US Non-Farm Payroll fell to 20.5 million in April, not as much as expected, but is the most jobs lost in a month in history. The unemployment rate tripled to 14.7%, the highest since the great depression ended. All major work areas saw a reduction in employment with education showing a loss of jobs due to school closings and leisure and hospitality losing 7.7 million jobs. The USD has reacted slightly positively following this release with the EUR/USD a little lower and USD/JPY a little higher. DOW Futures are higher as well, indicating an opening of over 200 points. US Treasury yields also moved higher overnight with the 10-year note at 0.6354% and the 30-year note at 1.3219%.
EUR/USD trading higher this morning as traders react to the US-China negotiations and await the NFP release. According to reports, ECB President Christine Lagarde said on Thursday that the central bank will do whatever is necessary to aid the economy, defying the ruling of the German constitutional court. Negative US interest rate discussions are also is aiding the single currency as traders are considering this as a real possibility. Technical rejection of support areas overnight as well as some traders reversing “short” positions has pushed the EUR higher. Traders have moved away from the safe-haven USD trades and depending on the reaction towards US NFP, we could see the EUR test resistance levels and push higher.
GBP/USD is trading in the middle of its overnight range, as the comments from the Bank of England yesterday leave room for more support of the economy. PM Johnson is also preparing his comments to let the country know when the lockdown will begin to ease. The UK is on holiday today celebrating the Early May bank holiday, so markets have been quiet ahead of the North American trading day. Traders exited USD safe-haven trades have also moved into GBP trades. Adding to the positive mood were comments from China, showing better than expected numbers indicating a possible earlier recovery to the coronavirus. The pound has tested resistance levels earlier in overnight trading but the move higher was capped by comments from BOE Governor Bailey that there could be an extension of quantitative easing as early as June.
USD/JPY had a very quiet overnight trading range and is currently near the lower end, testing support levels. Failure to break resistance levels early in overnight trade has seen traders push the currency pair towards support levels. The four-hour technical charts remain skewed towards the downside. Economic releases overnight showed overall Household Spending in March decreased by 6.0% and Bank services PMI felt to 21.5 in April after 33.8 in March. Japanese Finance Minister Aso said overnight that the "government will respond appropriately to ruling party lawmakers’ calls for more steps to cushion the economic fallout from the coronavirus outbreak”. There was a proposal made for rent relief aid for small businesses that have been hurt by the virus. As no new virus cases were reported overnight the easing of the state of emergency is now within sight.
The Canadian Dollar has strengthened overnight as oil prices have risen. With economies beginning to open there is an expected rise in demand. Brent Crude was up $0.42 at $29.88 per barrel, after falling almost 1% on Thursday, and US WTI rose $0.45 to $24.00 per barrel, after being down almost 2% yesterday. The rally is based on expectations of better demand moving forward. Canada will also release its labor market figures for April and it is expected the economy will have lost 4,000,000 jobs in April, roughly one-fifth of the workforce, and the unemployment rate will have risen to 18%. The Canadian government has attempted to keep people at work and how successful they were will be shown later today. April was the first full month that non-essential businesses were closed by the government and the strict social distancing measures were enacted.
The US and Chinese trade negotiators held a conference call yesterday, discussing the implementation of the Phase One trade agreement. Reports from the Chinese press indicate these talks made some progress. This was confirmed by a statement made by US Trade Rep Lighthizer, saying economic and trade issues were discussed. According to the statement, despite the current global health emergency, both countries are expected to meet their obligations under the agreement promptly. These meetings are required by the agreement and will continue via conference call regularly. The positive tone of these discussions has given traders some confidence heading into the weekend.