The market sentiment is mixed. Let’s look at most interesting movements on the market today.
Forex today: why rate hikes do not support the USD
The US dollar does not rush to grow. Although the Fed is anticipated to raise an interest rate tomorrow, the greenback cannot strengthen. The reason is hidden in the unstable environment in the White House. More dismissions are planned this week.
- The pound is rising. The weakening dollar and successful Brexit negotiations are supporting the sterling. On weekends the EU and the UK managed to agree on the most of the transitional deal’s conditions. The resistance lies at 1.41. Today’s CPI and PPI Input data (at 11:30 MT time) can support the sterling or can lead to the return of the pair. The support is at 1.3910.
- Worries about trade wars are strengthening. The US President Mr. Trump announced that he is going to implement a package of $60 billion in annual tariffs against China by Friday. More than 100 products that are supposed to be developed by using the intellectual property of US companies will be under tariffs.
- Trump is not going to stop. According to Bloomberg, a Trump’s administration is looking for alliances to push back against China trade in return for relief from American tariffs on steel and aluminum. If a country wants any exclusions, it has to follow next 5 rules:
- cut steel and aluminum exports to the US to 2017 levels;
- support the US at the G-20 Global Steel Forum;
- work together with the US on cases against Chinese practices at the WTO;
- address China’s trade-distorting policies;
- increase security cooperation with the USA.
- Despite positive house price index’s data (actual of +1.0% vs forecast of 0.1%), the Australian currency is continuing to fall. The reason is the Bank of Australia minutes. The RBA repeated that the rising AUD has a negative impact on the economic growth and inflation. The AUD/USD pair confidently broke the support at 0.7710 and is moving down. The support lies at 0.7650. Moreover, the development of a trade wars’ issue highly affects the Australian dollar.
- Some concerns for digital giants. A lot of tech companies are questioned about their protection of personal data by the US and the EU. So the tech sector, as well as automobiles, are supposed to be among the most vulnerable to supply-chain disruptions.
- The S&P 500 index broke the support at 2700 but rebounded and now the price is quite above it.
- Another result is declining of the yen. Yesterday the pair did not reach the support at 105.60 and turned around. The resistance is at 106.85.
- A weakness of the greenback led to the appreciation of many currencies. However, tomorrow the Fed will announce the interest rate at 20:00 MT time. There is a high possibility that the interest rate will be raised. So the greenback can get the support and the situation in the market will change again.
The Reserve Bank of Australia will publish its statement and announce the interest rate on July 7, at 7:30 MT time.
The overall market sentiment was mixed after the USA recorded the largest increase in virus cases since May 9. The data even offset the better-than-expected NFP.
The risk-on tone is back on the market again. Let’s look at main trading opportunities.