· Dollar finds support as coronavirus, China data sap confidence
The dollar steadied on Friday as a jump in U.S. bond yields and a drag on sentiment from lackluster Chinese economic data put the brakes on a selldown of the world’s reserve currency.
China’s retail sales unexpectedly extended their fall into a seventh month in July and industrial output missed expectations – suggesting bumps in even the world’s most promising rebound.
The mood had the dollar within reach of snapping a seven-week losing streak against the risk-sensitive Aussie, which has settled around $0.7149 and is flat for the week.
Tepid demand in a long-dated U.S. government bond auction on Thursday has also extended a surge in Treasury yields that has drawn some investors – especially from Japan – back to dollars.
The yen is on course for its weakest week against the dollar in two months and is down about 0.9% at 106.84 from last Friday’s close.
The euro hung on at $1.1816 in the Asia session on Friday and the pound was also steady at $1.3062, as investors have sought to focus on a rebound in growth in June rather than the diabolical quarterly contraction.
· US retail sales may dim hopes of a quick recovery – Forex News Preview
US retail sales for the month of July will hit the markets on Friday at 12:30 GMT and expectations are for a sharp slowdown from June’s remarkable growth. While a weaker data set is highly expected, traders may pay attention to the size of damage that the virus caused on consumption. The outcome may provide some policy direction, driving the dollar accordingly.
US retail sales to sharply decelerate in July
Following May’s historical monthly expansion of 18.2%, US retail sales beat forecasts and surged by a whopping 7.5% m/m rate in June as the lockdown loosening allowed consumers to dine out, shop for clothing, and spend on big-ticket items such as vehicles.
Weaker consumption could increase pressure for more stimulus
Should the data miss forecasts by a wide margin, the dollar could drift lower amid concerns that the White House and the central bank may need to unleash more stimulus to support consumers and businesses. After talks over the next round of fiscal aid collapsed in the Congress last week, President Trump was able to sign executive orders and extend the expired unemployment benefits at a reduced rate on Saturday. His pledge to cut taxes on capital gains was another positive headline on Tuesday. However, in the bigger picture, the economy is still lacking a timely and substantial aid package, and that keeps some downside pressure on the greenback as other economies are handling the virus resurgence more effectively and have already settled their fiscal stimulus plans.
Meanwhile, the ongoing debate in Congress is a headache for the Fed too. Its next policy meeting is in mid-September, and unless Democrats and Republicans secure a deal by then, the central bank should act first to fund the economy if the unemployment rate shoots up and spending shrinks. However, interest rates are already near zero and its balance sheet has expanded to record levels, so the Fed chief may need to go the extra mile to find alternative policies. Besides, September is expected to be a compact month as the new fiscal year starts on October 1.
News that Russia has approved its “Sputnik” vaccine for use hurt traditional safe-haven assets such as gold and the Japanese yen, but did not affect the greenback, which found support from Trump’s temporary political relief and rising yields. Taking into account US-China geopolitical tensions and the unpredictable virus and vaccine evolution, one could comfortably say that the global economic environment remains risky and traders may not easily abandon the world’s reserve currency, hence the risk for the dollar is still tilted to the upside and any downside move from here could easily be corrected.
· U.S., China Plan to Review Phase-One Trade Deal Mid-Month
Senior U.S. and Chinese officials are planning to assess the nations’ trade agreement this month against a backdrop of rising tensions between the countries, according to people briefed on the matter.
The discussion on the so-called phase-one deal, led by U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, would take place on or around Aug. 15, six months after the agreement took effect, as directed in the text of the accord, the people said.
The White House declined to comment, and the U.S. Trade Representative’s office didn’t immediately respond to a request for comment. The planned talks were reported earlier Tuesday by the Wall Street Journal.
· EUR/USD trades above 1.18 ahead of US retail sales
EUR/USD is trading above 1.18, off the highs. The dollar advanced along with higher yields, the ongoing fiscal impasse, and upbeat jobless claims. The focus shifts to US retail sales for July.
From a technical perspective, the pair has been oscillating in a broader 200 pips trading range over the past three weeks or so. The price action constitutes the formation of a rectangle on short-term charts, warranting some caution for aggressive traders. Hence, it will be prudent to wait for a sustained move beyond the 1.1900 mark or a convincing break below the 1.1700 level before positioning for the pair’s next leg of a directional move.
Above the 1.1900 mark, the pair is likely to aim towards reclaiming the key 1.2000 psychological mark with some intermediate resistance near the 1.1975-80 region. Conversely, a break below the 1.1700 mark will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent corrective slide from near two-year tops set earlier this month. The pair might then accelerate the fall towards the 1.1625-20 support area. Subsequent fall below the 1.1600 mark will set the stage for an extension of the corrective slide towards testing the next major support near the 1.1550-40 region, marking the 50% Fibonacci level of the 1.1168-1.1916 rally.
· Novavax to deliver 60 million doses of COVID-19 vaccine candidate to UK for trial
U.S. drug developer Novavax Inc said on Friday the UK would buy 60 million doses of its coronavirus vaccine candidate, NVX-CoV2373, for a phase 3 clinical trial in the country.
The company and the UK government will collaborate for the trial to assess the efficacy of the vaccine in the UK population, Novavax said in a statement, but did not disclose any financial details of the agreement.
The company is also gearing up to deliver 100 million doses to the United States by January after it was awarded $1.6 billion to cover testing and manufacturing of its potential vaccine in the country.
Novavax has received $2 billion in funding so far for its coronavirus vaccine, including $384 million from the Coalition for Epidemic Preparedness Innovations (CEPI).
· China central bank to conduct MLF operations on Monday as 400 billion yuan of such loans expire
China’s central bank said it would conduct medium-term lending facility (MLF) operations on Monday, as a batch of 400 billion yuan ($57.6 billion) worth of such loans expired on the day
The People’s Bank of China (PBOC) said in an online statement on Friday that this would be a one-off MLF operation for August, while the volume would be dependent on market demand.
Another batch of MLF loans with a value of 150 billion yuan is due to expire on Aug. 26.
· Sino-U.S. tensions to hurt China, U.S. and the world: stats bureau
China will be able to maintain steady economic growth this year although the tensions between China and the United States will negatively impact the two countries and the world, China’s National Bureau of Statistics spokesman Fu Linghui said.
China’s investment is steadily recovering on policy support, but employment pressure still exists, Fu said on Friday.
· Japan exports to post double-digit fall again, machinery orders seen up: Reuters poll
Japan’s July exports are expected to have recorded a double-digit decline for the fifth straight month as the coronavirus pandemic hit global demand, a Reuters poll showed on Friday.
The poll also showed machinery orders in June rose for a second straight month and core consumer prices probably grew for the first time in four months in July.
But analysts say weak global demand and restrictions on business activities in some major economies due to a resurgence in infections suggest any recovery in the world’s third-largest economy will likely only be moderate.
Exports in July were projected to fall 21.0% from a year earlier, less than a 26.2% tumble in June, the poll of 16 economists showed.
Imports, however, were expected to have dropped by a sharper 22.8% from a year earlier after a 14.4% fall the previous month, resulting in a trade deficit of 77.6 billion yen ($725.84 million), the poll found.
· Pandemic to hit Japan's economy more than expected, U.S.-China tension adds to concerns
Japan’s economy will contract more than previously expected and suffer mild deflation during the current fiscal year, analysts predict, underscoring the fragile nature of the recovery from the devastating coronavirus pandemic.
The economy is forecast to shrink 5.6% in the current fiscal year to next March, the poll of 32 economists showed, more than a 5.3% contraction projected last month. In a worst case scenario it will shrink 8.0%.
The downgrade came as many analysts revised their forecasts for April-June gross domestic product (GDP) to a 27% contraction - last month’s worst case forecast - from a nearly 24% drop projected in July.
A recent sharp deterioration in U.S.-China relations could complicate the outlook, as the world’s two largest economies disagree on issues such as trade, technology and the pandemic.
Asked how the conflict between the two nations will affect Japan’s economy, about 90% of economists surveyed said it would have a negative impact.
· Hong Kong’s economy contracts 9% on-year in the second quarter, cuts full-year GDP forecast
· South Korea finance minister sees third-quarter GDP bouncing back to growth quarter-on-quarter
South Korea’s economy is seen bouncing back to sequential growth in the third quarter given signs of gradual recovery in recent economic data, but a slump in exports remains a major concern, its finance minister said on Friday.
The ministry is currently not considering another supplementary budget, which would be the fourth, that has been discussed to cope with local damages from torrential downpour during the monsoon season, Hong added.
· Coronavirus jolts Malaysia's economy into first contraction since global financial crisis
Malaysia’s economy plunged into its first contraction since the 2009 global financial crisis in the second quarter as the coronavirus pandemic ravaged business activity, prompting the central bank to sharply cut its GDP forecast for this year.
The central bank said on Friday gross domestic product shrank by 17.1% in April-June from the same period a year earlier - its worst slump in over 20 years and a much deeper contraction than the 10% decline forecast in a Reuters poll.
· Oil slips below $45 on demand doubts, rising supply
Oil slipped further below $45 a barrel on Friday, giving up this week’s gains, under pressure from doubts about demand recovery due to the coronavirus pandemic and rising supply.
Two prominent forecasters, the International Energy Agency and the Organization of the Petroleum Exporting Countries, trimmed their 2020 oil demand forecasts this week. [IEA/M] [OPEC/M] OPEC and its allies are increasing output this month.
Brent crude LCOc1 was 29 cents, or 0.7%, lower at $44.67 by 0810 GMT, heading for a flat week. U.S. West Texas Intermediate CLc1 slipped 25 cents, or 0.6%, to $41.99.
Reference: CNBC, Reuters, FXStreet, Fox News, Bloomberg
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