In contrast with Monday’s quiet trading sessions, during Tuesday’s sessions the FX markets displayed healthy movement and provided extensive price-action opportunities for day-traders to bank profit. The dollar index rose to a five week high as investors increased confidence in the globe’s reserve currency after the IMF raised its GDP prediction for the USA to 2.6% in 2019. This confidence may be tested on Friday when USA growth is forecast to come in at 1.8% for Q2 according to the Reuters panel of economists.
Investors have also put aside any thoughts aside and lowered their bets that the FOMC will cut the key interest rate by 0.25% at the culmination of next week’s two-day meeting. At 21:35pm U.K. time the DXY traded up 0.47% at 97.71. USD/JPY traded up 0.32%, USD/CHF up 0.32% and USD/CAD up 0.16%. USD rose against both antipodean dollars, rising by as much as 0.77% versus the Kiwi dollar NZD.
OIL rose on global markets during Tuesday’s sessions as Iran tensions increased and optimism was restored regarding the China-USA trade talks set to resume over the coming weeks. The IMF raising their world growth forecast also helped lift the price of commodities used in industry. At 22:00pm WTI oil traded at $57.16 per barrel up 1.69%. The recent recovery in WTI price has been marked by the 50 and 200 DMAs converging.
The euro slumped versus the majority of its peers as bets have increased that the ECB will revisit its ultra loose monetary policy easing in an attempt to jump-start the moribund Eurozone economy. EUR/USD slammed through the third level of support, S3, as the major pair sold off by -0.55%. The ECB will reveal its latest interest rate decision and deliver any forward-guidance on Thursday at 12:45pm U.K. time. Forty-five minutes later the president of the ECB Mario Draghi will hold a press conference and it’s during his appearance when the euro could move quickly and dramatically.
U.S. equity markets closed up on Tuesday just short of the record highs posted over recent weeks. The SPX reclaimed the 3,000 handle at 3,005 as it closed up 0.68% on the day. The tech-heavy NASDAQ index closed just short of the 8,000 handle at 7,995 up 0.63% on the day. Investors remained bullish and engaged in risk-on trading despite the latest USA housing data missing forecasts. Existing home sales came in at -1.7% for June missing the expectation of a -0.4% reading and falling from 2.6% growth in May. House price rises for the whole of the USA fell to 0.1% in the month of May.
As the Tory government invested in a fanfare on Tuesday morning, to grandstand the announcement that Boris Johnson is now the unelected prime-minister of the U.K. sterling immediately rose versus its peers in what appeared to be a shortly lived relief rally. The gains were short lived as GPB/USD quickly whipsawed and reverted to the bearish pattern which had developed earlier in the morning session. At 22:00pm U.K. time GBP/USD traded at 1.243 oscillating close to the second level of support, S2 and down -0.27%.
Similar to U.S. investors brushing off the poor housing data, those investing in U.K. markets ignored the desperately poor CBI data published in the morning session. The CBI business optimism reading came in at -32 falling from -13 while trend orders came in at -34 falling from -15. Both prints were multi year lows and close to the record lows not seen since the depth of the Great Recession.
Wednesday’s key economic calendar events mainly concerns IHS Markit PMIs for both the Eurozone and the USA. Analysts and traders will mostly focus on the PMI data for Germany, as the powerhouse and engine of E.Z. and E.U. growth if the country’s industry falters it can signal a downturn in the wider area. The E.Z. PMIs are published between 8:15am and 9:00am on Wednesday. Based on the Reuters forecasts there are no significant falls predicted. The USA PMIs for: services, manufacturing and the composite are due for publication at 14:45pm U.K. time. If the new home sales come in at 5.1% for June, beating the previous monthly figure of -7.6%, the poor housing data published on Tuesday will be mostly ignored.