Archives of “July 29, 2020” day

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Dollar set for worst month in a decade

  
Analysis, Forex
The US dollar is on course to record its worst July since 2010. This is according to Bloomberg data from the Commodity Futures Trading Commission which show that asset managers added to net long positions on the yen, euro and Canadian Dollar. These moves further added to the weakness in the Bloomberg Dollar Spot Index seeing it fall 3.4% this month. The net result is that the Index is on track for its worst July since 2010.
The reasons for dollar weakness
There are a number of reasons for dollar weakness:
  • The further deterioration in the relationship between US and China
  • The expanding COVID-19 case count in the US
  • The uncertainties around a November presidential election
  • Growing expectations that the Fed will need to cut policy rates further.
What to expect from the Fed tonight?
The Fed is expected to signal more accommodation tonight. So, if there is any talk of yield curve control or negative interest rates expect that to add further weakness to the USD. However, that seems unlikely as the Fed will most likely just stay in a wait and see mode. The Dollar Index has broken through a key monthly trend line and a clean break opens the way up for more sellers. The key monthly support sits below in the 90.00 region.
Via Bloomberg 

Japan to release several growth forecasts for fiscal year 2020, 2021 – report

  
Analysis, Economy

Reuters reports, citing four government sources familiar with the matter

The multiple forecasts are due to the uncertainty over how long the coronavirus pandemic will last, with the government planning to release several scenarios for both fiscal year 2020 and also fiscal year 2021.
It is reported that the government will give projections for GDP based on two assumptions i.e. either the pandemic would end quickly or be prolonged.
As unusual as it may be for policymakers to do so, it is only prudent given the current situation. But as mentioned before, take forecasts during this period with a pinch of salt.
It is an evolving process and view, depending on how the virus situation plays out globally.
As for Japan itself, the country recorded another 981 new virus cases yesterday – a new daily record – with ~8,300 active infections seen currently. For some context, there was “only” ~1,000 active cases on 30 June.

 

Japan

Nikkei 225 closes lower by 1.15% at 22,397.11

  
Analysis, Global Indices

Asian equities trade more mixed on the session

Nikkei 29-07

Japanese stocks end the day lower, following the softer mood from Wall Street overnight as risk sentiment keeps more cautious ahead of the Fed later today.

The mood in Asia is more mixed with the Hang Seng up by 0.3% while Chinese equities are gaining strongly, with the Shanghai Composite up 1.5% on a technical rebound and bargain hunting following a correction last week.
Overall, the risk mood is rather stalled as the focus turns towards the FOMC meeting later. Major currencies are keeping in narrower ranges still, with USD/JPY seen just above 105.00 and AUD/USD seen around 0.7165 – little changed on the day.

Fitch on Japan: Affirms rating at ‘A’ , but lowers its outlook to negative

  
  Analysis
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Fitch Ratings

  • projects Japan’s economy to contract by 5% for full year in 2020, before rebounding to 3.2% growth in 2021
  • fiscal support & expected recovery in external demand should set stage for return to quarterly growth in 2h20 under fitch’s baseline for Japan
  • says sharply wider fiscal deficits in 2020 and 2021, will add significantly to Japan’s public debt
  • project Japan’s deficit to narrow to 10.9% of gdp in 2021 and 5.3% in 2022
  • expects BOJ to maintain current interest-rate settings through at least end of 2022 under its yield-curve control framework for japan

Goldman Sachs says real concerns about USD as reserve currency. Barclays says No.

  
Analysis, Forex
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GS is alarmed, says “Real concerns about the future of the US Dollar as the world’s reserve currency have started to emerge.”

Barclays says nope, the US “isn’t anywhere close to losing its reserve currency status”. Barclays cite:
  • “depth of capital markets and overwhelming volume of USD denominated global transactions” 

On the recent decline in the dollar:

  • “Reserve managers and investors have spent the better part of the last few years accumulating USD assets and with the recent developments, simply find it prudent to diversify into less USD denominated exposures” 

Barclays comments via Bloomberg.

I’m with Barclays on this one.
GS is alarmed, says "Real concerns about the future of the US Dollar as the world'sreserve currency have started to emerge."

US stocks end the day near session lows.

  
Analysis, US Market
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A soft ending to the stock day

The US stocks are ending the day just off the lows for the day. The NASDAQ index by the way with a -1.27% decline.
The final numbers are showing:
  • S&P index -20.97 points or -0.61% at 3218.44.
  • NASDAQ index fell -134.17 points or -1.27% at 10402.09
  • Dow industrial average fell by -205.49 points or -0.77% at 26379.28
After the close Starbucks is reporting a less than expected loss and a sales beat. They also expect the 4th quarter to show a significant rebound. Earnings-per-share came in at $-0.46 vs. $-0.59 expectations. The revenues also be at $4.2 billion vs. $4.06 billion estimate.
Amgen earnings and revenues came in better-than-expected. However after an early rise, the price is currently trading lower in after hour trading.  Earnings-per-share came in at $4.25 I was higher than the $3 and 84 expected. Revenues grew by $6.21 billion vs. expectations of $6.18 billion.
These earnings-per-share came in a little bit better at $1.07 vs. $1.03 expectations. Revenues were little light however at $4.8 billion vs. $4.82 billion expected
Ebay earnings came and at $1.08 vs. $1.06 expectations. They also raised their year end outlook
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