Tin tức thì trường

• Expects inflation to pick up next year
• Notes greater than usual uncertainty in outlook
• Long-term economic scarring inevitable
• Inflation is likely to fall further in the 2nd half of the year in part due to effects of ongoing weaker demand
• There is a risk unemployment could rise sharply to levels last seen in early 1980s
• Says that reviewing and doing negative rates are "quite different things"
• There is also work underway on other potential instruments available to MPC for example further rounds of QE, credit easing policies and forward guidance

• Main operational challenges relate to policy tools
• MPC has some policy space available in near term
• Precise amount depending in part on prevailing market conditions

Oil Futures: Calm before the storm - Charles Schwab

FXStreet reports that oil futures prices have been trading in a relatively tight price range so far this month with the lead month September futures showing a trading range of less than $3 so far in July. The recent increases in demand may begin to wane as the coronavirus outbreak could cause nations that are seeing rising cases to halt or even pull back on the reopening measures, per Charles Schwab.

“OPEC is expected to reduce its production cuts by about 2 million barrels per day to 7.7 million barrels per day starting August 1. However, OPEC has cautioned that oil demand could fall if the next wave of the coronavirus outbreak is not contained.”

“Looking at the daily chart for September 2020 Crude Oil futures (CLU20), we notice the market forming a rising wedge formation that began in early June. This chart pattern is generally considered a bearish formation but confirmation of a breakdown in prices from the pattern is needed for confirmation.”

“We note a bearish divergence in the 14-day RSI as this momentum indicator has been trending lower despite a moderate up-move in prices overall.”

“The March 6 chart ‘gap’ at 42.49 remains unfilled and looks to be the next major resistance level for the September futures. Chart support is seen at the 50-day moving average, currently near the 34.64 price level.”

FXStreet notes that full compliance by OPEC+ members will limit the increase in output from August. The next Joint Ministerial Monitoring Committee meeting is scheduled on 18 August. Rising COVID-19 case numbers could see another reduction in traffic while refinery margins have yet to recover, suggesting refiners’ demand will stay subdued, per ANZ Bank.

“OPEC+ agreed to reduce its production cuts by 2mb/d to 7.7mb/d from August. Full compliance from other members and its commitment to compensate for higher production in May and June could limit this increase to 1mb/d.”

“Demand recovery will absorb some excess, helping bring the market into balance by Q4 2020.”  

“A resurgence in COVID-19 cases remains a key risk, as renewed lockdowns could undermine the demand recovery.” 

CNBC reports that newly released data published Monday in the medical journal The Lancet revealed that the potential coronavirus vaccine developed by Oxford University with pharmaceutical giant AstraZeneca has produced a strong immune response in a large, early-stage human trial.

The researchers said the vaccine produced both antibodies and killer T-cells to combat the infection. Neutralizing antibodies, which scientists believe is important to gain protection against the virus, were detected in participants after 28 days.

• Climate has changed for the better at EU summit
• Won't give up in opposing idea that single country can control and verify others use of recovery fund

U.S. stock-index futures were mixed on Monday, as worries about rising coronavirus infections kept risk appetite in check.

Global Stocks:

FXStreet notes that risk appetite, rather than oil prices, remains the key driver for oil-related currencies, in the view of economists at HSBC who expect the loonie to debilitate materially in a 12-month horizon.

“On 15 July, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed to ease their crude production cut to 7.7 million barrels per day starting from August through December, from the existing level of 9.7mbpd. Oil prices were a little lower on 16 July, but we believe, weaker oil-related currencies, including the CAD, were likely echoing risk appetite rather than oil prices.”

“We believe there are sufficient medium-term challenges for the CAD that merit an independent bias to weakness in any short-term outlook. Activity measures (such as retail spending and dining at restaurants) show some improvements but remain far below pre-COVID-19 levels. The CAD faces the additional challenge of a highly indebted household sector.  In addition, the risk of sustained economic scarring in the labour market remains. The outlook for business investment is also poor, with capex appetite at its lowest since the global financial crisis and soft employment metrics.”

“We think that the degree of strength in the CAD against the USD since March following the pick-up in risk appetite seems to be misplaced. We expect the CAD to weaken materially against the USD during 2H20 and into 2021.”

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

Starbucks (SBUX) initiated with an Overweight at Wells Fargo; target $92

Facebook (FB) target raised to $305 from $258 at Credit Suisse 

Amazon (AMZN) target raised to $3800 from $3000 at Goldman

Freeport-McMoRan (FCX) downgraded to Equal Weight from Overweight at Barclays; target $14

Travelers (TRV) upgraded to Outperform from Mkt Perform at William Blair

Johnson & Johnson (JNJ) upgraded to Buy from Hold at Independent Research

S&P 500: Key resistance still at 3233/39, upside bias while above 3173 - Credit Suisse

FXStreet reports that according to Credit Suisse, S&P 500 remains capped at its June high at 3233 and further consolidation is seen likely, with supports seen at 3198 initially, then 3173 ideally holding to maintain an immediate upside bias.

“A quiet end to the week for the S&P 500 leaves the immediate outlook finely balanced as the market extends its consolidation beneath the 3233 June high.” 

“Near-term support for the S&P 500 remains seen at the price gap from last Wednesday morning at 3201/3198, below which can see weakness extend back to the 13-day average at 3173. This needs to hold to suggest the overall risk can stay higher in the range. A closing break though can reinforce the broader sideways range with support seen at 3154 next, then 3128, but with removal of 3116/13 needed to mark a top to warn of a more concerted correction lower within this range.” 

“Above 3233/39 remains needed to resolve the range higher to clear the way for a challenge on the bottom of the February ‘pandemic’ gap at 3260. Above here and we see resistance next at 3288.”

EUR rose against most major rivals in the European session on Monday on hopes that the European Union (EU) leaders would break the deadlock over the proposed multibillion-euro recovery fund to help revive the region’s economy hit by the COVID-19 pandemic.

The EU summit, which started on Friday, was originally planned to last two days. Today, however, the EU leaders are to meet for a fourth day to work out details of their regional recovery plan. The meeting is set to resume at 14:00 GMT.

France's president Macron noted that there have been tense moments but things have advanced in the EU summit and a compromise is likely. Meanwhile, Germany's chancellor Merkel said that she is hopeful that an agreement on the recovery fund would be possible by today. 

If the EU members agree on a recovery fund that should inject confidence in single currency.

In addition, market participants received data from the European Central Bank (ECB), which revealed that the Eurozone's current account surplus fell sharply in May. According to the report, the current account surplus fell to EUR8 billion in May from EUR14 billion in April. Primary income declined to EUR5 billion from EUR8 billion a month ago. Meanwhile, the deficit on secondary income widened to EUR18 billion from EUR12 billion.

FXStreet reports that EUR/USD is seen starting the week strongly and remains on course to challenge pivotal resistance from the 1.1495 March high for the year. Whilst this is likely to prove a formidable barrier, analysts at Credit Suisse continue to hold a bias for an eventual break higher to establish a major base and medium-term trend higher.

“We maintain our bullish bias for a challenge on pivotal resistance from the high for the year at 1.1495. Whilst we expect this latter level to remain a formidable barrier, a break higher at any stage would be seen completing a significant medium-term base to mark a more sustained trend higher with resistance next at 1.1571, then the 50% retracement of the fall from 2018 at 1.1596, which we would expect to cap at first for a pullback.”

“Big picture, we suspect we could eventually see the market test its early 2018 point-of-breakdown at 1.2155.”

“Support moves to 1.1412 initially, then 1.1378/70, which we look to try and now hold. A break can see a deeper setback to the uptrend and price support at 1.1337/25, with weakness now not ideally extending back below here.”

• Hopes are there for a compromise but I remain prudent regarding EU summit outcome
• I am starting today with a lot of determination to make progress on EU summit

• Says that framework for agreement is currently in place after the lengthy period of talks over the last few days

FXStreet notes that USD/CHF is posting small gains today, up 0.05% to 0.9390. Although some consolidation is expected at this level, a close below the key support at 0.9380 is on the cards, the Credit Suisse analyst team reports.

“USD/CHF has fallen back to the key support area at 0.9380/63 after failing to follow through on the sharp reversal higher and its bullish ‘reversal day’, which was on the back of the failure to close above 0.9459 as expected. Although a near-term consolidation phase should be allowed for at this point, we look for another attempt the break below this key support in due course.” 

“Beneath 0.9380 on a closing basis would negate the ‘reversal day’ as well as confirm a range breakdown, with support seen next at the 78.6% retracement of the June spike at 0.9337, where fresh buyers are expected at first for a fresh, short term pause.” 

“Resistance is seen initially at 0.9413, then 0.9425/30, above which would ease the immediate downside bias. Removal of here would see 0.9459/70, which ideally caps once more if reach. In contrast, a close above 0.9459/70 today would confirm a reversal from the range bottom.”

• ECB had expected Q2 GDP drop of 13%, now sees contraction "slightly better"
• Hopes that European governments response is proportionate to challenge

July 20

After the Close:

IBM (IBM). Consensus EPS $2.09, Consensus Revenues $17721.13 mln

July 21

Before the Open:

Coca-Cola (KO). Consensus EPS $0.41, Consensus Revenues $7255.90 mln

After the Close:

Snap (SNAP). Consensus EPS -$0.10, Consensus Revenues $442.19 mln

United Airlines (UAL). Consensus EPS -$9.25, Consensus Revenues $1396.16 mln

July 22

After the Close:

Microsoft (MSFT). Consensus EPS $1.38, Consensus Revenues $36543.48 mln

Tesla (TSLA). Consensus EPS -$0.28, Consensus Revenues $5309.94 mln

July 23

Before the Open:

American Airlines (AAL). Consensus EPS -$7.76, Consensus Revenues $1489.45 mln

AT&T (T). Consensus EPS $0.80, Consensus Revenues $40867.50 mln

Dow (DOW). Consensus EPS -$0.23, Consensus Revenues $7959.50 mln

Freeport-McMoRan (FCX). Consensus EPS -$0.02, Consensus Revenues $3057.40 mln

Travelers (TRV). Consensus EPS -$0.20, Consensus Revenues $7137.34 mln

Twitter (TWTR). Consensus EPS -$0.01, Consensus Revenues $703.61 mln

After the Close:

Intel (INTC). Consensus EPS $1.11, Consensus Revenues $18550.85 mln

July 24

Before the Open:

American Express (AXP). Consensus EPS $0.07, Consensus Revenues $8262.48 mln

Honeywell (HON). Consensus EPS $1.24, Consensus Revenues $7279.33 mln

Verizon (VZ). Consensus EPS $1.15, Consensus Revenues $29867.61 mln

FXStreet reports that economist Lee Sue Ann at UOB Group reviewed the latest set of data releases in the UK economy.

“UK’s economy’s expansion was much weaker than expected in May, casting doubt on how fast the country can rebound from the depths of contraction caused by the COVID-19 pandemic. GDP expanded 1.8% m/m in May, short of the 5.5% m/m pace expected, and leaving the economy contracting by almost 20% over the latest three months.”

“Overall, the services sector, which makes up around 80% of the UK’s economic output, grew by just 0.9% m/m in May, following a 19% m/m decline in April.”

“Inflation unexpectedly accelerated in June, pushed higher by the cost of clothing and games. CPI increased 0.6% y/y, following May's four-year low reading of 0.5% y/y. Core CPI, which excludes volatile energy and food prices, picked up to 1.4% y/y, from 1.2% y/y previously.”

“The jobless rate remained unchanged in May at 3.9%, much better than expectation of a surge to 4.7%. The claimant count change showed an unexpected decrease last month… These numbers will be heavily scrutinized next month, as it remains to be seen whether some employers have sought to get themselves ahead of the game regarding giving notice to staff before the furlough pay cliff hits.”

“We believe the latest move by the BOE is unlikely to mark the end of its efforts to counter the economic slump, and we forecast a further extension of GBP100bn by the November meeting. A further option is for the BOE to make changes to the Term Funding Scheme (TFS). This could give lenders access to funding below the Bank rate, assuming they increase lending to businesses (specifically SMEs).”

“The Office for Budget Responsibility (OBR) has predicted that the UK economy would shrink by 12.4% in 2020. Our 2020 GDP forecast stands at -7.6%, but much will depend on how quickly consumer confidence recovers.”

CNBC reports that the economic aftermath of the coronavirus pandemic is likely to worsen when authorities start rolling back relief measures — and banks could experience “far more damage” to their balance sheets, said Piyush Gupta, group chief executive of Singaporean bank DBS.

Speaking to CNBC, Gupta said government stimulus in many countries is helping businesses tide through the current difficult period. But when those measures come to an end, many companies may not survive, he explained.

“If a lot of companies are not able to survive ... you’ll have this million-dollar question of how do you deal with these ‘zombie companies,’” said the CEO.

“Do you keep putting money ... using public finances to support companies or do you let creative destruction happen a la Schumpeter? This is going to be a real challenge particularly in the SME space around the world, I suspect this will be a big, big challenge next year,” he added.

Gupta was referring to a concept popularized by Austrian economist Joseph Schumpeter, which describes the process of dismantling the old to make way for the new and improved.

The CEO said politics and civil society would make it difficult for governments to continue supporting those businesses financially for long periods. That “means that you’ll start seeing a lot more default, which in turn means that you’ll start seeing the problems spill over to the financial sector,” he explained.

For banks, there would be “far more damage” to their balance sheets, said Gupta. But banks globally have also entered the current pandemic-induced crisis on stronger footing and can take on “a lot more pain” compared to the global financial crisis more than a decade ago, he added.

FXStreet reports that after a marathon weekend, press reports suggest a deal on the European recovery fund is fast approaching. Economists at Deutsche Bank expect the market to move on and focus on data divergence between the EU and the US. They forecast EUR/USD at 1.20 in coming months.

“What matters in the near-term is that the market perceives the ECB backstop to be intact and that European break-up risk remains low. The deal achieves both. A strengthening of Italian political stability together with an application for ESM support would be the best case scenario in coming weeks.”

“A European deal is a necessary but not sufficient condition for a stronger euro. But in our view the euro higher trade for coming months is all about divergence and whether European growth outperforms the US plays in coming months, encouraging more portfolio inflows. High-frequency indicators such as restaurant visits suggest that this divergence is accelerating. Our high-frequency equity flow monitor continues to perk up.”

“Bottom line, the market will very quickly shift focus away from the Recovery Fund. As European leaders and market participants attempt to go on a summer holiday, it will be data divergence and portfolio inflows into Europe that drive EUR/USD higher in coming weeks and months. We remain bullish targeting 1.20.”

According to the report from IHS Markit, at 41.5 in July, up from 40.7 in June, the headline seasonally adjusted IHS Markit UK Household Finance Index (HFI) – which measures households’ overall perceptions of financial wellbeing – reached its highest level since March.

While any reading below 50.0 is indicative of an overall squeeze on household finances, the latest figure highlighted a continued turnaround from the eight-and-a-half year low seen in April (index at 34.9). Moreover, the headline index was broadly in line with its long run average of 41.2. 

The phased reopening across parts of the UK economy appears to have been a factor supporting household finances in July, with this leading to a slightly improved situation for income from employment and workplace activity in comparison those recorded during the lockdown period. However, households' financial outlook for the next 12 months was one of the few survey measures to worsen since June, with this index dipping from 45.9 to 42.5 in July. As recently as February, financial wellbeing expectations had been at a  survey record high of 52.7. This sharp reversal of household sentiment has been overwhelmingly driven by pessimism about job security. Nearly four times as many survey respondents (31%) reported a decline in job security during July as those that indicated an improvement (8%).

FXStreet reports that the OPEC+ virtual technical meeting was held this week and resulted in a decision to move forward with the planned easing of the current supply cuts in August. Economists at Rabobank continue to view the current weakness in the refined product crack spreads as indicative of a fragile end-user fuel demand recovery. 

“The decision will add close to 2mb/d of crude to an industry already dealing with record oil stocks but there was little price reaction given the announcement came as no surprise to the market and was mostly in line with recent public guidance. Surprisingly though, the group of oil exporting nations concluded that adding supply to the market now would not hinder the recent price strength but it's hard to see how that extra supply coupled with a relatively fragile demand recovery is not negative for crude oil prices, at least on the margin.”

“We continue to view the current weakness in refining margins as indicative of less than stellar end-user fuel demand and with half of the summer driving season behind us in the Northern hemisphere, the near-term outlook does not offer much upside with respect to gasoline consumption.”

“We continue to see limited upside to both flat price and calendar spreads as a result of fundamental and quantitative market pressures. As such, it would not surprise us to see a washout of the out-sized speculative ‘longs’ that have built up in crude oil futures in recent months and specifically in WTI as retail investors continue to flee the space in droves.”

“On the flip side, we still expect any major dips in crude to be bought as oil still looks attractive on a relative basis to other asset classes and especially given the amount of stimulus flushing through financial markets, a dynamic we expect to remain in place for the foreseeable future. Given this view, we expect sideways to lower oil price action for the balance of this year.”

According to the report from European Central Bank, the current account of the euro area recorded a surplus of €8 billion in May 2020, decreasing by €6 billion from the previous month. Surpluses were recorded for goods (€17 billion), primary income (€5 billion) and services (€4 billion). These were partly offset by a deficit for secondary income (€18 billion).

In the 12-month period to May 2020, the current account recorded a surplus of €264 billion (2.2% of euro area GDP), compared with a surplus of €318 billion (2.7% of euro area GDP) in the 12 months to May 2019.

In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling €468 billion in the 12-month period to May 2020 (up from €72 billion in the 12 months to May 2019). Over the same period, non-residents made net acquisitions of euro area portfolio investment securities amounting to €355 billion (up from €132 billion).

FXStreet reports that analysts at Natixis believe the most likely scenario is that the expansionary monetary policies will remain in place because of their irreversibility. A return to a restrictive monetary policy would lead to serious problems for borrowers whose debt level is consistent with low interest rates, investors, due to higher risk premia when they have rotated significantly into risky assets and those investors with a liquidity gap in their balance sheet.

“Debt ratios have adapted to the very low level of interest rates. If interest rates rise, significant deleveraging would be needed by the government and the private sector to prevent borrower insolvency, leading to a drastic recession.”

“Low risk-free interest rates have driven investors into risky assets: the result has been a squeezing of risk premia (on corporate bonds, on peripheral euro-zone bonds). In the event of a return to a more restrictive monetary policy, risk premia would rise and investors would be hit with massive losses.”

“Investors have invested some of the liquidity created by central banks in illiquid assets (High Yield corporate bonds, private equity, real estate, infrastructure, etc.). A contraction in liquidity would trigger a crisis by forcing investors to sell illiquid assets at inevitably very low prices.”

Reuters reports that New Zealand's economy is doing better than predicted, thanks to an early economic and health response to the coronavirus pandemic, the finance minister said on Monday.

The government announced plans to tackle a potential second wave of infections by setting aside NZ$14 billion ($9.16 billion) from a COVID Response and Recovery Fund included in this year's budget in May.

"The economy is doing better than expected and is more open than anywhere else in the world," Grant Robertson told a news conference.

"We want to manage debt as tightly as possible and remain prepared for a rainy day."

Robertson said the government was no longer considering 'helicopter' cash handouts, or the direct distribution of free cash to individuals as a form of policy stimulus for the economy, a strategy it had said in May was being discussed.

Asked if such handouts were off the table, Robertson responded, "For the foreseeable future, yes."

With 22 deaths from 1,204 virus infections, New Zealand has successfully contained COVID-19, and last reported a case of community transmission 80 days ago. Its active cases now stand at 26, all in managed isolation.

Although the economy has opened up to pre-pandemic levels, Prime Minister Jacinda Ardern has warned of a second wave of infections, such as those suffered by other countries.

During today's Asian trading, the euro rose against the US dollar, yen and pound on news of the ongoing fourth day of the EU summit.

Negotiations of the 27 EU member States at the Brussels summit, scheduled for two days, continue on Monday for the fourth day in a row. European media noted the tense atmosphere of discussions on the EU budget for 2021-2027 and the plan for anti-crisis economic recovery.

The yen is getting cheaper against the dollar and euro. Data released on Monday showed that Japanese exports fell 26.2% year-on-year in June, with a double-digit rate of decline recorded for the fourth month in a row.

The yuan is getting more expensive against the dollar. The People's Bank of China (PBOC) kept its benchmark annual interest rate at 3.85%. The country's Central Bank left the rate unchanged for the third month in a row after cutting 20 basis points in April to revive the economy. This decision met market expectations due to signs of recovery in the country's economy.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, fell 0.08% relative to the previous trading day.

CNBC reports that with the coronavirus pandemic exacerbating a slowdown in the global economy, governments around the world may have no choice but to increase spending to support businesses and households well into the next year, according to an economist from S&P Global Ratings.

Many governments have announced large amounts of fiscal support in the wake of the pandemic. But some countries, including the U.S., have shown “a degree of fiscal fatigue” and are considering rolling back some of the stimulus, said Shaun Roache, the ratings agency’s chief economist for Asia Pacific.

“We’re seeing some fiscal policymakers think about pulling back some of their measures or maybe letting them expire without renewing them, and that’s quite a dangerous thing to do when demand in the rest of the economy still remains quite suppressed,” he told CNBC’s “Squawk Box Asia” on Monday.

“So we expect and we hope to see some of those fiscal measures being renewed, pushed forward into the next year. That is going to mean more fiscal easing but at the moment there is no alternative to that,” he added.  

Roache explained that additional spending will worsen the balance sheets of governments, but it’s necessary to “prevent things from getting even worse.” That’s especially so when authorities have to take actions that suppress economic activity to contain the virus given the absence of an apparent medical solution to the outbreak, he added.

S&P Global Ratings earlier this month downgraded its forecast for the global economy. It now expects global gross domestic product to shrink by 3.8% this year — worse than the 2.4% contraction it previously projected.   

The global economy is forecast to bounce back to an average 4% growth in 2021 to 2023, but the level of economic output in nearly all economies is expected to remain below 2019 levels — before the virus spread globally — for several years, the agency said in a report.

“So we’re not going back to where we would have been in the absence of the virus and to a very large extent this reflects a lot of the damage that’s been caused ... to labor markets but particularly to balance sheets and that’s not going to be fixed easily or quickly,” said Roache.

FXStreet reports that FX Strategists at UOB Group noted USD/CNH remains under downside pressure and could recede to the 6.9500 region in the next weeks.

24-hour view: “We highlighted last Friday that ‘downward pressure has dissipated and the current movement is viewed as part of a consolidation phase’ and expected USD to ‘trade within a 6.9880/7.0080 range’. USD subsequently traded within a narrower range than expected (between 6.9893 and 7.0030). The current movement is still viewed as a consolidation phase and USD is likely to trade between 6.9870 and 7.0040 for today.”

Next 1-3 weeks: “There is not much to add to our update from Monday (13 Jul, spot at 7.0050). As highlighted, USD could weaken to 6.9650 with lower odds for extension to 6.9500. Only a break of 7.0180 (‘strong resistance’ level previously at 7.0390) would indicate that the current downward pressure has eased.”

According to the report from Federal Statistical Office (Destatis), in June 2020 the index of producer prices for industrial products decreased by 1.8% compared with the corresponding month of the preceding year. In May the annual rate of change all over had been –2.2%. Compared with the preceding month May the overall index remained unchanged in June 2020 (-0.4% in May).

Energy prices as a whole decreased by 6.2%. On an annual basis, prices of petroleum products were down 20.5%, prices of natural gas (distribution) decreased by 13.8%. However, prices of petroleum products increased by 5.5% compared to May 2020.

The overall index disregarding energy was 0.4% down on June 2019 and fell by 0.1% compared to May 2020.

Prices of intermediate goods decreased by 2.5% compared to June 2019. Prices decreased especially regarding basic iron, steel and ferro-alloys (-9.9%) and basic chemicals (-8.2%). Prices of cereal flour were down 3.0%. By contrast, prices of precious metals increased by 21.7% compared to June 2019. Prices of ready-mixed concrete rose by 4.9%.

Prices of non-durable consumer goods increased by 0.6% compared to June. Food prices were up 0.4% on June 2019. The price of sugar increased by 17.6%. Prices of meat and poultry meat products rose by 5.7% though the prices fell by 3.9% compared to May 2020. Butter prices were down 16.4% compared to June 2019.

Prices of capital goods increased by 1.2% compared to June 2019, durable consumer goods by 1.5%.

France says that they see a path to a deal on the recovery fund

Meanwhile, Bloomberg reports, citing an official familiar with the matter, that EU hardliners ready to accept €390 billion in grants on recovery fund

RTTNews reports that China's central bank left its key interest rates unchanged for the third consecutive month as the economy showed signs of recovery from the unprecedented slump caused by the coronavirus pandemic.

The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.

The bank was expected to retain its rates Monday as the medium lending facility rate was kept unchanged at 2.95 percent earlier this month.

The one-year and five-year loan prime rates were last reduced in April. The one-year loan prime rate was lowered by 20 basis points and five-year rate by 10 basis points in April.

The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This new lending rate replaced the central bank's traditional benchmark lending rate in August 2019.

A broad-based easing is not only unnecessary as the economy shows signs of recovery but it could also fuel asset price increases, Iris Pang, an ING economist said.

The economist expects that the PBoC to continue its targeted easing approach for smaller businesses. Apart from targeted easing, any broad-based interest rate cuts or RRR cuts during the economic recovery is not expected, she added.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1529 (1140)

$1.1506 (4863)

$1.1477 (1740)

Price at time of writing this review: $1.1452

Support levels (open interest**, contracts):

$1.1346 (534)

$1.1313 (266)

$1.1275 (688)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 7 is 52089 contracts (according to data from July, 17) with the maximum number of contracts with strike price $1,1400 (4863);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2741 (1779)

$1.2678 (1421)

$1.2633 (655)

Price at time of writing this review: $1.2542

Support levels (open interest**, contracts):

$1.2440 (505)

$1.2406 (1148)

$1.2368 (1515)

Comments:

- Overall open interest on the CALL options with the expiration date August, 7 is 20232 contracts, with the maximum number of contracts with strike price $1,3000 (3057);

- Overall open interest on the PUT options with the expiration date August, 7 is 19306 contracts, with the maximum number of contracts with strike price $1,2400 (1515);

- The ratio of PUT/CALL was 0.95 versus 0.97 from the previous trading day according to data from July, 17

* - 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.