(30 JUNE 2020)DAILY MARKET BRIEF 2:WTI remains bid near $37

(30 JUNE 2020)DAILY MARKET BRIEF 2:WTI remains bid near $37

30 June 2020, 09:29
Jiming Huang
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In this respect, the Chinese manufacturing and services PMI expanded quicker than expectations in June according to the official data. The factory activity reached the strongest level since March, hinting that the Chinese economy is back on track despite interruption in some businesses due to a renewed lockdown to contain the second wave contamination. This is good news for the rest of the world: the second wave containment measures didn’t have a material impact on the fast-reacting PMI figures.

FTSE (+0.13%) and DAX futures (+0.48%) point at a marginally positive start on Tuesday.

But firm demand in US treasuries and gold hint at a steady grip on safe assets.

Gold remains bid near the $1770 per oz and the reluctance to take profit at these levels hint at a growing possibility of an advance to $1800. But solid offers should come in play above this level if the risk sentiment remains solid on investors’ selective perception of risk regarding the news flow.

The US dollar is steady. The EURUSD trades rangebound within the 1.12/1.13 zone.

The economic activity in the UK contracted faster than expected in the first quarter. The British GDP fell 2.2% q-o-q versus a 2% contraction penciled in by analysts. But the latter disappointment is dwarfed compared what is to be announced in the second quarter: a slump in activity that will probably range near 30%. This partly explains the market’s muted reaction to the Q1 data after the release.

Cable slipped to 1.2250 on Monday. The 100-day moving average (1.2390) now acts as a trigger for top sellers as the face-to-face Brexit negotiations this week may be just another flop regarding a satisfactory exit deal for the UK. But the downside potential should remain limited by the extended deadline to October, which helps maintaining hope that a progress could still be made later this summer.

WTI remains bid near $37 per barrel, but solid offers should cap the upside potential as investors scale back their post-Covid recovery expectations. A consensus of analyst expectations points at 900’000-barrel contraction in US oil inventories last week. The EIA data is due on Wednesday, but the API figure released earlier could provide a stronger case for a move above the $40 handle if the data comes in parallel to expectations.

By Ipek Ozkardeskaya

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