ECB meeting to be held tomorrow, and summit of EU leaders – at the end of the week

This morning, the US dollar index keeps declining for the 4th day in a row. The large-scale measures to support and stimulate the American economy, carried out by the Fed through monetary emission, became the main reason for this. Market participants are concerned about the 0.6% increase in inflation in June compared to May figures. This is the highest monthly increase in almost 8 years. Data on industrial production in June and the economic review of the «Fed Beige Book» will be released in the US today. EURUSD quotations updated today a 4-month high in anticipation of positive statements at the ECB’s regular meeting tomorrow July 16. No rate changes expected (0%). A meeting of EU leaders to discuss the plan of economic assistance to the European countries most affected by the coronavirus pandemic will be held on July 17-18. The regular meeting of the Bank of Canada is scheduled for today. No rate changes expected (0.25%).

On Tuesday, there was a surge in the US stock market quotations. Oil and other raw materials rose in price amid the weakening of the US dollar. Energy, materials and industrial sectors led the S&P 500 Index. The S&P 500 banks index lost 1.6% due to weak quarterly reporting of major banks: Wells Fargo (-4.6%) and Citigroup (-3.9%). Today, UnitedHealth and Goldman Sachs will release their quarterly reports ahead of the opening of trading in the United States. Their preliminary forecasts are very optimistic, which contributes to the growth of futures for US stock indexes. It is difficult to predict the market reaction, because the stocks of UnitedHealth have already grown by 65% from their March low​​, and Goldman Sachs – by 56%. European stocks are now up about 1%, thanks to Moderna’s latest positive announcement about the Covid-19 vaccine. It is about to begin clinical trials of the vaccine in humans on July 27.

Oil rises in price for the 2nd day in a row. The regular OPEC + Joint Ministerial Monitoring Committee meeting is scheduled for today, at which the oil production in August will be discussed. The current decline in production is 9.7 million barrels per day (bpd). It can be prolonged for August or reduced to 7.7 million bpd. The 2nd option is more likely and can lead to a slight correction in oil quotes. In the meantime, they are supported by data from the independent American Petroleum Institute (API) on a week-long drop of 8.3 million barrels in US oil reserves. Official data, as usual, will be released today at 13-30 CET.

Today, gold is getting more expensive for the third day in a row amid the weakening of the US dollar index. The risks of the resumption of the coronavirus pandemic support the demand for precious metals. California Governor Gavin Newsom has approved the reintroduction of social distancing measures (quarantine) in his state due to an increase in the number of Covid-19 patients. Japan and Hong Kong have noticeably tightened quarantine measures. Demand for gold also increased due to another escalation of US-Chinese relations. US President Donald Trump signed the Hong Kong autonomy law, which could put pressure upon the Chinese authorities. In addition, he refused to negotiate with Chinese leader Xi Jinping. Chinese authorities declared they would consider retaliatory sanctions against the United States.