points and remained in the negative zone, but the services sector recovered rapidly and rose from 26.5 to 45.0 points. Retail sales in May fell -12.3% year-on-year. The unemployment rate rose from 2.6% to 2.9%. USD/JPY ended the week appreciating 0.3%.
The British pound rose against the U.S. dollar. In Britain, first-quarter economic results were released, slowing down -1.7% year-on-year. The manufacturing PMI index was at 50.1 points, but the sentiment in the services sector recovered even faster and the index rose to 47.1 points. GBP/USD ended the week appreciating 1.2%.
This week will start with European retail data. The volumes of the German industrial sector will be monitored on Tuesday. No important data is planned for Wednesday, and German export figures are expected on Thursday. No important announcements were also scheduled for Friday.
According to Admiral Markets market sentiment data, 41% of investors have long positions in the EUR/USD pair (down -10 percentage points from last week's data). In the main Asian pair USD/JPY, 48% of investors have long positions (fell by -12 percentage points). In the GBP/USD pair, 34% of participants expect a rise (down -24 percentage points). Such market data is interpreted as the opposite indicator, so EUR/USD and GBP/USD are expected to rise and the USD/JPY position is relatively 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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