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Euro Shrugs Strong Investor Confidence, Markets in Subdued Holiday Trading

Overall, the forex markets are relatively mixed today and trading will probably continue to be subdued with US on holiday. Sterling is currently the stronger one, followed by Yen and Aussie. Canadian is the weakest, followed by Kiwi and then Swiss. Eurozone is mixed despite strong investor sentiment data. But all major pairs and crosses are staying inside Friday’s range. Some volatility could finally be seen again, especially in Aussie, with RBA rate decision scheduled in the upcoming Asian session.

Technically, it looks like AUD/CAD has defended 0.9247 key support again. Further rebound tomorrow, subject to RBA’s decision and statement, could pop the cross back towards 0.9394 resistance. Firm break there will complete a double bottoming pattern (0.9258, 0.9245), and turn near term outlook bullish. We’ll see if that would happen.

In Europe, at the time of writing, FTSE is up 0.52%. DAX is up 0.05%. CAC is up 0.35%. Germany 10-year yield is up 0.0232 at -0.211. Earlier in Asia, Nikkei dropped -0.64%. Hong Kong HSI dropped -0.59%. China Shanghai SSE rose 0.44%. Singapore Strait Times rose 0.39%. Japan 10-year JGB yield dropped -0.0104 to 0.036.

Eurozone Sentix investor confidence rose to 29.8, but expectations dropped

Eurozone Sentix Investor Confidence rose to 29.8 in July, up from 28.1, but missed expectation of 30.2. Nonetheless, it’s still the 5th increase in a row, and highest since February 2018. Current situation index rose from 21.3 to 29.8, 5th increase in a row, and highest since October 2018. Expectations index, however, dropped from 35.3 to 29.8, lowest since December 2020.

Sentix said, “the result is impressive” but, “we are approaching a certain point of maximum momentum in the short term” as expectations dropped. “For the economy as a whole, this is not yet a worrying decline. For the equity markets, on the other hand, which are very much focused on investor expectations, this development could contribute to increased market volatility.”

It added, “in this environment, the ECB remains in focus. So far, there is no sign of a turn away from the expansive monetary policy. However, the inflation barometer, which remains clearly in negative territory at -38.25, underscores the danger of further rising inflation rates in a globally increasingly synchronised, strong economic upswing.”

Eurozone PMI composite reached 16-yr high, recovery stepped up a gear, but inflationary pressures ratcheted higher

Eurozone PMI Services was finalized at 58.3 in June, up from May’s 55.2. PMI Composite was finalized at 59.5, up from May’s 57.1. That’s also the highest level in 15 years since June 2006. Looking at some member states, Ireland PMI composite dipped to 2 month low at 63.4. Spain hit 256-month high at 62.4. Germany hit 123-month high at 60.1. Italy reached 41-month high at 58.3. France also reached 41-month high at 57.4.

Chris Williamson, Chief Business Economist at IHS Markit said: “Europe’s economic recovery stepped up a gear in June, but inflationary pressures have also ratcheted higher… A wave of optimism that the worst of the pandemic is behind us has meanwhile propelled firms’ expectations of growth to the highest for 21 years, boding well for the upturn to gain further strength in coming months.

“Firms are increasingly struggling to meet surging demand, however, in part due to labour supply shortages, meaning greater pricing power and underscoring how the recent rise in inflationary pressures is by no means confined to the manufacturing sector. Service sector companies are hiking their prices at the steepest pace for over 20 years as costs spike higher, accompanying a similar jump in manufacturing prices to signal a broad-based increase in inflationary pressures.”

UK PMI services finalized at 62.4, composite at 62.2

UK PMI Services was fina