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House passes additional stimulus bill

USD

The USD looks to open the North American trading session higher against the EUR, GBP, and CAD while trading sideways against the JPY. The greenback will finish the week on its best footing since early April as falling oil prices and problems in Europe have traders buying USD. Last night the House passed the $484 billion bill that will hopefully help small businesses and hospitals. The bill now goes to President Trump who is set to sign the bill sometime in the next few hours. The bill includes new funds for the Paycheck Protection Program which gives loans to small businesses and allows those loans to be forgiven if they are used on wages, benefits, rent, and utilities. US equity markets are expected to open “flat” this morning after yesterday’s turbulent trading session. After rising early in the trading day, reports that the drug Gilead Sciences had hoped would work against the virus were proven inconclusive, which moved the DOW lower, finishing slightly higher. Trader concern over the failure of the virus treatment also has Treasury yields lower this morning with the 10-year note trading at 0.5945% while the 30-year bond is lower at 1.1718%. US Durable Goods for March will be released this morning and they are expected to come in at -12.0% after last months 1.2%. Expect the USD to end the week on a firm note.

EUR

EUR/USD continues to move lower and should end the week in a technically bearish stance. Today’s trading has brought the single currency to a new month low as the EU Summit failed to agree on a recovery package. Adding to the Euro’s woes, German IFO Business Climate for April came in at 74.3, lower than the expected 80.0 and lower than last month’s 85.9. The end of the EU Summit had members agreeing to continue studying the possibility of EUR relief packages which includes more grants than loans. The sides remain the same as Spain, Italy, and France argue for relief, while Germany and the Netherlands remain against “coronabonds”. ECB President Lagarde told leaders that the economic fall in the Eurozone could reach 15% of GDP. As economic statistics continue to be awful around the world, safe-haven USD buying will continue to negatively affect the EUR.

GBP

GBP/USD is trading near overnight lows as retail sales in the UK fell by 5.1% in March worse than expected. There was a bit of hope released overnight as PM Boris Johnson announced that he will be back leading the government on Monday. He is determined to manage this crisis as he hopes to device a plan for the eventual end to the UK lockdown. Although the UK has reported a drop in daily fatalities, the country still lacks adequate testing capacity. Services Purchasing Managers Index for April fell to 12.3, the lowest reported number on record. 

JPY

USD/JPY trading in a quiet range overnight, as Japan announced CPI was unchanged at 0.4% year-on-year in March, matching expectations. Analysts looking at the data suggest that underlying inflation in Japan has continued to weaken due to the pandemic. As oil prices continue to fall, more downward pressure on the economy is expected to continue. The Bank of Japan is scheduled to meet next week and they are expected to lower economic assessments. According to Economy Minister Nishimura, the government’s new economic stimulus package may boost GDP by 4.4%. There are still some traders looking towards the JPY as a safe-haven alternative to the USD and that should keep the JPY better bid during the trading day.

CAD

USD/CAD trading lower overnight as the pair has broken through intraday support levels and is expected to move even lower during the day. The move lower for the Canadian Dollar happens even as oil prices moved higher overnight. Brent crude was up $0.60 at $21.93, while U.S. oil was up $0.66 at $17.16 per barrel. Kuwait announced overnight that they would be cutting output and traders have taken this as a positive for the commodity. Traders are hoping that the eventual opening of businesses around the country will add to the need for oil and the markets should eventually calm down. Positions in USD/CAD were mostly long over the last few trading sessions and the reversal of positions as the currency pair moved through support levels triggering USD/CAD stop loss sell orders.

CNY

Reports from Reuters showed Mainland China sporting 6 new cases of the virus down from 10 the previous day. There was also a report that no new deaths occurred overnight. According to China’s Commerce Ministry, the country will begin an online shopping festival in hopes that it will push consumption up after growth contracted 6.8% year-on-year in the first quarter. Also, to stimulate growth, the People’s Bank of China, (PBoC) has cut the Target Medium Lending (MLF) rate by 20 bps to 2.95%.

Quick Insights

USD: USD higher as house passes additional $484 billion stimulus bill.

USD: USD higher as house passes additional $484 billion stimulus bill.

EUR: EU leaders fail to agree on recovery plan pushes EUR to monthly lows.

EUR: EU leaders fail to agree on recovery plan pushes EUR to monthly lows.

GBP: PM Johnson set to return on Monday.

GBP: PM Johnson set to return on Monday.

JPY: JP remains a safe-haven alternative.

JPY: JP remains a safe-haven alternative.

CAD: Loonie strengthens as oil prices rebound.

CAD: Loonie strengthens as oil prices rebound.

CNY: Reports of lower viral outbreaks in China. Government take steps to get economy going.

CNY: Reports of lower viral outbreaks in China. Government take steps to get economy going.

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