The market mood is calm after three consecutive positive days and despite growing covid concerns. The safe-haven dollar is down, except against the euro, which is pressured after the dovish ECB meeting. Gold and oil are edging higher. Preliminary PMIs are eyed.
US shares have been stabilizing after three consecutive days of gains, compensating for Monday's sell-off. Tech company earnings have contributed to the upbeat mood while growing worries of the Delta COVID-19 variant have been brushed aside.
Coronavirus: America's CDC issued a stark warning about the spread of the highly transmissible strain and German Chancellor Angela Merkel also expressed concern. Italy followed France by requiring vaccine passports for certain activities and the opening ceremony for Tokyo's Olympic Games will be held with few spectators.
The US dollar is on the back foot, trading in tandem with falling 10-year Treasury yields, which have failed to recapture the 1.30% level. Lower returns on US debt also support gold, which is holding above $1,800.
EUR/USD stands out by trading close to the three-month lows. The European Central Bank enhanced its forward guidance regarding raising rates, conditioning any more by forecasting a 2% annual increase in prices in the middle and toward the end of its policy horizon of three years. The bank also wants to see core inflation rise and would allow a temporary overshoot.
ECB Analysis: Three dovish changes hit EUR/USD, more could be in store
GBP/USD is holding onto gains above 1.3750 after UK Retail Sales exceeded estimates, rising by 0.5% in June. The British government has eased self-isolation rules following the country's “pingdemic” – hundreds of thousands are called to quarantine every day, causing disruptions to the economy. The UK and the EU remain at Woods over the Northern Irish protocol, which London wants to rewrite and Brussels refuses to.
Markit's preliminary Purchasing Managers' Indexes for July are being released on Friday, with economists expecting the figures to edge off the highs. Worries about the virus, supply-chain issues and staff shortages may push PMIs lower.
US Markit PMIs Preview: Pre-weekend dollar boost？ Downbeat figures could exacerbate risk-off mood
Cryptocurrencies have been extending their recovery, with Bitcoin flirting with $33,000 and Ethereum advancing toward $2,100. WTI Crude Oil is hovering around $71, up from the low levels seen early in the week.