Daily Market Pulse

Another 4.4 million Americans file for unemployment


All eyes are on the US this morning, as the Labor Department released its weekly jobless claims number. Another 4.4 million workers have filed for unemployment benefits last week, which has brought the total to over 26.5 million since states started shutting down in the second half of March to slow the virus. Economists say this week’s data should confirm that the weekly claims filings have peaked. This number may give a strong indication as to how negative the April non-farm payroll number could be. In fact, analysts expect the April NFP number to be the worst month ever recorded. The USD remains strong as economic numbers in Japan and Europe were extremely disappointing and traders remain confident of safe-haven USD purchases. After finishing trading yesterday up over 450 points, DOW Futures are trading quietly this morning, but that will certainly change in the hour between the jobless claims release and the opening bell. US Treasury yields were mixed in overnight trading as the 10-year note was slightly higher at 0.6235%, but the 30-year bond was a little lower at 1.2129%. If there are no surprises in the jobless claim number the USD should continue to remain better bid throughout the trading day.


EUR/USD has tumbled overnight trading below all technical moving averages and momentum if gaining towards the downside. There are several reasons for the EUR decline, the first being terrible economic figures. While PMI numbers throughout Europe were expected to fall due to the coronavirus, the numbers released were way worse than expected. Considering any number below 50 represents contraction. German PMI fell to 17.1 points when 31 was expected. The numbers in France were just as poor as French PMI fell to 10.4 when 25.0 was expected. Overall PMI for the Eurozone was fell to 13.5 against a 25.0 expected number. Adding to the pressure on the EUR is the expectation of failure coming from the EU Summit. Northern and Southern camps continue to be at odds regarding fiscal stimulus for the Eurozone that would help the economy. While France and Spain continue to push for coordinated debt relief, Germany and the Netherlands continue to resist. Expect the EUR to test support levels and remain pressured throughout the day.


GBP/USD is trading lower this morning as UK PMI numbers were disappointing. UK PMI fell to 12.9 for April when 31 was expected after the previous report of 36. According to officials, the UK has reached its peak concerning the coronavirus as statistics are pointing to a lower outbreak of cases. The government, however, continues to get strong criticism for the way they have handled the coronavirus outbreak. Lockdown in the UK is scheduled through May 7th and may likely be extended. As the country remains shut down, the economy continues to suffer. Trading in the GBP overnight has been up and down, with momentum gaining towards a test of the downside. One reason the GBP hasn’t moved lower is trader positions point to being oversold and there is some profit-taking buying occurring at the lower levels. US jobless claims will strongly affect the USD and therefore affect the GBP. A test lower in GBP today is expected.


Adding to the PMI debacle, Japan’s PMI composite fell to 27.8, as economists expect the economic effects of the coronavirus to continue. Japan Manufacturing PMI saw its largest contraction since 2009, while services PMI reported their worst contraction since 2007. As the PMI continues to contract in the Japanese economy, GDP is expected to decline at an annual rate of over 10% in the second quarter. According to officials, the current state of emergency is expected to remain in place until May 6th, but given other country comments, this is expected to be extended as well. These extensions will continue to weigh on the economy. USD/JPY had a quiet trading range overnight and remains rangebound as traders are still looking at the Japanese currency as a safe-haven trade along with the USD. There isn’t much movement expected in USD/JPY during the trading day.


USD/CAD trading towards the lower end of its overnight range as oil prices moved higher overnight. Brent crude moved to $21.90 per barrel, an increase of $1.53, while US crude also moved $1.53 higher to $15.31. Technically the USD/CAD still shows room to move higher, but once again traders' positions could affect the move. The loonie is in an oversold position and position reversal could affect the next currency move. Economic releases have been below expectations as CPI fell 0.6% in March, which has pushed the year-on-year inflation rate down to 0.9%. According to analysts, these moves showed the sharpest contraction since September of 2006. These numbers, as well as lower commodity prices, are weighing on the Canadian Dollar. 


In an interview with the Xinhua news agency overnight, Chinese President Xi Jinping said the Chinese economy's long-term improving trend has not changed. He said there will be more investment in transportation, hydro-engineering, and energy. He also stated the government will push for further investment in new infrastructures such as 5G and AI. Economists are now forecasting the Chinese economy to grow 1.3% year-on-year in Q2 2020. The economy is also predicted to grow 5.35 in Q3 2020. Coronavirus reports in China have eased as only 10 new cases were reported on the Mainland yesterday, against 30 reported cases the previous day.


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