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Major Forex Market Struggles as Euro Leaders Negotiate Solution

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Major Forex Market Struggles as Euro Leaders Negotiate Solution
  • EUR/USD and GBP/USD Both Slipping Lower
  • Eurozone Leaders Start Discussing Stimulus
  • US Markets Turn Positive at Opening

Major forex market pairs slipped in Europe today amid a market uncertainty. Much of this uncertainty comes not from data, but from a spike in cases within Europe, particularly Germany. Both the EUR/USD and the GBP/USD struggled to hold on to their positions. Leaders from across the EU also met today to discuss further stimulus plans for the region as US markets took a positive turn in an attempt to end the week on a high.

Case Spike a Likely Cause of Negative Sentiment in Europe

Both the Euro and Pound shrugged off improving data figures to slip slightly lower on Friday. The Euro was below $1.12 before recovering slightly, and Sterling fell below the $1.24 mark at the time of writing. It is likely that both have been somewhat impacted by the rise in coronavirus cases, particularly in Germany where thousands remain quarantined after a breakout there.

A strong factor for the Pound struggling with its current position likely also comes from comments made yesterday by the Bank of England Governor, Andrew Bailey. He commented that negative interest rates were something that was under “active consideration”. This is not an idea that bodes well with those involved in forex trading the cable, and has likely sparked a movement away from the currency pair which can be seen on the charts.

EU Leaders Try to Compromise on Fiscal Plans

Leaders from around the EU were meeting again by video today to discuss a financial stimulus plan worth €750 billion. Hopes are that a deal can be reached as the region faces its most severe economic crisis since inception. European Council President Charles Michel though conceded that there was “still some way to go” in the negotiation. Several countries remain divided on how best to approach the crisis in terms of the financial package.

Much of the disagreement comes from two points, the first of these is how much capital should be injected. Several countries are in favor of a lower amount with a view toward how the future and repayment structure could impact nations. The second point of divergence is largely around who gets what, and how this is determined. It is thought that face to face meetings may be required to finalize any agreement. This is likely another reason why forex brokers noted a dip in Euro trading to end the week.

American Markets Rally into Weekend

US markets opened strongly on Friday with the Dow Jones up more than 300 points. This is leading markets to finish in a positive position for the fourth week in the last five. Much of the positive movement seems to have been garnered by news that China will increase its purchases of US farm products.

Despite the positive moves though, concern remains as jobless claims came in higher than expected at 1.5 million, and all eyes are paying close attention for any increase in coronavirus cases that could indicate a second wave.

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Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

Forex

Forex Market Majors Stabilize on Mixed US Retail Data

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Forex Market Majors Stabilize on Mixed US Retail Data
  • US Retail Sales Grow Slower Than Expected
  • Easing Coronavirus Restrictions Boost GBP Markets
  • Biggest USD Sell-Off Since 2010

Retail sales data in the US came in lower than expected on Friday. The figures for July did show a slight increase though this was significantly below the numbers forecast. This has led to sideways trading in many major forex market pairs including the EUR/USD as traders consider their next moves. Meanwhile in the UK, Sterling continues to improve on news that some restrictions may be eased in the coming days. This all comes amid the worst week in a decade for the US Dollar index which is trading just above 93.00 at the time of writing.

Mixed Retail Sales Data a Stumbling Block for US

Forex trading in the major currency pairs continues to be steady today with no strong direction taken one way or the other. This comes in a large part due to the mixed retail sales data released by Washington today. This data noted a 1.2% increase in July. The figure is well below the 2.3% that had been expected. This would point to a recovery slowdown even as the S&P 500 bids to reach new heights.

There has still been no further progress with a proposed second stimulus deal in the country. Both sides are at loggerheads over the terms of a new deal as congress heads for a recess which could see the talks drag on for several weeks. This level of uncertainty leaves an already weak US Dollar, and other sectors of the economy in limbo.

Sterling Shows Strength as Reopening Moves Closer

The Pound has taken advantage of a weak US Dollar and increasing optimism over a successful Brexit negotiation to strengthen further. The currency has reached a several month high against the JPY breaking through the 140.00 threshold, and has also pushed beyond 1.31 in US Dollar trading. Sterling traders have been boosted further by hopes that domestic lockdown measures could be eased.

Forex brokers have also noted an uptick in support for the GBP as the chief negotiator for the UK in the ongoing Brexit negotiations, David Frost, commented on Thursday that he had high hopes of reaching a deal in September. This would undoubtedly push the Pound higher if a deal which has been stagnating for months, could be concluded.

US Dollar Index Continues to Spell Trouble

Despite the improving unemployment claim numbers in the US which came in under 1 million for the first time during the pandemic this week, the US Dollar continues to weaken against major world currencies. This is reflected in a very lacklustre US Dollar Index which has failed to gain any upward momentum and is headed for another losing week, the longest such streak since 2010.

There now exists genuine and credible fear of a US Dollar collapse with the ongoing COVID-19 pandemic taking its toll, and numbers failing to rebound on expectation. This has led many traders away from the Dollar toward more traditional safe havens like the Japanese Yen, and Swiss Franc.

 

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Dollar Weakness Continues in Forex Market Despite Positives

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Dollar Weakness Continues in Forex Market Despite Positives
  • GBP Gains on USD Despite Huge Employment Drop
  • Hopes Build For Airline Bailout as Stocks Surge
  • Putin Claims Russian Victory in Vaccine Race

Even after revealing the largest quarterly employment drop in more than a decade, the GBP forex market managed to continue gaining ground on a US Dollar displaying weakness. More than 94,000 new unemployment claims were lodged in the UK for July alongside the employment drop. The currency weakness though has not negatively impacted Wall Street as stocks push for an eighth consecutive day of gains. It has also been widely reported that Russian leader Vladimir Putin has claimed his country to have developed the first coronavirus vaccine, with his daughter being among the initial recipients.

10-Year Record Employment Drop in UK

Employment numbers in the UK have seen their largest quarterly drop since 2009. This comes as the figures show there are 220,000 less people in employment than the previous quarter. The number of people in receipt of unemployment benefit has also seen a sharp rise of more than 100% over the same period, standing at 2.7 million people. The overall unemployment rate stands at 3.9% though this is not reflective of the situation on the ground where millions remain backed by government fiscal measures.

Still these dire numbers have not taken a toll on the Pound to date. This is due to an ongoing combination of US Dollar weakness combined with a prevailing optimism from the Bank of England that they will continue to support the economy if is encounters another stumbling block. Those forex trading the may also be buoyed by a renewed positive push on Wall Street which has pushed many away from the safety of the US Dollar.

Possible Bailout Helps Airline Stocks to Soar

Despite still being down record numbers, the fact that the TSA has clocked air travel at its highest rate since March was good enough for airline stocks to rise strongly in trading on Monday. This is a positive sign of a return to some degree of normality for a sector which has been hugely hampered by COVID-19.

Forex brokers were not the only ones to note strong activity in certain markets. Stock traders continued to push flagging airline stocks back up yesterday as support continued to grow for a new stimulus package to help the industry in the amount of $25 billion in federal payroll backing for airlines.

Russia Declares Successful Virus Vaccine Development

Despite some skepticism, Russian President Vladimir Putin has announced that the country has successfully developed the world’s first coronavirus vaccine. With many countries racing through trials to develop a vaccine, this would be a landmark achievement for Moscow.

He has also reported that one of his daughters has successfully received the vaccine. There are plans for mass vaccination to begin early next year. There are still widespread concerns that the virus may not have been fully tested, but the news is sure to stir a global reaction as markets on Wall Street open in search of another success day with futures trading positively.

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Forex Market Majors Boosted by Positive Data

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Forex Market Majors Boosted by Positive Data
  • US Jobless Numbers Drop as Euro Reach Highs
  • Interest Rate Hold Helps GBP/USD
  • Markets Wait on Stimulus Bill Update

Both the Euro and the Pound were given a timely boost against the US Dollar as unemployment numbers in the US came in much lower than expected. The number of new claims filed dropped almost 250,000. Sterling has been boosted further by the news that the Bank of England will leave interest rates unchanged for now. This positive news has not though impacted the opening on Wall Street as traders hold out for more news on the proposed stimulus deal.

Better Than Expected Unemployment Data Provides Confidence

Although unemployment numbers are still easily at record-setting numbers, there are continuing signs of movement in the right direction as the number of weekly claims has continued to trend downward, albeit against the expectations of analysts. They had forecast a figure above 1.4 million, though the number which came in is far below that at 1.186 million.

Continuing claims have also dropped by more than 800,000 and while there is still a great distance to go, traders and the forex market alike have been quick to take the positives from the situation. The EUR/USD market quickly moved to a new two-year high above 1.19 though this has since dropped back closer to 1.185 as many forex trading the pair await the outcome of the proposed second stimulus package for the US economy.

Pound Receives Boost from BoE

The Pound has been trading well in recent days, shaking off concerns over the stalling Brexit negotiations and a step back in the UK lockdown reopening process to gain further against a weakened US Dollar. It was further aided today by news that the bank will not move to negative interest rates at any time in the near future.

Although a positive message was taken by traders, and forex brokers noted an uptick in trading of the Pound, Bank of England Governor Andrew Bailey was also quick to warn that this should not be perceived as an optimistic outlook, and that the bank will continue to monitor developments closely. In other positive developments though, they also revised GDP projections to predict a 2020 contraction of 9.5% instead of the previously estimated 14%. This has all left the GBP/USD trading above 1.315, having hit a multi-month high.

Quiet Market Opening as Stimulus News is Awaited

Despite the drop in unemployment numbers, markets on Wall Street opened quietly on Thursday. This follows recent days of strong gains with the S&P 500 ending yesterday within 2% of its all-time high level.

Many traders are poised and waiting for further news on the new coronavirus stimulus package which has so far failed to overcome an impasse with lawmakers in Washington. It seems that several concessions have been made in a bid to get the package passed, though there still appears to be a gap between what is being proposed, and what some feel is appropriate.

 

 

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