July 14 (Reuters) - Dollar was again beset by euro gains that are now on the cusp of June’s pandemic recovery peak at 1.14225 amid divergent U.S.-EU mitigation paths and hopes the EU will agree to at least a watered-down recovery plan later this week.
A more robust rebound in Chinese imports in June and above-forecast exports helped to stanch follow-through risk-off action in the wake of the late-Monday U.S. equity dive tied to coronavirus lockdowns in California and yet more tension between the U.S. and China .
Euro gains against the dollar and yen appeared to throw caution to the wind given a pretty big miss from the German ZEW and ahead of the EU summit.
A watered-down agreement might suffice for EUR/USD bulls, but a weekly close above 1.1369, the 38.2% Fibo of the 2018-20 downtrend, is probably needed to clear this year’s 1.1495 high and vaunted 1.15 pivot point.
The 0.6% rebound in June U.S. CPI, and the steady core 1.2% yr/yr rate, were led by rising gasoline and food prices amid pandemic re-openings. But the near-forecast data didn’t deter demand for Treasuries or effect Fed policy expectations, particularly as rapid and somewhat reckless re-openings have led to surging COVID-19 cases, though with a far lower mortality rate than earlier this year.
A modest bounce in U.S. stocks and soggy Treasury-JGB yield spreads eroded USD/JPY’s risk-off rise to the 107.42 EBS high, with a correction toward the 107.12 session low favored technically .
GBP/USD fell to its lowest level in a week amid early risk-off flows, much weaker-than-expected May GDP data and the UK banning Huawei equipment from being used in their 5G rollout , but prices recovered to flat with the bounce in stocks off their NY lows.
AUD and other commodity currencies were firmer following the robust Chinese trade data, though recently hot industrial metals ran into some mild profit-taking, perhaps as the rebound in Chinese import demand may have reached a recovery rate peak.
The first wave of U.S. bank earnings reports were mixed, but the three largest banks are preparing for more economic pain from the pandemic .
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(Editing by Terence Gabriel Randolph Donney is a Reuters market analyst. The views expressed are his own.)
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