Asian stocks posted light losses overnight amid investor concerns around an increase in covid-19 cases in US, Europe and China as some lockdown measurers have temporarily been put back in place. 

Both the AUD and NZD traded higher amid a decline in covid-19 cases being reported in Beijing. AUD/USD traded 0.45% higher to 0.6875 and NZD/USD was 0.40% higher with an intra-day high of 0.6437. USD/JPY traded unchanged around 106.88 after falling 0.50% last week

Markets remain driven by different crosscurrents, keeping sentiment relatively in check. Concerns about a second wave of covid-19 infections are capping the optimism stemming from the phased reopening of economies, plentiful policy support and slowly improving data.

FX Observations

EUR/USD

EU leaders meeting on Friday ended without an agreement, in line with market expectations. However there was an overall positive undertone with all members agreeing the necessity and importance of the EU recovery fund, this is especially applicable for members such as Italy that have accumulated high amounts of debt. 

They will meet again in July, ideally in person, to finalise the deal in the best case. The single currency had a very short lived rally on back of that, overall price action is still not constructive as we have seen lower lows and lower highs for the best part of last week.

GBP/USD

Cable pushed 0.3% higher along its G10 peers with little to no reaction to BoE’s Bailey indicating that he would prefer to unwind the bank’s balance sheet before raising rates.

EU-UK trade talk risks remain as negotiators meet to try and formulate an agreement before the fall, though the same issue remains with both sides showing no signs of  loosening their demands.