US stocks recover; EUR slides as ECB mulls policy change


  • Wall Street rises after recent declines

  • Stock of the week: Galapagos

  • Euro losses ground as ECB mulls inflation target change

  • UK retail sales beat forecasts

  • Nickel has another astonishing week


Wednesday saw US indices close lower for the 2nd day in a row, as stock markets pulled back from their recent highs. The change in short-term trend was neatly captured by a break below the H1 Ichimoku cloud for the S&P500 and the market has made an overnight low of 2975 but since then an attempt at a recovery has taken hold. The decline has seen price fall back into the 8/21 EMAs and this has proved on several occasions a good buying zone in recent months when they are in a positive orientation (8 above 21).  


On the data front the most noteworthy US figure came before the opening bell. The Philly Fed manufacturing index, rose to 21.8 for the current month, up from 0.3 prior and comfortably higher than the 5.0 expected. This is the highest reading since October and means that 2 of the past 3 have come in better than forecast. 


Our latest stock of the week focuses on Galapagos after an incredible run higher of late. Read our full analysis here. 


Just before lunchtime, the euro moved down all of a sudden after market participants were offered news that the ECB was reportedly mulling over a change in its inflation target determined as “below but close to 2%”, the news was brought by Bloomberg. A possible change would probably need a broader policy review and one could imagine it would be implemented later this year when Mario Draghi ends his term in office. That could be considered as the first material impact of an incoming change at the post of ECB governor - Christine Lagarde will lead the ECB since this autumn.


An unexpected rise in UK retail spending during June has come as a welcome development for the pound with the currency looking to recover after hitting its lowest level in over 2 years against the US dollar yesterday.  A print of +1.0 M/M is well above the -0.3% consensus forecast and means that for 5 of the 6 months this year that the data has been released it has been better than expected. The resilience of the consumer in the face of ongoing political uncertainty is both surprising and admirable and suggests that despite heightened levels of uncertainty people are keeping calm and carrying on. What is more, the usual suspects behind a summer pick-up in consumer spending such as warm weather and sporting events have not really been felt in these numbers, with the England cricket team’s heroic performances likely to boost the next month’s release. 


The price of nickel is going through another great day, despite a general risk-off that is primarily visible on the stock market and is caused by concerns about an economic slowdown. Nickel takes advantage of the growing demand from battery sector for electric cars and supply disturbances in the South Africa and Indonesia. Bullish gap from the opening today was almost 3% and in the whole week the price is higher by nearly 10%.


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