Global market watch - 7th August 2020
The Bank of England held rates steady and was ultimately not as dovish as the market thought it could be. BoE Governor Bailey teased the market saying that alongside quantitative easing, forward guidance and yield curve control, negative interest rates were in the bank’s toolbox. However, the Bank had no plans to use them. In this case, sterling strengthened against the euro and dollar.
There isn’t any UK data out for release today so it will be down to US employment data for direction.
GBPEUR buyers pushed the euro lower a touch in early trading yesterday as it traded close to the important 1.2000 level. The current trend is still for a weaker US dollar at the moment, so if either the US payrolls data or US congress provides a negative event, it wouldn’t surprise if EURUSD again moved higher.
Swiss foreign currency reserves are released today and the market will be interested to see how much intervention the SNB has been conducting over the past month.
Jobless claims fell to 1.186 million last week which was a welcome relief and lower than the 1.4 million expected. Although, it has been reported that there are now more permanent job losses than temporary ones, so the Non-Farm Payrolls report will be important today. The range for the expected payrolls number is between 600k job losses to 2.5 million job gains therefore difficult to gauge how the market will react.
We should remember that the US dollar is currently in a well-defined downtrend. Even though Congress has an agreed deadline of today to agree the latest support package, it could be that it is missed. In this case, there may be a moratorium on property evictions by the President to help stricken families.
Overnight, President Trump has signed an executive order on Bytedance to divest TikTok and banned the use of Wechat starting in 45 days’ time.
The AUD encountered profit taking sellers before the release of the RBA monetary policy statement and comments from RBA Assistant, governor Ellis. He said that he saw the pace of recovery slower than previously thought and said that the RBA would maintain loose policy for as long as required.