CFD Markets News and Forecasts — 13-08-2020

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FXStreet reports that analysts at Wells Fargo point out Mexico is still struggling with COVID spread. They see few signs of a meaningful fiscal stimulus on the way and consider the Mexican economy may not see as much of a rebound in economic growth during the second half of the year. 

“Unfortunately, not all economies are on the upswing. Mexico’s economy remains in a difficult place as the country grapples with its still-robust spread of COVID-19. Industrial production in Mexico was down 16.7% year-over-year in June, compared to 10.8% in the United States. And in July, the manufacturing PMI for Mexico registered a 40.4 reading, up just a bit from 38.6 in June and still firmly in contractionary territory.”

“We have long maintained that countries with the fiscal capacity, capital markets access and political will to float their economies through the COVID-19 would have a major leg up, and Mexico’s experience thus far is a prime example of how a country without

these ingredients may struggle mightily when dealing with the economic fallout from COVID-19.”

“Our latest forecast has downgraded real GDP growth for Mexico for both 2020 and 2021. If realized, Mexican real GDP would contract in three consecutive years from 2019-2021.”

FXStreet reports that Lee Sue Ann, Economist at UOB Group, sees the RBNZ clinging to its loose stance when comes to monetary conditions.

“At its latest monetary policy, the Reserve Bank of New Zealand (RBNZ) decided to expand its quantitative easing (QE) program. The central bank increased its Large Scale Asset Programme (LSAP) to as much as NZD100bn from NZD60bn, and extended it until June 2022. The official cash rate (OCR) remained at the record-low of 0.25%, but the RBNZ said it is open to cutting interest rates further, including taking them negative.”

“Today’s decision to expand QE was in line with our expectations, except that we were expecting QE to be expanded to a cap of NZD90bn… In fact, the case for further significant monetary easing is clear, as inflation is set to tumble and unemployment climbing higher.”

“The RBNZ will want to keep its options open. In this regard, a negative OCR and foreign asset purchases will remain options on the table. On the former, we recognize how this will have a negative impact on bank margins. For now, we do not see any cuts to the OCR for the remainder of the year. On QE, we currently think a NZGB-centric programme will remain the main monetary policy tool, but the RBNZ may consider expanding the programme to include other assets (including foreign assets). This could help cap excessive gains in the New Zealand dollar.”

• We are not near the limits of the borrowing power of U.S.
• This is the time to borrow with 10-year yields down at 0.6%
• Negotiations on coronavirus aid are at a stalemate
• I wouldn't mind a small, interim stimulus package
• Jobless claims are a good sign
• Things are trending in the right direction
• Different sectors are showing significant recoveries

FXStreet notes that EUR/JPY has seen a further impressive acceleration with the 50% retracement of the 2018/2020 bear trend at 125.94 removed with ease. Economists at Credit Suisse stay biased higher with the next meaningful resistance seen at the 127.52/72 2019 high.

“EUR/JPY has seen a further impressive acceleration higher after successfully holding a cluster of supports at 124.34/24, including its accelerated 13-day average, now at 124.87 and resistance at 125.94 has been cleared with ease – the 50% retracement of the 2018/2020 downtrend. This suggests the trend should stay directly higher with resistance seen at the April 2019 high at 126.84 next, with tougher resistance then seen next at 127.52/72 – the 2019 high and potential downtrend from late 2014.” 

“We would expect the 2019 high at 1.27.72 to prove a tougher initial barrier and would expect an initial pullback from here. A direct break though can see resistance next at the 61.8% retracement of the fall from 2018 at 128.67.” 

“Near-term support moves to 125.76, then 125.51, the 124.95/87 which ideally holds to keep the immediate risk higher A break can see a setback to 124.50/33, but with fresh buyers expected here.”

U.S. stock-index futures traded mixed on Thursday as the release of the better-than-expected jobless claims report was not enough to outweigh lingering uncertainty over a second coronavirus stimulus bill.

Global Stocks:

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

Deere (DE) downgraded to Underweight from Neutral at JP Morgan; target raised to $160

The Labor Department reported on Thursday the import-price index, measuring the cost of goods ranging from Canadian oil to Chinese electronics, rose 0.7 percent m-o-m in July, following an unrevised 1.4 percent m-o-m gain in June. Economists had expected prices to advance 0.6 percent m-o-m last month.

According to the report, the July advance was driven by higher fuel prices (+6.9 percent m-o-m), while nonfuel prices (+0.2 percent m-o-m) increased only slightly.

Over the 12-month period ended in July, import prices fell 3.3 percent, due to a tumble in fuel prices (-32.8 percent), while nonfuel prices were unchanged (0.0 percent).

Meanwhile, the price index for U.S. exports increased 0.8 percent m-o-m in July, following a revised 1.2 percent m-o-m gain in the previous month (originally a 1.4 percent m-o-m rise).

Prices for both nonagricultural (+0.7 percent m-o-m) and agricultural (+1.5 percent m-o-m) exports contributed to the July increase.

Over the past 12 months, the price index for exports plunged 4.4 percent, reflecting drops in prices of both agricultural (-3.3 percent) and nonagricultural (-4.6 percent) exports.

The data from the Labor Department revealed on Thursday the number of applications for unemployment fell below 1 million for the first time since March 21 last week, signaling that the U.S. labor market is continuing its recovery from the coronavirus pandemic.

According to the report, the initial claims for unemployment benefits totaled 963,000 for the week ended August 8. That brought the number of job losses over the past twenty-one weeks (since the U.S. went into coronavirus lockdown in mid-March) to near 56.3 million.

Economists had expected 1,120,000 new claims last week.

Claims for the prior week were revised upwardly to 1,191,000 from the initial estimate of 1,186,000.

Meanwhile, the four-week moving average of claims fell to 1,252,750 from an upwardly revised 1,339,000 in the previous week.

Continuing claims decreased to 15,486,000 million from a downwardly revised 16,090,000 in the previous week.

GBP strengthened against its major counterparts in the European session on Thursday as investors shrugged off the shocking UK's Q2 GDP figures, which were released the day before and showed the British economy (-20.4% q/q) suffered the worst slump in Europe in the second quarter. The broad USD weakness and improved risk sentiment also underpinned the pound. 

However, market participants remained cautious ahead of the next round of the UK-EU trade negotiations, set for 18-21 August. Britain's chief Brexit negotiator David Frost stated today that the UK wants a deal with at its core a free trade agreement like the one the EU has with Canada. He also suggested that the agreement with the EU can be reached in September. 

FXStreet reports that the S&P 500 Index has quickly and abruptly negated Tuesday’s bearish “reversal day”, turning the spotlight on the 3394 record high. Whilst momentum is starting to slow, economists at Credit Suisse see scope for a move to test the 3432/36 mark, which is expected to cap for a consolidation phase.

“Whilst we continue to see signs upward momentum is slowing and the market is now above what we see as its ‘typical’ extreme (10% above its 200- day average, currently at 3368) we look for a challenge on the 3394 record high, with scope for an overshoot to potential trend resistance, today seen at 3412, which we would look to cap at first.” 

“Bigger picture, our ‘ideal’ roadmap would be for a test of Fibonacci projection resistance at 3432/36, but with this then capping for a consolidation/corrective phase.” 

“Support at 3371 needs to hold to keep the immediate risk higher. Below can see a retreat back to the beginning of the price gap from yesterday morning at 3355. Overall though key near-term support is seen at the recent low and 13-day average at 3326/12, and only a close below here would suggest a correction lower is finally underway.”

• Democrats' demand for election funding in Covid-19 aid bill is also an issue that is holding up talks

FXStreet notes that the Nikkei surged higher on Thursday, ending the session up 1.78% and above the 23185 range high. This completes the bull ‘triangle’ continuation pattern, which signals a move to 24090/115 initially, economists at Credit Suisse inform.

“We now look for a move towards medium-term resistance, seen starting at 23970/24000, the potential downtrend from the 2018 high and stretching up to 24090/115, which is the 2019/20 highs. It’s worth highlighting though that the ‘measured triangle objective’ points even to an eventual breakout above here to test the 2018 high at 24450.”

“Reinforcing the breakout is the fact that daily MACD has now crossed higher for first time since June.”

“We now ideally look for the market to hold above 23185/10 to keep the risks directly higher, however only a move below 22670 would negate the ‘triangle’ to leave the market trapped within its range again, which is not our base case.”

Francesco Pesole, the FX Strategist at ING, notes that the good performance of equities in spite of the stalemate in US relief package negotiations, virus data continuing to raise second wave concerns and a fragile geopolitical environment is likely to be the story of the week in global markets. 

"The S&P500 briefly touched record highs yesterday, confirming the ability of equities to quickly shrug off negative drivers to sentiment. This remains a key point in favour of the USD bearish argument. The greenback today is indeed showing weakness across the board as Japanese equities are following yesterday’s US gains and providing support to global sentiment."

"The economic calendar will not offer catalysts today apart from the weekly jobless claims report. Initial claims are expected to nudge lower from 1,186k to 1,100k, according to consensus. The coincidental end of the US$600/week Fed payment may have discouraged fresh filings and this could favour a lower figure. Still, US politics is likely to remain at the center of investors’ radars heading to the weekend: while the announcement of Kamala Harris as Joe Biden’s running mate has shifted some attention from US stimulus negotiations, the latter remains a key sticking point to endorse market reflation hopes."

"Despite Secretary Mnuchin reportedly reaching out to Democrat Speaker Pelosi yesterday to take some steps towards resolving the standoff, the two parts still appear very far apart and a breakthrough is hardly imminent. The question now is whether this will be enough to prompt a slowdown/correction in the stock rally. Latest evidence suggests investors may turn a blind eye to the matter, and the balance of risks remains tilted to the downside for the USD today as well."

• We are not looking for a special agreement; we want a deal with at its core a free trade agreement like the one the EU has with Canada
• We are not looking for anything which threatens the integrity of the EU's single market
• UK sovereignty over our laws, courts and fishing waters is not up for discussion; we will not accept anything, which compromises it

Next round of UK-EU negotiations is scheduled for 18-21 August

Lyft (LYFT) reported Q2 FY 2020 loss of $0.86 per share (versus -$0.68 per share in Q2 FY 2019), better than analysts’ consensus estimate of -$0.97 per share.

The company’s quarterly revenues amounted to $0.339 bln (-60.9% y/y), missing analysts’ consensus estimate of $0.349 bln.

LYFT fell to $30.49 (-0.10%) in pre-market trading.

Cisco Systems (CSCO) reported Q4 FY 2020 earnings of $0.80 per share (versus $0.83 per share in Q4 FY 2019), beating analysts’ consensus estimate of $0.74 per share.

The company’s quarterly revenues amounted to $12.154 bln (-9.5% y/y), roughly in line with analysts’ consensus estimate of $12.087 bln.

The company also issued downside guidance for Q1 FY 2021, projecting EPS of $0.69-0.71 versus analysts’ consensus estimate of $0.76 and revenues declining 9-11% y/y to ~$11.71-11.98 bln versus analysts’ consensus estimate of $12.29 bln.

CSCO fell to $45.09 (-6.26%) in pre-market trading.

FXStreet notes that the pound corrected modestly lower following the release of yesterday’s UK GDP report for Q2. EUR/GBP moved back above the 0.90 level and hit an intraday high of 0.9053 while cable fell back within touching distance of the 1.30 level. Economists at MUFG Bank foresee a bumpy road ahead for sterling.

“The GDP report confirmed that the UK economy has been one of the hardest hit by the negative COVID shock as it contracted by a record -20.4% in Q2. It was marginally better than the BoE’s forecast for a contraction of -21% although that provides little comfort. More encouraging was the stronger than expected recovery in recent months. The latest monthly GDP report revealed that activity started to rebound more robustly by 8.7% in June following an upwardly revised expansion of 2.4% in May. It still leaves the level of GDP 17.2% below its pre-COVID peak.”

“Lockdown measures remained in place for longer in the UK than in many advanced economies, but have eased back more notably in recent months which should support a strong rebound in Q3. However, the expected lagged deterioration in the labour market when the job furlough scheme ends and uncertainty over the path of the virus mean that the recovery will be uneven and protracted.” 

“In addition, the risk of further Brexit uncertainty poses downside risks to the recovery later this year. In these circumstances, we continue to maintain a cautious outlook for the pound even after the BoE’s decision to dampen negative rate expectations which has helped ease downside risks in the near-term.”

FXStreet reports that USD/JPY has been capped as expected at its 55-day average and 38.2% retracement of the fall from March at 107.01/06 and analysts at Credit Suisse look for the risk to turn lower. The pair remains depressed near 106.70-75 area, snapping four consecutive days of the winning streak.

“We continue to look for the recovery to stall here and for the immediate risk to shift lower again. Support is seen at 106.43 initially, then 106.25/20, which we look to try and hold at first. Below 105.93 though is needed to ease the immediate upside bias with support then seen next at 105.70, with a break here needed for a retest of 105.33/27.” 

“Should strength extend above 107.06 we see resistance next at the late July high at 107.53, then the 50% retracement at 107.95, with more important resistance seen not far above at the 200-day average and downtrend at 108.13/17.”

RTTNews reports that the French employment rate declined drastically in the second quarter to the lowest since early 2017 as the lockdown to contain the spread of the coronavirus dampened job creation, the statistical office Insee said Thursday.

The employment rate fell 1.6 points to 64.4 percent in the second quarter, the lowest since 2017. Employment among youth logged a marked fall of 2.9 points to reach 26.6 percent, which was the lowest since the records began in 1975.

At the same time, the jobless rate also declined in the second quarter, to the lowest since 1983 as the number of people looking for work decreased during the period of lockdown, the Insee reported.

The jobless rate fell to 7.1 percent in the second quarter from 7.8 percent in the first quarter. This was the lowest since the second quarter of 1983 when it was 7 percent.

The number of ILO unemployed people decreased by 271,000 to 2.0 million people.

The unemployment rate among youth aged between 15 and 24 rose to 21 percent from 19.2 percent in the preceding period.

Among inactive people as defined by the ILO, 2.5 millions wished to work without being considered as unemployed according to the ILO definition: they made up the halo of unemployment, the Insee said.

FXStreet reports that OPEC supply is rising just as demand growth hits some headwinds. Brent Oil is trading above the $45 but strategists at ANZ Bank believe the black gold will be unable to maintain such level in this quarter.

“Rising supply risks overwhelming the fragile recovery in oil demand. The sharp rebound in demand has seen prices recover and producers grow in confidence that the market can absorb more crude. However, high-frequency data suggest the recent surge in COVID-19 cases is slowing demand growth.” 

“The easing of restrictions in many parts of the US and Europe have slowed amid a pick-up in infections. Overall, we estimate demand has risen 8mb/d over the past four months to 88mb/d. However, this is still 13mb/d below this time last year. In the second half of the year, we expect growth in crude oil demand to fall. This will see global demand push above 90mb/d in Q4 2020.”

“The rebound in prices over the past few months has emboldened OPEC to stick to its supply agreement by increasing output by 2mb/d in August. Whether the market can withstand the additional output will depend demand rising in Asia. Weak margins and high inventories are threatening import demand from major consumers such as China and India. As such, we struggle to see Brent crude remaining above $45/bbl in Q3.”

FXStreet reports that FX Strategists at UOB Group believe USD/CNH could embark into a deeper retracement if 6.9300 is cleared in the near-term.

24-hour view: “Our expectation for the recovery in USD to ‘extend higher’ was wrong as it dropped to an overnight low of 6.9315 before ending the day on a soft note at 6.9325 (-0.14%). Downward momentum has improved but not by much and from here, USD could weaken towards 6.9210. At this stage, the odds for a move to the next support at 6.9050 are not high. Resistance is at 6.9400 followed by 6.9500.”

Next 1-3 weeks: “On Tuesday (11 Aug, spot at 6.9620), we highlighted that ‘while USD could still weaken further out, for the next 1 to 2 weeks, USD is likely to consolidate and trade sideways within a 6.9300/6.9800 range’. USD is currently holding just above 6.9300 and if there is a NY closing below this relatively strong support level, it would indicate the start of a period of sustained weakness in USD that could lead to a move to 6.9050, possibly even to 6.8850. At this stage, the odds for such a scenario are quite high and only a move back above 6.9700 within these few days would indicate that USD is still trading in a consolidation phase.”

Reuters reports that almost one in three businesses in the United Kingdom has operating costs that are greater or equal to their turnover, Britain's statistics office said on Thursday in an update on the impact of the coronavirus pandemic on the economy.

Companies in the arts, entertainment and recreation sector reported the largest percentage of businesses with operating costs exceeding turnover at 42%, followed by the accommodation and food service activities sector at 29%.

Manufacturing and real estate reported the largest percentage of businesses indicating that turnover exceeded operating costs, at 54% and 53% respectively, the Office for National Statistics said.

FXStreet reports that a break of 1.2950 would signal a deeper correction is in play potentially targeting a reversal back to 1.26/1.28 – a great buy opportunity ahead of FOMC meeting on 15/16 September, according to economists at Westpac.

“The eye-popping 20.4% collapse in UK GDP emphasises the vulnerabilities in the UK economy, especially if COVID case counts continue rising across Europe.” 

“GBP looks to be in a technical holding pattern as what looks like a short-term USD correction evolves through August. We still tend to see that move developing into an opportunity to sell USD into the Sep 15/16 FOMC outcome. However, it is quite possible that the correction could go further.” 

“For now, key support at 1.3020 and then 1.2950 remain intact; but a break of that lower level would signal a deeper correction is in play potentially targeting a reversal back to 1.26/1.28. We would use such a dip as an opportunity to buy ahead of the Fed’s possible move to average inflation targeting.”

Reuters reports that the International Energy Agency (IEA) cut its 2020 oil demand forecast on Thursday, warning that reduced air travel due to the coronavirus pandemic would lower global oil demand this year by 8.1 million barrels per day (bpd).

The Paris-based IEA slashed its 2020 outlook by 140,000 bpd to 91.9 million bpd, its first downgrade in several months.

"Jet fuel demand remains the major source of weakness," the IEA said in its monthly report.

"In April the number of aviation kilometres travelled was nearly 80% down on last year and in July the deficit was still 67% ... The aviation and road transport sectors, both essential components of oil consumption, are continuing to struggle."

The agency said that while supply exceeded demand in June, uncertainty over future demand along with increased output by top producers means re-balancing oil markets will be "delicate".

Oil production was recovering in the United States, Canada and Brazil at the same time producers from the Organization of the Petroleum Exporting Countries and allies such as Russia, a group dubbed OPEC+, were easing their output cuts, the IEA said.

"However, if countries that have not hitherto complied with their quotas cut back by enough to bring them into compliance, global oil supply would not necessarily increase significantly," the IEA added.

eFXdata reports that ING Research discusses EUR/GBP outlook and sees a scope for a gradual upside through 0.92 in 1-3 months.

"GBP performed well in July. The EUR trade-weighted index rallied 3-4% after the EU Recovery Fund was agreed – but GBP matched those gains. Driving that move was probably a market underweight GBP, but also the UK economy opening up. In fact the BoE now states the economy recovered more quickly than expected," ING notes. 

"Importantly the BoE assumes that the UK secures a comprehensive free trade deal ahead of year-end. We concur, although expect tense discussions to weigh on GBP into October.

We note that the global investor community remains very underweight UK equities. Yet we struggle to see the case for rerating the UK and instead see EUR/GBP heading to 0.92," ING adds. 

FXStreet reports that resilience of industrial commodities and RBA reluctance to highlight new policy options plus underlying USD softness suggest a retest of tricky 0.7240/45 area for the aussie, per Westpac.

“Risk appetite has held firm through many weeks of lousy US Covid-19 data which only seem to reaffirm expectations of yet more Fed loosening, keeping equity portfolio weightings elevated. This should remain the case in the week ahead.” 

“The domestic mood continues to cool, with Australia’s whole eastern seaboard rattled by Victoria’s lockdown judging by the Aug consumer sentiment survey. It is yet to have much impact on national employment, with July showing a firmer than expected 115k jump in jobs.” 

“RBA Gov Lowe should be pressed on the faltering Q3 growth story but last week’s SoMP stuck to an upbeat 2021 outlook so no hints of policy loosening are likely. Along with iron ore >$120/t, AUD/USD should find buyers on dips to 0.7100/20 and have another go at breaking 0.7245.”

During today's Asian trading, the US dollar declined against most of the world's currencies.

The U.S. Dollar index, which shows the value of the US dollar against six major world currencies, fell 0.30% from the previous day.

The US state budget deficit in July 2020 fell to $63 billion, compared with $120 billion in the same month last year and $864.1 billion in June, according to data from the country's Ministry of Finance. The decrease in the deficit is due to a significant increase in budget revenues due to the postponement of the 2019 tax payment deadline from April 15 to July 15 due to the COVID-19 pandemic.

The day before, the US Department of labor reported that inflation in the country remained at 0.6% in July. In annual terms, consumer prices rose 1% after rising 0.6% in June. Experts on average predicted an increase in consumer prices in the US in July by 0.3% compared to the previous month and by 0.8% in annual terms. On Thursday, traders expect the publication of data on the number of Americans who first applied for unemployment benefits.

Australia's seasonally adjusted unemployment rate rose to 7.5% in July from 7.4% in the previous month, the Australian Bureau of statistics said. Thus, the indicator reached its highest level since November 1998. Analysts on average expected a larger increase in unemployment in the country - up to 7.8%.

FXStreet reports that Bart Melek, Head of Commodity Strategy at TD Securities, reviews the last oil inventory. Stock reduction along with demand recovery draws an optimistic outlook for the black gold. WTI, which trades at $42.66, -0.3% on a day, could test the recent highs at $45.

“Crude oil stocks once again plunged a much larger-than-expected 4.5 million bbls (consensus was calling for a 2.2 million decline). Also on the bullish side, imports fell 389K b/d, with exports growing 324k b/ d and production was down by a very large 300K b/d to just 10.7 million b/d. Furthermore, product demand continued to increase, rising 1.457 million b/d.”

“On balance, the report is modestly positive. With US demand likely continuing to recover as the federal government adds another trillion dollars worth of stimulus, as therapeutics and a vaccine for COVID-19 emerge and the rest of the world slowly opens up, crude oil demand should move on an upward trajectory into 2020. This, along with OPEC+ supply discipline and US shale oil industry weakness suggests that the existing inventory overhang should erode materially over the next four months and beyond.”

“While WTI crude may test recent highs, moving toward resistance just under $45/bbl, it is unlikely to move into a significantly higher trading range anytime soon. There will continue to be demand risks due to COVID-19 and OPEC+ will likely match supply to growing demand.”

Bloomberg reports that the standoff in Washington over the flow of stimulus money to state and local municipal governments is adding more risk to U.S. credit markets, according to Morgan Stanley Wealth Management.

State and local government budgets have been severely damaged by the Covid-19 pandemic due to lost tax revenue and rapidly rising expenses, and that may have ramifications for investors, Morgan Stanley Wealth Management strategists Scott Helfstein and Monica Guerra wrote in a note Tuesday.

“Though municipal budgets are strained, muni bond yields have reached historic lows due to constructive seasonals and risk-off sentiment,” the strategists wrote. “Failure to secure aid for state and local governments presents downside risk for bonds of low credit quality at a time when investors are willing to move down the credit curve.”

A $600 enhanced weekly benefit for unemployment insurance expired at the end of July, and negotiations between Congress and the Trump Administration haven’t progressed much. President Trump announced an executive order that would offer $400 a week in jobless benefits, with states covering 25% of the cost, as one of several moves that he may lack the authority to make unilaterally.

Another area flagged by Morgan Stanley Wealth was in student loans, where deferral of principal and interest payments was automatically extended to Dec. 31 for some federal loans.

“Those with private loans get no reprieve from payment due on principal and interest,” the strategists said. “Thus, we believe that securities backed by private student loans with speculative grade credit quality and tranches with few enhancements may experience pressure.”

FXStreet reports that EUR/USD is expected to keep navigating within the 1.1660-1.1880 for the time being, according to FX Strategists at UOB Group.

24-hour view: “Yesterday, we held the view that EUR ‘is under mild downward pressure and could weaken to 1.1700’. However, after drifting to a low of 1.1709, EUR staged a surprisingly rapid rebound and touched an overnight high of 1.1814. Upward momentum has improved, albeit not by much. From here, the rebound in EUR has room to extend higher towards 1.1835. For today, a move beyond the major resistance at 1.1880 would come as a surprise. Support is at 1.1770 followed by 1.1740.”

Next 1-3 weeks: “There is not much to add to our update from Tuesday (11 Aug, spot at 1.1740). As highlighted, while EUR has likely formed a short-term top at 1.1915, any weakness in EUR is likely to be slow and is viewed as part of a broad 1.1600/1.1880 range. EUR traded in a relatively quiet manner over the past couple of days and for now, we continue to hold the same view wherein EUR is in a consolidation phase and is likely to trade sideways, albeit within a narrower range of 1.1660/1.1880 range.”

According to the report from Federal Statistical Office (Destatis), the inflation rate in Germany, measured as the year-on-year change in the consumer price index, stood at -0.1% in July 2020. This means that the inflation rate declined in July 2020 (June 2020: +0.9%). Destatis also reports that consumer prices decreased by 0.5% compared with June 2020.

The prices of goods (total) decreased by 1.4% from July 2019 to July 2020. The value added tax cut was probably one of the causes. At -6.7%, the fall of energy prices accelerated slightly year on year (June 2020: -6.2%) although oil prices are on the rise again in the world market. A price decline was recorded especially for heating oil (-31.3%) and motor fuels (-12.9%). Electricity prices rose by merely 2.1% (June 2020: +4.1%). Food prices were up by 1.2% compared with a year earlier, with the price increase slowing markedly as well (June 2020: +4.4%). However, above-average price increases were again recorded for fruit (+7.8%), meat and meat products (+5.4%), while the prices of edible fats and oils were down (-3.4%). Owing, among others, to the VAT reduction, there were falling prices in other groups of goods as well, for example clothing and footwear (-1.7%) and durable consumer goods (-1.0%). There were considerable price rises for tobacco products (+6.6%), which are exempt from the VAT cut.

The year-on-year decrease in energy product prices continued to have a downward effect on the inflation rate. Excluding energy product prices, the inflation rate would have been +0.8% in July 2020; excluding the prices of energy products and food, it would have been +0.7%.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1949 (2768)

$1.1915 (2361)

$1.1886 (2387)

Price at time of writing this review: $1.1811

Support levels (open interest**, contracts):

$1.1744 (265)

$1.1727 (1133)

$1.1707 (587)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date September, 4 is 86782 contracts (according to data from August, 12) with the maximum number of contracts with strike price $1,0500 (5007);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3243 (984)

$1.3174 (840)

$1.3120 (1510)

Price at time of writing this review: $1.3077

Support levels (open interest**, contracts):

$1.2955 (503)

$1.2909 (1371)

$1.2847 (1365)

Comments:

- Overall open interest on the CALL options with the expiration date September, 4 is 22191 contracts, with the maximum number of contracts with strike price $1,3800 (3396);

- Overall open interest on the PUT options with the expiration date September, 4 is 16704 contracts, with the maximum number of contracts with strike price $1,3000 (1371);

- The ratio of PUT/CALL was 0.75 versus 0.73 from the previous trading day according to data from August, 12

* - 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.