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Fiscal Policy, Geopolitics, and COVID-19 to Test the Markets

Earlier in the Day:

It was a relatively busy start to the day on the economic calendar. The Japanese Yen was back in action in the early part of the day.

Away from the economic calendar, riskier assets struggled. The deployment of agents by the U.S administration and the continued rise in COVID-19 cases tested the markets early on.

Looking at the latest coronavirus numbers

On Tuesday, the number of new coronavirus cases rose by 240,565 to 15,091,452. On Monday, the number of new cases had risen by 182,589. The daily increase was higher than Monday’s rise and 218,739 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 1,889 new cases on Tuesday, which was down from 5,413 new cases on Monday. On the previous Tuesday, 1,110 new cases had been reported.

From the U.S, the total number of cases rose by 67,140 to 4,028,569 on Tuesday. On Monday, the total number of cases had increased by 62,790. On Tuesday, 21st July, a total of 65,594 new cases had been reported.

For the Japanese Yen

Prelim July private sector PMIs were in focus in the early part of the day.

July’s manufacturing PMI rose from 40.1 to 42.6 according to prelim figures. The services PMI increased from 45.0 to 45.2. Economists had forecast PMIs of 42.4 and 47.2 respectively.

According to the prelim survey,

Manufacturing:

  • Production and new orders continued to fall at substantial rates, albeit slower than in June.
  • The rate of decline in employment accelerated further.
  • Japanese goods producers continued to reduce both purchasing activity and inventories.

Services:

  • New business inflows contracted at a slower pace than in June.
  • The amount of incomplete work declined further, indicating further development of spare capacity.
  • Service sector employment fell for a 5th consecutive month.

The Japanese Yen moved from ¥106.858 to ¥106.882 upon release of the stats. At the time of writing, the Japanese Yen was down by 0.02% to ¥106.82 against the U.S Dollar.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.03% to $0.6641, while the Aussie Dollar was up by 0.03% to $0.7130.

The Day Ahead:

For the EUR

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market sentiment towards the EU Recovery Fund. The markets will also need to monitor chatter from Capitol Hill.

Now that EU member states have reached an agreement, the focus will return to COVID-19 news and the near-term economic outlook. Support from the Recovery Fund will now likely drive hopes of a speedier economic rebound.

At the time of writing, the EUR was up by 0.06% to $1.1534.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

Brexit and trade negotiations with key trading partners will remain the main drivers.

At the time of writing, the Pound was down by 0.03% to $1.2727.

Across the Pond

It’s a relatively quiet day ahead for the U.S Dollar. June existing-home sales figures are due out later today.

The numbers are unlikely to have too much impact on the risk appetite, with U.S fiscal policy back in focus.

COVID-19 numbers and the U.S administration’s decision to deploy agents will need close monitoring.

At the time of writing, the Dollar Spot Index was flat at 95.119

For the Loonie

It’s another busy day ahead on the economic calendar. June inflation figures are due out later today.

While inflation is a key consideration, expect the Loonie to brush aside the numbers. Progress towards a COVID-19 vaccine and expectations of more fiscal stimulus will influence on the day.

At the time of writing, the Loonie was up by 0.05% to C$1.3452 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.