US and European stock markets advanced on the back of promising economic data on Monday. Technology stocks led gains. The DAX rallied 2.71% and Nasdaq (+1.47%) renewed record as investors continued piling into technology stocks favourable for the stay-home business conditions.  

Meanwhile, US policymakers are discussing on the next fiscal stimulus package, and there is a chatter that Monday talks were productive. We expect a new fiscal aid package of around $1.5-2 trillion to get approval in the coming weeks.


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Call it a market rally, or a stock market inflation, the global equity markets are poised for more gains on hope that more stimulus would support economies, or at least the stock prices. 

Major Asian indices followed up on New York session gains. The ASX 200 rebounded 1.89%, the Hang Seng advanced 0.83%, as the Nikkei (+1.47%) reversed yesterday’s weakness. 

The US dollar, treasuries and gold were steady. 

The Reserve Bank of Australia (RBA) maintained the status quo at today’s meeting but maintained its accommodative approach on expectation that the post-Covid recovery would be uneven and bumpy. The bank pledged to keep its interest rate at the actual all-time low until it sees material progress towards full employment and the 2-3% inflation target. The AUDUSD remains bid near the 0.7100/0.7150 area, but the broad based USD weakness is responsible for a part of the recent gains, and a further recovery in the greenback could settle the Aussie below the 0.70 cents mark before a further positive attempt. 

Released yesterday, strong manufacturing PMI surveys from Asia, Europe, and the US hint at a solid boost in services data, due Wednesday, as well.  

The economic calendar for Tuesday is light. The US factory orders are expected to have improved 5% in June versus 8% a month earlier on the back of renewed virus-containment measures and the European factory gate prices are expected to have risen 0.5% m-o-m in June from -0.6% printed a month earlier as a result of gradual winddown of confinement measures and economic normalisation. 

The EURUSD consolidates near the 1.17 mark, but support at this level could easily give in if we see a further recovery in US dollar and drag the pair to 1.1630, minor 23.6% Fibonacci retracement on April – July rebound. 

For Cable, there is probably little hope for an extended rally above the 1.30 mark given that the medium-term outlook remains comfortably negative on the bitter mix of pandemic and uncertain Brexit situation. The Bank of England (BoE) is expected to maintain its rate and asset purchases policy unchanged at this month’s meeting, but there is a chatter that moving toward the year-end, the bank should allow banks to borrow at negative rates, or increase the volume of funds available at the bank rate to further relax the financial conditions. Hence, the dominance of the BoE doves should put a decent downside pressure on sterling against the dollar and the euro

Else, WTI crude finds buyers below the $40 per barrel on the back of promising manufacturing data, but the equilibrium is fragile near the current levels. Any deterioration in the risk appetite could rapidly tilt the balance to the downside and send the price of barrel tumbling below the $40 level.

This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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