Dollar fights back, Euro stumbles, Pound sulks
It was another volatile week for financial markets as new coronavirus cases surged in China, parts of the United States and Japan.
The phenomenal market rally sustained by monetary and fiscal stimulus, suddenly appeared unsustainable with risk aversion sending investor sprinting towards Gold, the Japanese Yen and King Dollar.
When markets are down and feeling blue, trust the knight in shining armour to come to the rescue. Although the Fed’s tremendous support to the US economy lifted investor sentiment mid-week, this was overshadowed by coronavirus related concerns. On the bright side, it looks like US consumers have joined the party after retail sales came in more than double the estimate at 17.7% in May.
As the week slowly comes to an end, the question on the mind of many investors is whether the second wave of COVID-19 will end the current rally?
It has not been the best of trading weeks for the Euro which has weakened against almost every single G10 currency.
Earlier in the week, we discussed how the Euro was struggling against the Dollar with prices heading towards 1.1200. With this target reached, the next key point of interest for the EURUSD will be found around 1.1100.
A solid weekly close below the 1.1200 may confirm further down in the week ahead. unchanged at 0.1% and increase purchases of government bonds by £100 billion but it seems investors were looking for more action.
Given how the coronavirus has swept through the UK economy like a crazy tornado, there was hope for the BoE to increase QE purchases by £150 – £200 billion. Such a move would lower the interest rates offered on loans and mortgages – ultimately encouraging consumption which remains an engine for growth in the United Kingdom. Looking at the technical picture, the GBPUSD may tests 1.2200 if a weekly close below 1.2350 is achieved.