Summary: The New Zealand and Australian Dollars outperformed in FX, as the antipodeans lead the fight against Covid-19 with their ability to control the spread. Both countries will be easing restrictions are set to gradually restart their economies in the weeks to come. The Kiwi (NZD/USD) surged 1.39% to 0.6010 (0.5955) while the Aussie (AUD/USD) was up 1.11% in late New York trade to 0.6372 (0.6322). Australian Prime Minister Scott Morrison declared that with the current rate of decline, Covid 19 could be eliminated from the country. Against the Canadian Loonie, the US Dollar eased 0.79% to 1.4075 (1.4150) as oil prices extended their recovery. While the Loonie was boosted by the climb in Oil, the economic outlook in Canada is still dour. Worse than expected Euro area and Eurozone PMI’s weighed on the Euro, which slipped further against the Greenback to 1.0775 (1.0820). The European Union EC leaders meeting ended without an agreement which also put the shared currency on slippery ground. Sterling finished little changed at 1.2345 from 1.2335 yesterday. The USD/JPY pair dipped to 107.65 (107.75). Wall Street stocks declined after a data leak showed that trials from a virus drug (Gilead) had no benefit among coronavirus patients. The Dow closed at 23,487 (23,490) while the S&P 500 was last at 2,793 (2,800). Data released yesterday saw global Manufacturing and Services PMI’s decline sharply, most missing forecasts. The Eurozone’s Flash Manufacturing PMI fell to 33.6 from 44.5 the previous month, and worse than the median estimate of 38.7. Germany’s Manufacturing PMI dropped to 34.4 from 45.4, underwhelming forecasts at 39.0. Germany’s GFK Consumer Climate plunged to -23.4, against forecasts of -1.9, and a downward revision of the previous month’s 2.3 (2.7). The number of American workers filing for Unemployment benefits in the latest week numbered 4.427 million, and while an improvement from the previous week’s revised 5.237 million (5.245 million), still brought the 5-week total of jobless in the US to 26.45 million.
On the Lookout: The leak that resulted from a mistakenly uploaded report on the World Health Organisation’s website which reported that the hopeful Gilead drug Remdesivir failed to have any benefit for coronavirus patients in China hit risk sentiment at the end of the New York trading day. The spotlight now points to the economies which can restart earliest. Which will lessen the need for stimulus and enable interest rates in those countries to stabilise, even edge higher. For now, Oceania leads the race.
Markets will focus on the economic data today and the coming weeks. Today’s data releases start with Japan’s National Core CPI (annual) report, SPPI (Services Producer Price Index, a leading indicator of consumer inflation) and All Industries Activity for April. Two primary economic reports out of Europe are the UK’s Retail Sales and Germany’s IFO Business Climate for April. The US report their Headline and Core Durable Goods Orders and the University of Michigan Consumer Sentiment and Inflation Expectations Survey. Next week the BOJ, ECB and FED FOMC hold their policy meetings.
Trading Perspective: Expect the Euro to remain the underperformer in FX with the commodity currencies maintaining a bid. The failure of European leaders to agree on the size and shape of a much-needed rescue package is providing uncertainty and will continue to weigh on the shared currency. Meantime, the economic data out of the US still paint a grim picture.
The Dollar will continue to trade mixed against its rivals. Look for opportunities at either end of the recent established ranges and get your levels established. Expect further volatility which provide one with opportunities.