EU governments agreed a EUR1.0trn support package in principal but failed to agree details..

Euro-zone PMI business confidence data was much weaker than expected, reinforcing fears over the near-term outlook. The Euro briefly gained ground on hopes of a very substantial Eurogroup fiscal support deal, but then faded again with EUR/USD below 1.0800.

EU governments agreed a EUR1.0trn support package in principal but failed to agree details.

US data was marginally stronger than consensus forecasts with EUR/USD near 4-week lows just above 1.0750 on Friday. Global equity markets edged lower from late in US trading after a key coronavirus drug trial failed.

Sterling was initially resilient despite the weak PMI data, although it was unable to hold its best levels amid fundamental concerns.

The German manufacturing PMI index declined to 34.4 from the previous month while the services-sector index slumped to 15.9 from 31.7 previously and there was even sharper downturn in France, especially for services. The Euro-zone manufacturing index dipped to an 11-year low of 33.6 from 44.5 with the services index at a record low of 11.7 from 26.4 with all indices worse than market expectations. Earlier, there was a huge slide in the German confidence index to -23.4 from 2.7 previously.

EUR/USD was subjected to fresh selling after the data with a retreat to 4-week lows near 1.0750.

US initial jobless claims declined to 4.43mn from a revised 5.24mn the previous week while the insured unemployment rate increased to a record high of 11.2%. Claims have totalled over 26.0mn in the past few weeks, maintaining expectations of a jump in unemployment and slump in payrolls in next week’s jobs report.

According to flash data, the April PMI manufacturing index declined to an 11-year low of 36.9 from 48.5 previously while the services-sector index slumped to a record low of 27.0 from 39.8. The dollar failed to secure further gains and the Euro gained significant relief following comments from German Chancellor Merkel that the Euro-zone needed to provide huge support to economies. ECB President Lagarde also reported that a strong and flexible EU recovery fund is needed fast with EUR/USD regaining 1.0800.

EU leaders agreed in principle to build a EUR1.0trn fund to support the coronavirus recovery phase, but there were still important divisions over the structure of the fund with disagreement on whether there should be grants or loans. The EU Commission has been asked to present detailed proposals by May 6. The Euro dipped lower in response with an initial EUR/USD retreat to the 1.0780 area and remained on the defensive close to 1.0770 on Friday as the dollar maintained a firm tone.

The yen maintained a firm tone ahead of Thursday’s New York open despite a solid tone in global equities with USD/JPY testing support below 107.50. According to source reports, the Bank of Japan will consider suspending any upper limit to bond buying at next week’s policy meeting. The yen spiked lower following the report, but USD/JPY only briefly tested the 108.00 level before losing ground once again. US equities retreated in late trading with some disappointment that Gilead’s Remdesivir drug failed a clinical trial. USD/JPY retreated to the 107.50 area as the yen secured fresh support on the crosses.

The Federal Reserve confirmed that it will announce increased access to the paycheck protection program liquidity facility and the House of Representatives passed the latest $484bn economic support package. Treasury Secretary Mnuchin stated that it is considering a lending support program for US oil companies.

According to Japanese Finance Minister Aso there was no Bank of Japan decision on unlimited bond-buying yet with USD/JPY settling around 107.60.

The UK PMI manufacturing index declined to 32.9 for April from 47.8 the previous month and would have been even lower without a further substantial lengthening in delivery times. The services-sector index slumped to 12.3 from 34.5 with both figures at record lows. New orders slumped with over 80% of service-sector companies reporting a decline in activity. There was also the fastest rate of decline in prices for over 20 years, reinforcing expectations that inflation would decline sharply in the short term. With government borrowing set to increase rapidly, the Treasury announced £180bn in gilt sales over the next 3 months.

The CBI industrial orders index declined to -56 from -29 previously with a record decline in monthly business confidence and substantial scaling back of investment intentions. The Sterling impact was limited with the UK currency gaining an element of support from firmer risk appetite and a recovery in oil prices.

Bank of England MPC member Vlieghe stated that the economy was unlikely to recover quickly. Consumer confidence was unchanged at a record low of -34 for April with Sterling drifting lower on Friday. GBP/USD traded below 1.2350 as March retail sales registered a record 5.1% monthly decline.

Economic Calendar

Expected Previous
07:00 GBP Retail Sales ex-Fuel (Y/Y)(MAR) -4.70% 0.40%
07:00 GBP Retail Sales ex-Fuel (M/M)(MAR) -3.50% -0.50%
07:00 GBP Retail Sales (Y/Y)(MAR) -4.70% 0.00%
07:00 GBP Retail Sales (M/M)(MAR) -4.00% -0.30%
09:00 Consumer Confidence(APR) - 101
09:00 German Business Expectations(APR) 81.9 79.7
09:00 IFO - German Current Assessment(APR) - 93
09:00 German IFO Business Climate Index(APR) 77.2 87.7
09:00 Business Confidence(APR) - 89.5
12:30 USD Durable Goods Orders Ex Transportation(MAR) -5.80% -0.60%
13:30 USD Durable Goods Orders (M/M)(MAR) -13.00% 1.20%
15:00 USD Michigan Consumer Sentiment(APR 01) 68 71

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.