Yesterday, we observed a rebound in the main currency pair. Stock market indices also rose on Wall Street. On the other hand, the yields on US bonds fell. Weekly labor market data confirmed that nothing wrong is happening in this sector for now. However, disappointing news came from the real estate market and the final GDP reading, which showed a significant decline in consumption. Monetary policy was commented upon by Barkin and Goolsbee, among others. Their views could be counted among those less supportive of further interest rate hikes in the US.
The “dip” of the main currency pair below 1.05 turned out to be a temporary incident for now. For most of yesterday, we witnessed a rise in the EURSUD rate, resulting in this currency pair reaching a level close to 1.06. In the US debt market, there was a marked decrease in yields. 2-year bonds reached a level below 5.04 percent. Papers with a 10-year maturity term indicate a level of 4.54 percent. The main stock indices regained some of the losses suffered in recent days. On many of them, the negative RGR pattern was previously drawn, but its realization has not materialized so far. However, it should be noted that the chart setup currently leans more towards declines than continuing increases, at least in the short term.
Yesterday, the labor market once again showed its strength. The US GDP report for the second quarter, however, did not perform as well. First and foremost, the decline in consumption to 0.8 percent was disappointing. A result of 1.7 percent was expected. Economic growth settled at a 2.1 percent level, a result minimally lower than the forecast of 2.2 percent.
At the time of data publication at 14:30, we initially saw a drop in the EUR/USD rate. Soon, however, the quotations returned to the upward trend initiated in the morning. High dynamics of reaction, which we also observe today, may result from the fact that some short positions on euro-dollar are simply closed by investors who had “bet” on declines in recent weeks. From a fundamental point of view, no change occurred yesterday. In my opinion, we are currently seeing an upward correction after the quotations hit key technical support, corresponding to the lows of February and March of this year.
Łukasz Zembik Oanda TMS Brokers.
