USD - United States Dollar
The US dollars trades flat this morning after the strong rally experienced over the last few days. The lack of strength today is due to retail sales data, which plunged by a record of 16.4 percent in April versus the 12.3 percent drop expected. Additionally, US job openings fell 813 K to 6.19 M in March, down from 7.00 M the prior month. Finally, the New York Fed’s Empire Manufacturing Survey showed activity continued to deteriorate in May, as non-essential activity remained on pause.
On a more positive note, the University of Michigan’s consumer sentiment index came in at 73.7 in May, which is up from 71.8 in April. It seems like the CARES relief checks improved consumers’ finances and price discounting boosted their buying attitudes.
Jobless claims are just under 3m vs the estimate of 2.5m. Although very high, this represents the 6th consecutive decrease in the number. The total since mid-March has risen to 36.5 million, which equates to around ¼ of workers now being on benefits.
For years, Trump had been an advocate of a weaker dollar to gain an economic advantage for US exporters. However, he now appears to have changed his tune, saying it would be a “great time” to have a strong dollar. Well, the US dollar continues to strengthen even when US economic data disappoints.
The Fed bought $305 million of ETFs on the first day of its intervention into corporate debt markets, which increases the divergence between bad economic data and the strong equity market. In the meantime, the US dollar is appearing to be in a win win situation, where it increases with bad or good economic data and acts as a safe haven. Later today, the Fed will release its 2020 Financial Stability Report.
BoE Governor Andrew Bailey reiterated that negative interest rates are not something the BoE is contemplating at the moment, although he didn’t rule them out definitively.
The disagreement continues between the U.K. and the EU over which provisions on financial services can be included in the future trade agreement treaty. The Pound has fallen 0.85 percent versus the US dollar and 0.61 percent versus the Canadian dollar this morning.
Germany plunged into recession, with first-quarter GDP tumbling 2.2 percent, the most in more than a decade. The euro-area economy as a whole shrank 3.8 percent and employment fell 0.2 percent, the first decline since 2013. In Asia, the slide in Chinese retail sales moderated in April to 7.5 percent year over year, but still missed expectations for a 6 percent drop.
In Mexico, the central bank cut interest rates by 50 basis points to 5.50 percent and there was a unanimous rate cut decision, but despite the deteriorating economic growth outlook and evidence of abating inflationary pressure, Mexico’s central bank is favouring caution. The Mexican central bank mentioned that the global economic growth outlook has kept deteriorating and risks are still biased to the downside.
1.4050 - 1.4167 ▲EUR/USD:
1.0767 - 1.0850 ▼GBP/USD:
1.2060 - 1.2169 ▼AUD/USD:
0.6369 - 0.6469 ▼NZD/USD:
0.5911 - 0.5973 ▼