Yesterday the Senate passed a $484 billion virus relief package that will focus on small businesses, hospitals, and testing. The bill now goes to the House and will hopefully be approved on Thursday. The USD remained strong overnight as traders continued to seek safe-haven alternatives. The continued collapse of the oil markets, as well as the moves in the US equity market in the last two days, has helped keep the USD on firm footing. After falling for the past two days due to the oil futures crisis, the DOW is set to move higher this morning as futures are showing a positive move of 350 points. Adding to the equity market volatility are technical indicators that show a possible downturn after moving average resistance levels held. Analysts will now focus on the 22,500 level of support. Yesterday’s close was at 23,018. U.S. Treasury yields are mixed in overnight trading with the 10-year note trading high at 0.5782%, while the 30-year bond was lower at 1.1609%. Concerns over oil will keep the USD bid today.
EUR/USD trading towards the lower end of its overnight range this morning as nothing much has changed with falling oil and disagreement over EU economic support pressuring the single currency. While many traders are moving into dollars, the EUR is holding its own as there finally seems to be some encouraging COVID-19 data. Spain reported a minor increase in deaths on Tuesday. Spanish PM Sanchez asked for an extension on the country-wide lockdown to May 9th while indicating a gradual removal of lockdown measures soon afterward. Italy also saw a lessening of cases and PM Conte indicated and easing of restrictions beginning May 3rd. EU leaders will meet once again on Thursday, with the southern contingent pushing for “coronabonds”, while their northern neighbors continue to resist. Spanish PM Sanchez and German Chancellor Merkel have made progress on reaching a compromise, which is giving some support to the EUR. Traders will look for news regarding these meetings to determine the EUR’s next move.
After falling to overnight lows, GBP/USD has rebounded trading close to its overnight highs. Criticism over the way the government has handled the virus crisis continues as there was a jump in fatalities in the last few days. PM Boris Johnson continues to recover from the disease, but his absence from public appearances is causing unease. CPI numbers in the UK fell to 1.5% in March, which was within the expectation, showing some stability in the economy and jobless claims were lower than expected. There remains an overwhelming concern that removing restrictions too early and then having to re-apply them could be a harsher blow to the economy. Brexit talks continue and have been somewhat quiet ahead of the press conference that EU Negotiator Bernier will hold on Friday.
USD/JPY is lower this morning as traders move into JPY as a safe-haven alternative. According to Reuters, the Bank of Japan will take further steps to boost funding support for companies hit by the coronavirus pandemic. The BOJ will have their monthly meeting next Tuesday. The steps by the BOJ include raising the purchases of corporate bonds and commercial paper. The report also stated that there will be no further interest rate cuts. Any actions that the BOJ takes next week at their meeting will be an extension of measures put into place last month. As concerns over oil continue the JPY will be a destination for traders.
USD/CAD trading higher as the ongoing crisis continues to undermine the loonie. The meltdown in oil continues as Brent crude was trading at $18.28 after falling as low as $16 during the overnight session. The futures contracts continue to collapse as the June contract of US West Texas Intermediate fell below $11 per barrel. The latest economic numbers from Canada showed monthly retail sales grew to 0.3% in February as opposed to the 0.2% expected, but this number referred to a period before the viral crisis so this number is not as critical. As oil continues to dominate the news, the immediate effects will be seen on the Canadian dollar. There is a chance the market could reverse as trading positions are becoming well over-sold.
China’s GDP growth fell to historic lows in Q1 2020 due to the coronavirus. As the country returns from the viral pandemic analysts expect the GDP to slowly move higher, eventually climbing to 7% year on year in Q4, so GDP for 2020 should be around 2.2%. It is expected that Chinese authorities will loosen policy initiatives to get the economy moving as domestic demand is expected to rise. There was a minor rise in cases reported yesterday in China as 30 cases were cited after 11 cases were reported the day before. A total number of almost 83,000 cases have been reported in China resulting in over 4,600 deaths.