The US dollar index remains little changed near the 97 mark.
The EURUSD retreated below 1.13 as the single currency encountered solid resistance into the 1.1350 mark over the past 48 hours. Still, the expectation that the 750-billion fiscal rescue package could finally be approved at Thursday’s Eurogroup meeting should spur some dip-buying interest near the 200-hour moving average (1.1250). The earlier opposition to the fiscal aid proposals from the ‘frugal four’ and uncertainty around a final agreement keep the suspense going, therefore good news on the fiscal deck are not fully priced in and could unlock the euro’s upside potential in the coming days. A negative surprise could however trigger a reaction sell-off. The key support to the actual positive trend stands at the critical 1.1160 Fibonacci level.
Cable consolidates gains near the 1.2550 mark supported by the news that the EU is willing to make concessions on fishing policy, one of the sticking points preventing the parties from progressing on their EU divorce deal. But the medium-term outlook in sterling remains negative as an agreement on fishing rights won’t necessarily resolve separate issues as the London’s access to European financial markets after the EU exit and the Northern Ireland issue, although any material progress on one of the above stated points would increase the probability of a deal and support sterling in the short run.
Today, Chancellor of the Exchequer Rishi Sunak will deliver a mini budget to sustain jobs and the economic recovery. On the menu, VAT and insurance cuts, vouchers, and stamp duty holiday to boost spending in multiple sectors and boost activity to tackle the Covid-induced economic slowdown in the UK. Despite a soaring government debt, any additional stimulus would temper the recession worries in Britain and have a positive impact on both the FTSE and sterling.
In commodities, WTI crude sees fading appetite near the $40 per barrel as prospects of post-Covid recovery are being dashed by the rising number of new cases, as the API data hints at a surprise build in US oil inventories last week. The more official EIA data could confirm a weekly rise today. The combination of softening demand and abundant supply could trigger a downside correction in oil prices to $38/35 pb area.
Finally, gold is flirting with $1800 per oz on the back of souring market mood. Solid offers are eyed near and above this level.
