Forex news for NY trading on May 5, 2020
- Major indices close higher, but well off the highs for the day
- Oil - heads up for the inventory data due around the bottom of the hour
- US CDC coronavirus data for the day
- Fed Vice Chair Clarida: Recovery could begin in 2nd half of year
- US Health Secretary Azar: Developing a coronavirus vaccine by year and is realistic
- Pres. Trump volleys back to McConnell: Payroll, capital gains tax
- WTI crude oil futures settle at $24.56 a barrel
- Senate Majority Leader McConnell suggests it might be time to pause and evaluate
- Fed's Bostic: Fed's emergency programs have reduced market strain
- Pres. Trump mulling tax cuts for businesses in next stimulus
- Fed's Bullard: Virus shock to US economy unlike any other
- White House considering winding down the coronavirus task force according to the New York Times
- France's hospitalizations down to 24,775 from 25,548 on Monday
- ECB remains fully committed to doing everything necessary
- UK death toll rises to 29,427. Most any Europe
- NY coronavirus hospitalizations down slightly
- European shares end the session with solid gains
- Fed's Evans: Reasonable to assume a return to growth in 2nd half
- Global dairy trade price falls -0.8% with an average selling price of $2866 per ton
- Pres. Trump: China should've informed us about the coronavirus
- ISM non-manufacturing PMI for April 41.8 versus 37.9 estimate
- US Markit services PMI for April (F) 26.7 versus 27.0 estimate
- PM Johnson's spokesperson: What matters is we get any change to social distancing right
- Canada international merchandise trade for March C$-1.41 billion versus C$-2.5 billion
- The CAD is the strongest and the EUR is the weakest as NA traders enter for the day
Today, Fed's Evans, Bullard, Bostic and Vice Chair Clarida all spoke. All expected growth to return in the 2H of the year, but there were varying degrees of concern too. Vice Chair Clarida was perhaps the most sanguine/realistic (?) and that gave profit takers in stocks to enter and take the major indices well off their highs. Nevertheless, the major indices still closed higher on the day, but just off the lows for the day (see % ranges for the major indices below).
European shares all closed higher with the German DAX leading the way at +2.51%.
Regarding the Fed members below is a summary of the respective nuances from their comments.
Fed's Evans sees growth returning in 2nd half, but concerned about the impact and risks from opening. Sees unemployment and double digits.
- Reasonable to assume a return to growth in 2nd half
- Social distance and other moves to ensure safety will make growth slow and gradual
- By summer will have a better idea of the outlook for growth, confidence, spending
- Some businesses are likely to be able to operate safely; others won't, like travel, hospitality
- it's a bold move to start reopening, worried about the risks
- Sees April unemployment rising to double digits
Fed's Bullarrd sees most of the growth contraction in the 2nd quarter. Reiterates his belief that the economy has to reopen to avoid bigger problems from economic stagnation. Sees double-digit unemployment, that could go as high as 20%.
- still feels main disruption to economy will be in Q2 if situation is managed properly
- Fed has intervened effectively to maintain financial market functioning, stave off crisis on that front
- US fiscal support has been quite strong
- Economy does not have a pause button, if closures extend to long new problems will develop
- US cannot afford to stay on hold until there is a complete and total resolution of the virus such as a vaccine
- Still possibly you get 20% unemployment
- Would view 3rd quarter as a transition quarter
- Hoping economy opens up with some confidence
Fed's Bostic is not sure about the shape of the recovery
- very hard to know the shape of the US recovery, the recovery difficult to achieve in many areas of the country
Fed's Clarida's said the recovery COULD begin in the 2H. That the data will see will be historicically bad, and the Fed action may not be over as we can't minimize the fact we are in a a recession.
- We're living through the most severe contraction in activity and surge in unemployment we seen in our lifetimes
- Recovery could begin and 2nd half of the year
- We are using our full range of tools, rates, balance sheet, forward guidance and lending facility to support the economy
- We're in for a period of very difficult data we haven't seen for the economy in some time
- Unemployment rate is going to reach to levels not seen since the 40s
- It may well be the case that more policy support is needed from the Fed and some fiscal policy as well
- We can't minimize that were in a recession
Perhaps it was the word "recession" that caught the eyes of traders. He just was a little more negative.
In other market developments today, the price of oil surged by over 20%. IN fact, the front contract is trading in after hours at $25.30, up $4.93 or 24.18%. Some short covering, and hopes that the reopening is more positive and starts to balance rising demand with falling supply.
The sharp rise in oil prices caught the eye of the Canadian dollar. It was the strongest of the major currencies today with the CHF and EUR the weakest. The EUR suffered after the German courts said the ECB must provide assurances that the QE stimulus demonstrates proportionality In their words, the ECB is on a "unconditional pursuit of the monetary policy objective of the PSPP, to achieve an inflation rate of below but close to 2%, but is ignoring the economic policy implications of the program, therefore obviously disregarding the principle of proportionality". The ECB has 3 months to prove or clarify their proportionality.
For the dollar today, the greenback was mixed with gains versus the EUR and CHF, and declines versus the CAD, JPY, NZD and AUD. The dollar was near unchanged versus the GBP.
