The Dollar majors have been plying narrow ranges so far today, with global markets generally in somewhat of a directional stasis presently, with participants mindful of the potentially economically disrupting new waves and clusters of coronavirus infection outbreaks in reopening economies. There is also conjecture that even if the coronavirus remains reasonably contained, the rapid pace of the rebound out of the April nadir will taper substantially over the coming months.



Sterling yesterday saw an upward rotation against the Dollar and Euro, along with most other currencies. Confirmation that UK-EU trade discussions will continue throughout July, and then recommence in the week of August 17th following the summer recess, along with some speculation that the two sides might make a political declaration of intent (to makE a trade deal) before the end of the month, were taken as a bullish cue by the forex market.


The UK government will also be presenting a budget update today, where a range of targeted measures to tackle rising unemployment are expected. These factors have for now offset negative leads, including reports that the BoE has been talking with commercial banks to prepare them for the possibility of negative interest rates.

Incoming data out of the UK, including yesterday’s release of the June construction PMI survey (which showed the sector returning to expansion), have been indicating a strong rebound from the April nadir, when the coronavirus lockdown measures were in full force. However, the path ahead looks to be a rocky one. New lockdown measures have been re-introduced in the city of Leicester, due to a spike in coronavirus cases there; an ominous sign of the challenges being faced as the UK economy reopens, especially with social distancing rules having been relaxed and with pubs and restaurants reopening.

Hence there is a net neutral view on the Pound. Cable will likely remain hostage to the ebb and flow of risk appetite in global markets.



In Europe, however, since there wasn’t much progress on the EU-UK trade talks, the focus turned to the EU budget talks and of course the EUR 750 bln recovery fund as German Chancellor Merkel travels to Brussels to lay out her priorities for Germany’s EU presidency, which runs until the end of the year. EU heads of state are expected to meet at the end of next week, where an agreement on the details on the recovery fund is expected. So far the prospect of a jointly funded recovery program has been helping to prop up the EUR and failure would be a negative for the Euro.

So far today, EURUSD has drifted modestly lower, reflecting a pick up in demand for Dollars as European equity markets and USA500 futures turn lower, the latter more than giving back earlier advances. While there has been an abundance of above-forecast data out of the Eurozone and elsewhere of late, which has been a theme in global data releases since the April lockdown nadir, the pace of recovery is now likely to fall back. This especially looks to be the case given the problematic clusters of outbreaks of new coronavirus infections, which have been causing localised lockdowns across the world.

Markets look likely to remain trapped in a constant state of tweaking risk premia, which for EURUSD means downside pressure when the dollar gains on safe haven demand, and upside pressure when things are looking more rosy.

There is a slightly more circumspect view given the risks of setbacks on the road back to economic normalcy.  Any upset on this front would be a negative for the Euro.Today’s local data calendar is pretty empty – German trade data are due tomorrow.


Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD pressured toward 1.17 amid higher US yields

EUR/USD is falling toward 1.17 as US bond yields rise amid the US fiscal impasse and ahead of US inflation figures. Coronavirus headlines and eurozone industrial output are also in play.


GBP/USD rises toward 1.3050 as UK Q2 GDP falls 20.4%

GBP/USD is rising toward 1.3050 after UK Q2 GDP fell by 20.4%, marginally above expectations. The devastating drop was priced in by markets and US inflation is now eyed.


Gold bounces above $1,900 after rapid collapse

Gold is trading above $1,900 recovering from the biggest rout in seven years. Profit-taking and higher US yields weigh on the precious metal. US inflation figures are eyed.

Gold News

Forex Today: Gold sell-off extends, dollar reigns supreme amid fiscal impasse, ahead of data

US bond yields are on the rise, supporting the recovering dollar and contributing to a sell-off in precious metals. The lack of progress in US fiscal talks and the increase in America's coronavirus deaths are among the depressing factors. US CPI is eyed.

Read more

WTI: Big move looks overdue

WTI could soon witness a big move in either direction. That’s because, the spread between Bollinger bands – volatility indicators placed 2 standard deviations above and below the 20-day simple moving average of price - has narrowed ...

Oil News

Forex Majors