Risk appetite held relatively steady on Wednesday with hopes that the increase in global coronavirus cases was close to a peak..
Risk appetite held relatively steady on Wednesday with hopes that the increase in global coronavirus cases was close to a peak. US equity markets posted significant net gains and global bourses held firm, although with measured gains.
The dollar was little changed overall with reduced defensive demand limiting support. EUR/USD found support below 1.0850 as markets waited for the Eurogroup meeting to resume.
Sterling posted net gains as lower volatility helped provide an element of support. The Australian dollar made net gains as risk appetite held firm.
At the Eurogroup meeting Italy and some other countries were continuing to push for long-term joint bonds, but this was still being resisted by Northern counties. French Finance Minister Le Maire stated that the EU needs agreement on the crisis response within the next 24 hours, failure is not an option. The domestic economic institutes estimated that the German economy is likely to contract 9.8% for the second quarter with a full-year decline of 4.2% before a strong recovery of 5.8% for 2021.
Spain reported an increase in the number of new coronavirus cases of over 6,000 in the latest 24 hours and over 750 deaths, reinforcing concerns that it will take a long time to flatten the curve. Lockdown measures in Europe are also set to be extended which will reinforce concerns over the outlook.
ECB council member Villeroy stated that the central bank will have an obligation to keep interest rates low for a long period of time.
The Euro remained under pressure in European trading, but EUR/USD did find support below 1.0850 and settled around 1.0870 as the US currency drifted lower. The Eurogroup meetings will resume later on Thursday with the Euro liable to secure a limited boost if some form of agreement can be reached. EUR/USD settled around 1.0865 in early Europe with stronger than expected German trade data and volatility is liable to increase later in the session.
US Treasury Secretary Mnuchin stated that the Administration will aim to prevent small businesses running out of money and negotiations are on-going for another support package. Senator Sanders announced that he was suspending his presidential campaign, confirming a Trump-Biden context in November.
Markets were monitoring the situation in Wuhan to assess whether an easing of lockdown measures would be sustainable or whether infection rates would start to increase once again. US equities made significant gains into the European close which helped support risk appetite, but the dollar was unable to make headway as USD/JPY edged lower to the 108.70 area amid wider US currency losses.
Minutes from the March 15th Federal Reserve meeting stated that trading conditions across a range of markets were severely strained with reports of an acute decline in Treasury market liquidity. All participants viewed the near-term outlook as having deteriorated sharply and having become profoundly uncertain. Dallas Fed President Kaplan stated that unemployment could increase to around 15% before a decline to 7-8% by year-end and there could be new Fed programmes to support the economy.
Overall, USD/JPY settled around the 108.85 area at the New York close. Volatility eased on Thursday with a slight increase in US equity futures and USD/JPY held just below the 109.00 level amid evidence of exporter dollar selling above this level.
The medical bulletins on Prime Minister Johnson’s condition offered some encouragement as he was reportedly making good progress. Latest data, however, recorded the largest number of UK coronavirus deaths so far at 938 with new cases close to 5,500. EU chief trade negotiator Barnier stated that he will speak to his UK counter-part Frost next week to organise upcoming negotiation rounds, but markets remained uneasy over time pressures.
A firm tone in commodity currencies helped underpin sentiment to some extent while concerns over Euro-zone budget policies also helped underpin the UK currency.
Sterling overall held a firm tone during Wednesday with a GBP/USD peak above 1.2400 while EUR/GBP rallied above 1.1400. The RICS housing index weakened to 11% from 29% previously, although sales expectations declined to a record low. Sterling edged lower on Thursday as volatility eased with GBP/USD consolidation close to 1.2370 as February GDP data was weaker than expected with a 0.1% decline. There is the potential for choppy trading later in the day with position adjustment ahead of the Easter market holiday.
|07:00||GBP Industrial Production (M/M)(FEB)||0.10%||-0.10%|
|07:00||GBP Industrial Production (Y/Y)(FEB)||-2.90%||-2.90%|
|07:00||GBP Manufacturing Production (Y/Y)(FEB)||-4.00%||-3.60%|
|07:00||GBP Manufacturing Production (M/M)(FEB)||0.10%||0.40%|
|07:00||GBP Trade Balance(FEB)||-6.00B||-5.76B|
|07:00||GBP Trade Balance Non EU(FEB)||-0.50B||0.22B|
|07:00||German Trade Balance(FEB)||17.5B||18.5B|
|09:00||Industrial Output YY WDA(FEB)||-||-0.10%|
|09:00||Industrial Output MM SA(FEB)||-||3.70%|
|13:30||USD PPI Ex Food & Energy (M/M)(MAR)||0.10%||-0.30%|
|13:30||USD PPI Ex Food & Energy (Y/Y)(MAR)||1.70%||1.40%|
|13:30||USD PPI (Y/Y)(MAR)||1.80%||1.30%|
|13:30||USD PPI (M/M)(MAR)||-0.30%||-0.60%|
|13:30||CAD Employment Change (M/M)(MAR)||10.0K||30.3K|
|13:30||CAD Full Employment Change(MAR)||-||37.6K|
|13:30||CAD Unemployment Rate (M/M)(MAR)||5.60%||5.60%|
|13:30||USD Continuing Jobless Claims||8.000K||3.029K|
|13:30||USD Initial Jobless Claims||5.259K||6.648K|
|14:00||GBP NIESR GDP Estimate||-||0.00%|
|15:00||USD Michigan Consumer Sentiment(APR 01)||95||89.1|
|15:00||USD Wholesale Inventories||-0.50%||-0.40%|