CFD Markets News and Forecasts — 02-09-2020

• Downside risk to forecast from Covid-19 is higher than Brexit risk
• Very important our framework is robust enough that we can go big and go fast
• Household spending now close to pre-pandemic levels but it is pretty uneven picture
• Mortgage approval figures have been very strong
• Switch to online retail sales in the latest data raises the question of how much is permanent structural change
• So far, recovery in consumption has been very fast but the story has been weak on investment

• We have headroom to do materially more QE; we could do it fast if market dysfunction required it

• Fears in some quarters about 'monetary finance' are misplaced

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 9.362 million barrels in the week ended August 28. Economists had forecast a decrease of 1.887 million barrels.

At the same time, gasoline stocks dropped by 4.320 million barrels, while analysts had expected a decline of 3.036 million barrels. Distillate stocks fell by 1.676 million barrels, while analysts had forecast a drop of 1.357 million barrels.

Meanwhile, oil production in the U.S. tumbled by 1,100,000 barrels a day to 9.700 million barrels a day.

U.S. crude oil imports averaged 4.9 million barrels per day last week, decreased by 1.0 million barrels per day from the previous week.

• Fed's new policy framework makes it clear that policymakers seek inflation that targets 2% over time
• Lower neutral interest rates constrain the ability of monetary policy to offset negative shocks to economy
• FOMC participants' median estimate of neutral nominal rate has fallen to 2.5% from 4.25% in January 2012
• Statement on new strategy makes unequivocally clear that we seek maximum employment and will aim to eliminate shortfalls

• For me, risk of a permanent hit to GDP from the pandemic is likely to be above 1.5% points
• Likely, there will be a semi-permanent effect from this shock on commercial property sector
• Commercial real estate will probably see less investment in the immediate future."
• Open question whether this will result in more productive economy
• Possible investment in retail will shift into the capital from labour, could result in greater productivity
• UK inflation expectations have recovered
• Inflation expectations appear well-anchored; MPC can take some comfort

The U.S. Commerce Department reported on Wednesday that the value of new factory orders climbed 6.4 percent m-o-m in July, following a revised 6.4 percent m-o-m surge in June (originally a 6.2 percent m-o-m increase). That marked the third consecutive month of gains in factory orders.

Economists had forecast a 6.0 percent m-o-m increase.

According to the report, orders for transportation equipment jumped 35.7 percent m-o-m in July after a 19.5 percent m-o-m advance in June. Gains also occurred in orders for fabricated metal products (+2.7 percent m-o-m), computers and electronics (+2.6 percent m-o-m), machinery (+2 percent m-o-m).

Total factory orders excluding transportation, a volatile part of the overall reading, rose 2.1 percent m-o-m in July compared to an upwardly revised 4.8 percent m-o-m advance in June (originally a 4.4 percent m-o-m gain).

• There is a material risk in my view that it could take several years for the economy to return to full capacity
• I take little comfort from the fact that the unemployment rate has remained fairly stable so far
• I am fairly confident that, in the months ahead, the economy will bounce back but still leaving GDP 5% or more below its pre-pandemic level
• An economy with lots of job losses is one that will need more stimulus from monetary and fiscal authorities
• BoE forecast for output gap closing is quite quick

FXStreet reports that UOB Group’s Head of Markets Strategy Heng Koon How, CAIA, Senior FX Strategist Peter Chia, Rates Strategist Victor Yong and Markets Strategist Quek Ser Leang give their opinion on the latest Fed’s policy announcement.

“The Federal Reserve has announced a shift to an Average Inflation Targeting (AIT) mandate as well as giving greater consideration to its employment mandate, thereby raising the bar for pre-emptive monetary policy tightening even higher. Overall, this reinforces our expectation that short term US money market rates will stay glued at the zero bound, with flexibility for longer term US Treasuries yield to grind higher.”

“We keep to our overall thesis of gradual weakness in the US Dollar. While short positioning is stacking up and over the short term the US Dollar does appear oversold, all the key negative driving forces for the US Dollar remain intact. These factors are extended FED QE, elevated US money supply, lower US interest rate differentials, on-going diversification away from the USD and a persistent risk-on environment.”

“Much has been discussed about the post Jackson Hole rebound in 10-year US Treasuries yield. Our technical analysis suggests that a “short-term bottom could be in place and the recovery in 10-year US Treasuries yield has room to extend to 0.855%.”

U.S. stock-index futures rose on Wednesday, as demand for technology stocks remained strong despite disappointing U.S. private-sector payrolls.

Global Stocks:

• I didn't see any change in UK position this week
• UK still looking to keep benefits of EU without obligations
• Still hope and still think that a deal is possible
• We continue to think that despite difficulties, the British Prime Minister wants a deal
• EU has shown flexibility to work with UK red lines, now it's time for UK to reciprocate

FXStreet notes that the S&P 500 has extended the rally into a cluster of resistances at 3525/50 as the index held high-level support at 3484 on Tuesday. Economists at Credit Suisse continue to look for the 3525/50 neighborhood to ideally cap for a phase of consolidation.

“The S&P 500 strong surge higher into the close sees the market testing our objective of Fibonacci projection resistance at 3525/29. We continue to see scope for an overshoot above here to what we see as the upper end of its ‘typical’ extreme at 3550 – 15% above the 200-day average – but we continue to look for this 3525/50 zone to ideally cap at first for a consolidation phase, especially given the potential stalling we may be seeing in the US Breakevens rally. A direct break though can see resistance next at the top of the weekly Bollinger Band at 3565, then 3582/88.” 

“Near-term support moves to 3516, with a move below 3506 needed to ease the immediate upside bias for a test of 3495/93. Beneath here though is now needed to mark a minor top for a test of the uptrend from late June and the 13-day exponential average at 3446/43.” 

“The VIX remains well supported although still needs to clear 28.58 to mark a near-term base and more important turn higher.”

(company / ticker / price / change ($/%) / volume)

NVIDIA (NVDA) target raised to $650 from $600 at BofA Securities

FXStreet reports that strategists at Credit Suisse revise the USD/CAD target from 1.3150 to 1.2900, as recent Bank of Canada (BoC) official speeches suggest low levels of concern for priced in policy expectations and reduce potential for dovish surprises. The loonie is consolidating just above 1.3050.

“With a strong focus on communication and on the Bank’s long-term policy framework, BoC officials have for the past 2 weeks kept at a considerable distance from considerations on the near-term policy outlook. This is notable as BoC policy expectations remain amongst the most hawkish in G10, and especially against the Fed.”

“Forward OIS rates have now for many months priced in a policy differential that widens steadily in favour of a more hawkish BoC, compared to the Fed. The fact that BoC rhetoric has been devoid of any consideration on this topic despite its lasting presence signals in our view that the issue does not sit high in the list of urgent BoC priorities, and reduces the potential for dovish surprises from next week’s meeting.”

“The USD/CAD pair can test the 1.2965 low from 6 January and eventually pushing lower towards 1.29.”

The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed on Wednesday the U.S. private employers added 428,000 jobs in August.

Economists had expected an increase of 950,000.

The July number saw an upward revision to 212,000 from the originally reported 167,000.

“The August job postings demonstrate a slow recovery,” noted Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Job gains are minimal, and businesses across all sizes and sectors have yet to come close to their pre-COVID-19 employment levels.”

GBP traded mixed against its major rivals in the European session on Wednesday as investors awaited speeches from several Bank of England's (BoE) policymakers, including Broadbent and Haldane (due today at 14:30 GMT and 15:30 GMT respectively) and governor Bailey (tomorrow at 14:00 GMT). Investors will scrutinize the officials' comments for any fresh insight into their stance on negative interest rates. Last month, the BoE's governor Andrew Bailey said that negative rates are "in the toolbox," but there are no plans to cut rates below zero in the coming months.

The negotiations on the EU-UK trade deal also remained in focus. The sides are to start the eighth round of talks next week. The EU and UK chief negotiators Michel Barnier and David Frost held informal Brexit negotiations in London on Tuesday. After the talks, the UK Prime Minister Johnson's spokesman said that they would continue to work hard to reach an agreement and look forward to the next round (of talks) next week. “We believe an agreement is still possible and it is still our goal but it is clear that will not be easy to achieve,” he added. Meanwhile, the EU's Barnier said earlier today that they would continue difficult post-Brexit transition talks with patience and determination.

FXStreet notes that gold continues the expected consolidation following the move to the objective of $2075/80. Nonetheless, strategists at Credit Suisse believe this is a temporary pause only ahead of the yellow metal core bull trend eventually resuming.

“Whilst we continue to see the long-term trend higher, reinforced by falling US Real Yields and a falling USD, our immediate bias remains for further consolidation above a cluster of supports at $1867/37, which includes the 23.6% retracement of the rally from the 2018 low.” 

“Should weakness extend, we would see scope for a deeper setback to $1765, potentially $1726.” 

“We look for an eventual move above $2075 with resistance seen next at $2175, then $2300. Whilst we would look for a fresh consolidation at this latter level, a direct break can see potential trend resistance at $2417, with scope seen for $2700/20 over the longer-term.”

“It is worth noting that monthly RSI has reached its extreme levels seen in 2006 and 2008 adding weight to the view for a lengthier pause in the bull trend.”

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. fell 2.0 percent in the week ended August 28, following a 6.5 percent decrease in the previous week.

According to the report, refinance applications declined 3.1 percent, while applications to purchase a home edged down 0.2 percent.

Meanwhile, the average fixed 30-year mortgage rate fell to 3.08 percent from 3.11 percent.

“Lenders are reporting that the strong demand for homebuying is coming from delayed activity from the spring, as well as households seeking more space in less densely populated areas,” said Joel Kan, an MBA economist. “Both conventional and government refinancing activity decreased last week, despite 30-year fixed and 15-year fixed mortgage rates declining to near historical lows,” he also noted. “Mortgage rates have remained below 3.5% for five months now, and it’s possible that refinance demand may be slowing and will not significantly increase again without another notable drop in rates.”

• China will not resort to "flood-like" stimulus and will guide more credit to real economy
• Cabinet has approved rules on market access for financial holding companies

USD/JPY: Risks now shifted to the downside - UOB

FXStreet reports that FX Strategists at UOB Group now see USD/JPY facing some downside risks in the near-term.

24-hour view: “We held the view yesterday that USD ‘has likely moved into a consolidation phase’ and expected it to ‘trade within a 105.50/106.20 range’. Our view for USD to consolidate was not wrong even though it traded within a narrower range than expected (between 105.58 and 106.15). The consolidation phase appears to be on-going but the slightly firmed underlying tone suggests USD is likely to trade at a higher range of 105.75/106.25.”

Next 1-3 weeks: “We highlighted yesterday that ‘the risk has shifted to the downside’ and USD ‘could test the solid support at 104.70’. We added, ‘the ‘strong resistance’ at 106.30 is likely strong enough to hold, at least for these few days’. The subsequent rebound in USD is more robust than anticipated (high of 106.09) and while we continue to see chance for USD to test 104.70, we are moving the ‘strong resistance’ level slightly higher to 106.55. Meanwhile, oversold short-term conditions could lead to a couple of days of consolidation first (before downside risk should increase again).”

EUR/GBP to surge towards 0.92 as Brexit is back - Rabobank

FXStreet notes that EUR/GBP has been mostly failing to hold below the 0.90 level in recent months though the pair is currently struggling near multi-month lows, below 0.8900 mark. Looking ahead, economists at Rabobank see EUR/GBP recovering to 0.92 amid Brexit issues but hints of a trade deal can drop the pair below 0.90.

“In the coming months UK fundamentals have the potential to offer significant direction for the GBP crosses. The EU has indicated that October is the latest possible deadline for talks insofar as its member nations need time to ratify the deal before the close of the Brexit transition phase at the end of the year. There remains a substantial amount of ground to be covered with fishing rights and competition rules among the most contentious areas.” 

“Nervousness over the Brexit talks could see EUR/GBP pushing towards 0.92 in the coming months, though signs that a trade deal can be agreed in the coming weeks will be positive with EUR/GBP set to drop convincingly below the 0.90 area.” 

“Any deal, however, will subsequently be unpicked by market analysts, and any signs of confusion or indications that the UK has been dealt a poor hand will soon be reflected in GBP.”

• Economy faces a slowing labour market recovery
• Coronavirus pandemic has proven harder to contain than expected
• Labour market recovery has been slower than anticipated
• Expects employment growth to lag behind spending
• Says keeping rates lower for longer could invite 'risky' behaviour in markets
• But now isn't the time to worry about those hazards

FXStreet reports that USD/CNH could attempt some consolidation ahead of a potential move to 6.80, according to FX Strategists at UOB Group.

24-hour view: “We expected USD to weaken yesterday but were of the view that ‘any weakness is likely limited to a test of 6.8300’. However, USD plunged to a low of 6.8143 before rebounding to end the day slightly lower at 6.8363 (-0.16%). The rapid decline appears to be overdone and this coupled with oversold conditions suggest further USD is unlikely for today. USD is more likely to consolidate and trade within a 6.8240/6.8420 range.”

Next 1-3 weeks: “Yesterday (01 Sep, spot at 6.8480), we highlighted that ‘such lackluster price actions upon a breach of major support indicates either USD is not ready for further losses or it is biding time for a more aggressive decline later on’ and added, ‘we believe it is latter scenario’. We expected ‘the current weakness to extend to 6.8300, possibly 6.8160’. USD subsequently plummeted and quickly exceeded the 6.8160 level as it dropped to a low of 6.8143. From here, we continue to see risk for further USD weakness even though oversold conditions could lead to a few days of consolidation first. Only a break of 6.8800 (‘strong resistance’ level was tat 6.8950 yesterday) would indicate that the current weak phase in USD that started about 2 weeks ago (see annotations in the chart below) has run its course. Until then, the roundnumber support level of 6.8000 is likely beckoning to USD.”

According to the report from Eurostat, in July 2020, a month marked by some relaxation of COVID-19 containment measures in many Member States, industrial producer prices rose, compared with June 2020, by 0.6% in the euro area and by 0.4% in the EU. Economists had expected a 0.5% increase in the euro area.

In June 2020, prices increased by 0.7% in the euro area and by 0.8% in the EU. In July 2020, compared with July 2019, industrial producer prices decreased by 3.3% in the euro area and by 3.0% in the EU.

Industrial producer prices in the euro area in July 2020, compared with June 2020, increased by 2.1% in the energy sector, by 0.4% for durable consumer goods and by 0.1% for intermediate goods, while prices remained stable for capital goods and decreased by 0.2% for non-durable consumer goods. Prices in total industry excluding energy remained stable. In the EU, industrial producer prices increased by 1.7% in the energy sector, by 0.4% for durable consumer goods and by 0.1% for intermediate goods, while prices remained stable for capital goods and decreased by 0.1% for non-durable consumer goods. Prices in total industry excluding energy remained stable.

Industrial producer prices in the euro area in July 2020, compared with July 2019, decreased by 11.6% in the energy sector and by 2.0% for intermediate goods, while prices rose by 0.4% for non-durable consumer goods, by 0.9% for capital goods and by 1.6% for durable consumer goods. Prices in total industry excluding energy decreased by 0.4%. In the EU, industrial producer prices decreased by 11.2% in the energy sector and by 1.8% for intermediate goods, while prices rose by 0.8% for non-durable consumer goods, by 1.1% for capital goods and by 1.7% for durable consumer goods. Prices in total industry excluding energy decreased by 0.3%.

Reuters reports that Japanese Chief Cabinet Secretary Yoshihide Suga declared on Wednesday he would run for the leadership of the ruling Liberal Democratic Party, a race he is heavily favoured to win to become the next prime minister.

Suga, a longtime aide to outgoing Prime Minister Shinzo Abe, said he was entering the race to avoid a political vacuum during the pandemic. Should he win, Suga is widely expected to continue Abe’s policies of fiscal and monetary stimulus.

“I thought deeply as a politician and as somebody who supported the Abe administration what I should do. As a result, I made the decision to stand as a candidate for the leadership of the LDP,” Suga told reporters.

“In this time of national crisis, we cannot permit a political vacuum.”

Abe announced his decision to resign last week, citing poor health. The LDP’s majority in the lower house of parliament will ensure the party’s next leader will succeed him as prime minister.

Suga’s main competitors in the Sept. 14 party vote are a former defence minister, Shigeru Ishiba, and ex-foreign minister Fumio Kishida, but Suga’s position looks strong.

He has secured the backing of five of the LDP’s seven factions, public broadcaster NHK and others reported.

The party decided on Tuesday to hold a slimmed-down election with just members of parliament and three votes from each of the 47 prefectures - an advantage for Suga.

Many party chapters will poll rank-and-file members to decide how to allocate their three votes, but experts say this is unlikely to change the momentum growing for Suga if the members of the five factions back him.

Financial markets also favour Suga, assuming he will continue with the reflationary “Abenomics” strategy aimed at reviving the economy.

The veteran politician has repeatedly talked about the need to quickly bring back tourism to help revitalise Japan’s regional economies, which were hobbled even before the pandemic by ageing, shrinking populations.

On Wednesday, he underscored that theme again, saying he would push forward Abenomics policies and work to help struggling regions.

FXStreet reports that USD/CHF has established a near-term bull “wedge” after holding psychological support at 0.9000, opening the door to a correction higher to 0.9162 initially, the Credit Suisse analyst team reports.

“USD/CHF has held key psychological support at 0.9000 with RSI momentum not confirming the latest move lower and the subsequent sharp recovery has seen a bull ‘wedge’ established to raise the prospect of a correction higher.” 

“Resistance for a recovery is seen at 0.9123/28 initially, above which should add weight to this view with resistance then seen next at 0.9140, then 0.9162. Bigger picture we see scope for a move to the August high and 55-day average at 0.9241/63, but with this expected to cap the recovery and for the broader ear trend to then resume.”

“Support is seen at 0.9055, below which can see a fall back to 0.9000/0.8999. An eventual move below here can clear the way for a test of support at 0.8875.”

Bloomberg reports that following signs of a downturn in previous weeks, the latest readings show activity stabilizing across most advanced economies, though still some way from pre-Covid levels, according to Bloomberg Economics gauges that integrate high-frequency data such as credit-card use, travel and location information. Germany and Japan remain at the forefront of the recovery, while activity in France, Italy and Spain has edged down slightly on concern about fresh outbreaks, and the U.K., Canada and the U.S. remain laggards. With activity at just two-thirds of pre-virus levels, the U.S. is the worst performing of the advanced economies BE is tracking.

FXStreet reports that during August the yen strengthened versus the US dollar from 105.67 to 105.26. Economists at MUFG Bank see further JPY strength ahead and think the USD/JPY will break below the 100 level.

“One anchor for the yen we believe is the evidence of a credibility gap when it comes to the prospect of lifting inflation. The 5yr/5yr inflation swap rate for the US increased to the highest level since February before the COVID crisis. In Japan there has been far less evidence of that with inflation expectations remaining at much lower levels post-COVID. Adding to this uncertainty in August was the confirmation of the resignation of PM Abe for health reasons. A leadership election will take place in September and the candidates vying to take over signal in our opinion little prospect of any change in policy direction any time soon.”

“The key aspect of policy in Japan is of course the agreement between the government and the central bank to work together. Governor Kuroda will be in his position until April 2023 and we see no logical reason why an incoming government would want to threaten the relationship with the BoJ. Still, with the markets already showing scepticism over achieving higher inflation, the speculation over Abenomics is unhelpful and will only reinforce doubts over future inflation.”

“We believe it is only a matter of time before USD/JPY breaks back below the 100.00-level. The global pandemic will have notable repercussions for keeping global yields lower for longer and increased uncertainty will likely reduce FDI outflows and encourage investors to hedge more of their foreign currency exposures.”

Reuters reports that the economy's return to pre-pandemic levels will take longer than generally anticipated, the chief of Deutsche Bank warned on Wednesday.

The grim outlook from one of Germany's top bankers comes as many countries in Europe and beyond see rising coronavirus infection rates and governments grapple with how to respond.

Chief Executive Officer Christian Sewing forecast that the economy would not return to normal this year or next year, and that many sectors will be running at 70%-90% capacity, with "serious consequences".

"Many companies will have to adjust to this and manage to be profitable with longer-term lower revenues," Sewing said at a banking conference.

FXStreet reports that hurricane Marco and Laura came and went, and oil prices went back into consolidation. Brent Oil is stable around the $46 level but Howie Lee, an economist at OCBC Bank, expects the black gold to hit $50 by the end of 2020.

“The twin hurricanes largely avoided the key ports and refineries in Texas. Prices at the back end have rallied with the hurricanes but do not appear to have corrected as much as the front end of the curve.”

“US crude oil inventories declined for the fifth consecutive week; implied gasoline demand is now within 2.5% of its pre-coronavirus levels; and China diesel demand in July rose its highest since Feb 2018, notwithstanding seasonal effects.” 

“Near-term, consolidation looks like it might continue. Further out, we remain bullish on crude oil, with the view that Brent may hit $50/bbl by end-2020.”

The US dollar was slightly higher against the euro and yen in today's Asian trading.

"This reversal was not unexpected, given the mixed data for the euro area," said BK Asset Management analyst Kathy lien.

Data from the EU statistics Office on Tuesday showed a 0.2% year-on-year decline in consumer prices in August. Experts on average predicted growth of 0.2%. In addition, unemployment in the 19 countries of the Euro zone in July 2020 increased to 7.9% - the highest level since November 2018.

Retail sales in Germany in July 2020 decreased by 0.9% compared to the previous month, according to data from the country's Federal statistical Agency (Destatis). Analysts had expected an increase of 0.5%.

The ICE index, which tracks the dynamics of the US dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose by 0.05%.

The index of business activity in the US manufacturing sector in August 2020 rose to the highest since November 2018 and exceeded analysts ' expectations, the Institute for supply management (ISM) said on Tuesday.

The Australian dollar fell by 0.25% against the US dollar. The Australian economy in the 2nd quarter fell by 7% compared to the 1st quarter, according to data from the Bureau of statistics of the country. The decline in GDP was observed for the second quarter in a row, for the previous 3 months it was 0.3%. Thus, the Australian economy entered a recession for the first time in 30 years.

FXStreet reports that the correction in the USD sparked by the late August publication of the minutes of the Fed’s latest policy meeting illustrated that the USD was ripe for a correction and the sensitivity of the USD to how the Fed may or may not fine tune its policy in the months ahead. However, economists at Rabobank expect the greenback to be in demand due to its safe-haven appeal and forecast EUR/USD at 1.16 in three months.

“While the EUR’s fundamentals have been boosted by signs of improved political coordination and by a perception that the Covid-19 crisis may have been better handled in the EU than in the US, this year’s drop in real yields in the US has been a key factor associated with the plunge in the value of the USD in recent months.”

“Looking ahead, yields will continue to be influenced by usual factors such as the growth outlook, new issuance of debt and demand for safe-haven assets in addition to inflation. Clearly, how the outlook for inflation pans out will have a significant implication for asset prices in the coming years. That said, although the USD’s weakness in recent months can be explained by changes in fundamental factors, we would argue that it is the intrinsic qualities of the USD rather than those of the US economy that define its safe-haven appeal. These qualities are likely to ensure that the USD will continue to be a strong recipient of safe-haven flows on any further sharp pullbacks in risk appetite.” 

“We look for EUR/USD to correct lower towards 1.16 on a three-month view.”

Bloomberg reports that former Federal Reserve Chair Janet Yellen defended the rate increases executed during her term as head of the U.S. central bank, saying they were not enough to derail the expansion then underway.

“We saw ourselves as having our foot firmly on the gas pedal,” and raising rates represented easing up a bit, Yellen said during an online panel Tuesday hosted by the Brookings Institution. “It was by no means the case that we slammed on the brakes.”

The Fed began raising interest rates off zero in December 2015 when unemployment stood at 5.1% and year-on-year inflation was just 0.3%. When she left office in 2018, the federal funds rate sat in a range of 1.25% to 1.5%.

The Fed last week unveiled a new monetary policy strategy that will take a more relaxed approach toward inflation, which has long run below their 2% target, and allow unemployment to run lower than they previously tolerated.

Shortly before the panel, Fed Governor Lael Brainard said the new framework, had it been in place in 2015 and subsequent years, would have altered the institution’s policy.

The new strategy “would have changed deliberations earlier had all of these factors been well understood,” Brainard said.

Yellen pushed back against that conclusion. “It would have made a small difference,” she said.

According to the report from Nationwide Building Society, UK annual house price growth picked up to 3.7% in August, to £224,123.

Prices up 2% month-on-month, after taking account of seasonal factors, as momentum builds

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “UK house prices rose by 2.0% in August, after taking account of seasonal effects, following a 1.8% rise in July. This is the highest monthly rise since February 2004 (2.7%). As a result, annual house price growth accelerated to 3.7%, from 1.5% last month.

“House prices have now reversed the losses recorded in May and June and are at a new all-time high. The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions. This rebound reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing. Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown. Our own research, conducted in May (link), indicated that around 15% of people surveyed were considering moving as a result of lockdown. Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this point. These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward".

EUR/USD

Resistance levels (open interest**, contracts)

$1.2012 (3602)

$1.1974 (2515)

$1.1946 (2496)

Price at time of writing this review: $1.1903

Support levels (open interest**, contracts):

$1.1867 (907)

$1.1835 (1239)

$1.1794 (1253)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date September, 4 is 99064 contracts (according to data from September, 1) with the maximum number of contracts with strike price $1,0500 (5007);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3514 (937)

$1.3443 (1012)

$1.3403 (1371)

Price at time of writing this review: $1.3371

Support levels (open interest**, contracts):

$1.3234 (150)

$1.3148 (103)

$1.3099 (598)

Comments:

- Overall open interest on the CALL options with the expiration date September, 4 is 20021 contracts, with the maximum number of contracts with strike price $1,3800 (2994);

- Overall open interest on the PUT options with the expiration date September, 4 is 19366 contracts, with the maximum number of contracts with strike price $1,3000 (1567);

- The ratio of PUT/CALL was 0.97 versus 0.94 from the previous trading day according to data from September, 1

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

According to provisional data from Destatis, turnover in retail trade in July 2020 was in real terms 0.9% and in nominal terms 0.3% (both adjusted for calendar and seasonal influences) lower than in June 2020. Economists had expected a 0.5% increase in real terms.

In July 2020, the turnover in retail rose by 4.2% (real) and 5.6% (nominal) compared to the same month of the previous year, while both months, June 2019 and June 2020, had 27 days of sale. In comparison to February 2020, the month before the outbreak of Covid-19 in Germany, the turnover in July 2020 was 0.9% higher.

Retail sales of food, beverages and tobacco were in real terms 4.2% and 7.2% in nominal terms higher in July 2020 than in July 2019. Turnover in retail sale in supermarkets, self-service department shops and hypermarkets were in real terms 4.6% and in nominal terms 7.6% higher than in the same month last year. In addition, the retail sale of food, beverages and tobacco in specialised stores generated in real terms 0.4% and in nominal terms 3.9% more turnover. This is the first time since the beginning of the pandemic that the retail sale of food, beverages and tobacco in specialised stores had a higher turnover in real terms.

In the non-food retail sector, sales in July 2020 rose in real terms by 4.4% and in nominal terms by 5.1% compared with the same month previous year. The largest increase in turnover compared with the previous year's month in real terms by 15.6% and 16.6% in nominal terms was achieved by the internet and mail order business. Trade in furniture, household appliances and building materials also increased significantly, with a real plus of 12.9%. Trade in textiles, clothing, shoes and leather goods as well as the retail trade in various types of goods (e.g. department stores) did not yet return to the previous year's level, with real growth of -8.0% and -14.5% respectively over the previous year.