· The dollar held gains against major currencies on Thursday after U.S. Federal Reserve Chairman Jerome Powell dismissed speculation that policymakers will adopt negative interest rates.
Among Asian currencies, the Australian dollar fell on data showing the country shed jobs in April at the fastest pace on record, suggesting more monetary and fiscal easing may be needed to support the economy.
The focus will shift to economic data from the United States and Europe in the next two days for more clues on the depth of the downturns there, while investors will closely watch China’s activity gauges for signs of how long it may take to emerge from the sharp shock caused by the coronavirus outbreak.
The dollar traded at $1.0805 against the euro EUR=D3 on Thursday following a 0.3% gain in the previous session.
Against the pound GBP=D3, the greenback rose to a five-week high of $1.2203.
The yen JPY=EBS edged up to 106.88 against the U.S. dollar as some traders bought the Japanese currency on risk aversion after Nikkei shares .N225 fell to a one-week low.
· EUR/USD Forecast: Powell boosts the greenback
EUR/USD short-term technical outlook
The EUR/USD has remained within familiar levels, overall neutral. The 4-hour chart shows that a directionless 200 SMA continued to cap advances, with the pair now hovering around an also flat 20 SMA. Technical indicators, in the meantime, have turned lower, although they remain stuck to neutral levels. Bears could have better chances on a break below 1.0790, a strong static support level, although it seems unlikely that the pair could extend its decline far below this last during the upcoming sessions.
Support levels: 1.0790 1.0755 1.0720
Resistance levels: 1.0890 1.0920 1.0950
· Trump says Fauci’s warnings about reopening amid coronavirus crisis are not ‘acceptable’
Top coronavirus health expert Dr. Anthony Fauci’s recent warning about the potentially dire consequences of reopening states and schools too soon was “not an acceptable answer,” President Donald Trump said Wednesday.
Fauci, the director of the National Institute of Allergy and Infectious Diseases and a member of the White House task force, said at the hearing that he doubted that an effective vaccine or treatment for the virus would be available by the fall when schools are set to reopen.
Fauci also said that reopening states too soon amid the Covid-19 crisis could bring even more “suffering and death,” and that he was concerned that rushing to reopen “would almost turn the clock back rather than going forward.”
· U.S. weekly jobless benefits to stay elevated as coronavirus layoffs widen
The global novel coronavirus crisis continues to batter the U.S. labor market, with millions more Americans, including white collar workers, expected to have filed for unemployment benefits last week as the hit from the pandemic spills over into a broader swath of the economy.
Initial claims for state unemployment benefits likely totaled a seasonally adjusted 2.5 million for the week ended May 9, according to a Reuters survey of economists. While it still would be an astoundingly high number, that would be down from 3.169 million in the prior week. Claims have been gradually decreasing since hitting a record 6.867 million in the week ended March 28.
Last week’s filings would lift the number of people who filed claims for unemployment benefits to about 36 million since March 21, nearly a quarter of the working age population. Still, April was probably the trough in job losses during this downturn, which has also been marked by the sharpest decline in output since the 2007-09 Great Recession.
· U.S. March, April job losses revised higher
The U.S. economy lost a record 20.537 million jobs in April and not 20.5 million as reported last Friday, according to revised data published by the Labor Department this week.
The Labor’s Department’s Bureau of Labor Statistics (BLS), which compiles the closely followed monthly employment report, also raised March’s job losses to show nonfarm payrolls decreasing 881,000 instead of 870,000 as previously estimated.
Employment gains for February were revised up to 251,000 from 230,000 as previously reported.
· Goldman Sachs now sees US unemployment rate peaking at 25% - Bloomberg
Goldman Sachs economists David Mericle and Ronnie Walker estimate that the US jobless rate will peak at 25% versus the previous forecast of 15%, according to Bloomberg.
The forecast for the peak jobless rate has been revised higher following last Friday's Nonfarm Payrolls report, which showed a record contraction in job growth in April and a rise in the jobless rate to 14.7% - the highest since the Great Depression era.
· Treasury's Mnuchin says U.S. will slowly reopen economy
U.S. Treasury Secretary Steven Mnuchin said on Wednesday the economy will be reopened slowly but he cautioned that waiting too long risked severe economic damage.
Mnuchin said he expected the second quarter to be “pretty bad” but if the economy is reopened safely then subsequent quarters will be better and next year “we’ll be back to having a great economy.”
Mnuchin said the Trump administration was open to spending more money in the future but “we’re not in a rush to do that this week or next week. We’re going to take our time.”
· Goldman Sachs says a second wave of coronavirus could make the Fed rethink negative interest rates
Another “big setback” in the U.S. economy could prompt the Federal Reserve to consider cutting interest rates into negative territory — but such a monetary policy wouldn’t be “very helpful,” a Goldman Sachs strategist said on Thursday.
Fed Chairman Jerome Powell on Wednesday reiterated that the central bank is not considering negative interest rates at this point, even as other central banks — such as the Bank of England — appeared to be opened to the idea.
Pandl didn’t elaborate on why negative interest rates wouldn’t be helpful. But many analysts have long doubted the effectiveness of such a policy, citing the experience of some European countries and Japan which have struggled to grow their economies even after adopting negative rates for years.
· Bill Diviney, a Senior Economist at ABN Amro, believes the chances of imposing negative rates by the Fed are not impossible, but still unlikely.
Key quotes
“While there are certain circumstances in which negative rates become a viable option for the Fed, for the time being they look unlikely – at least not before other policy options are exhausted.”
“We think more likely options for a Fed wanting to provide more accommodation include: expanding the breadth and pace of asset purchases, stronger forward guidance, and potentially caps on bond yields.”
· Australian jobs plunged by the most on record in April as employers laid off hundreds of thousands of staff in response to the economy-wide shutdowns to curb the spread of the coronavirus.
Thursday’s data from the Australian Bureau of Statistics (ABS) showed employment in April decreased 594,300, the largest fall on record.
The unemployment rate shot up to 6.2%, the highest since September 2015, from 5.2% in March but lower than the 8.3% forecast by economists in a Reuters poll.
· China is likely to speed up the buying of U.S. farm goods, an executive at state-owned agriculture trading house COFCO said at an online industry conference on Thursday.
Soybeans are the top U.S. agriculture export to China.
China will allow imports of barley and blueberries from the United States effective Thursday, according to notices on its customs website.
· Finland’s government will grant crisis support totalling nearly a billion euros to companies hit by the economic blow from the coronavirus outbreak, Minister of Economic Affairs Mika Lintila said on Thursday.
· Oil prices climbed on Thursday following an unexpected drop in U.S. crude stocks, but gains were capped by a bleak outlook for the world’s No. 1 economy as the coronavirus pandemic crushes fuel demand, and concern over a potential second wave of cases.
Brent crude futures were up 18 cents, or 0.6%, at $29.37 per barrel at 0621 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 23 cents, or 0.9%, at $25.52 a barrel.
· Oil Price Forecast: WTI jumps 4% to regain $25 on voluntary output cuts, eyes on API
WTI (June futures on Nymex) is on a steady rise and regains the $25 mark in European trading, following a brief consolidation phase seen around 24.50 in the Asian session.
Saudi Arabia committed to cut output by a further 1 million barrels per day (bpd) in June while UAE and Kuwait offered to cut an extra 180,000 bpd in total next month. Adding to the upside in oil, Russian data showed that the country’s oil output has declined to 9.45 million bpd between the May 1-11 period.
Meanwhile, “Kazakhstan has ordered producers in large and mid-sized oil fields to cut output by about 22% in May to June, in line with the OPEC+ deal,” per Reuters.
Oil bulls remains unperturbed by fresh concerns over the second wave of the virus infection while the renewed trade tensions between Australia and China also appear to have little to no impact on the higher-yielding oil.
WTI technical levels to watch
At the time of writing, WTI jumps 3.80% to 25.06, with the next resistance seen at Monday’s high of 25.58. A break above the latter opens doors towards 26.00. Alternatively, any pullback will meet the demand near 24.45, the intersection of 5-DMA and daily pivot point. Further south, Monday’s low of 23.67 could be tested.
Reference: CNBC, Reuters,Worldometers,FX Street
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