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· Euro holds firm as markets bet on ECB stimulus boost

The euro held near multi-month highs against its peers on Thursday, on expectations the European Central Bank will expand its bond buying programme later in the day to shore up the corona virus-stricken economy.

The euro’s strength helped to push the dollar’s index against a basket of key currencies to the lowest in nearly three months while optimism over the reopening of economies around the world also reduced demand for the dollar.

The euro stood at $1.1220, down slightly on the day after having risen to $1.1258 on Wednesday, its highest levels since mid-March and the seven straight sessions of gains.

Against the Japanese yen, the common currency rose to a 4-1/2-month high of 122.625 overnight and last stood at 122.21 yen.

It also fetched 1.0793 franc on the safe-haven Swiss currency, having risen to as high as 1.0820, its strongest since Jan. 14.

The European Central Bank is widely expected to increase the size of its 750 billion euro ($669 billion) Pandemic Emergency Purchase Programme (PEPP) as early as Thursday.

The ECB delivers its policy decision at 1145 GMT and ECB President Christine Lagarde holds a news conference at 1230 GMT.

The currency has been bolstered by hopes for European Union-wide fiscal support measures after Germany last month threw its weight behind the idea of a European Union recovery fund, breaking away from its long-held tradition to resist moves towards fiscal integration in the currency bloc.

The dollar index stood at 97.450, having fallen about 1% so far this week as broad improvement in risk sentiment, underpinned by reopening of economies globally, reduced the allure for the greenback.

The safe-haven yen also weakened during much of this period, and was last trading at 108.96 yen, near a two-month low of 108.98 hit in U.S. trade previously.

Sterling was changing hands at $1.2576, near its strongest in more than a month, helped by signs that Britain might be willing to compromise on sticking points in Brexit negotiations with the European Union.

Britain is expected to indicate flexibility over fisheries and trade rules if the European Union agrees to lessen its demands regarding regulatory alignment and fishing access, the Times newspaper reported on Tuesday as a new round of talks kicks off.

The UK has until July 1 to ask for an extension to the current transition period, which ends in December.

· USD/JPY: Bullish bias intact while above 21-HMA in potential rising channel

The hourly Relative Strength Index (RSI) has turned flat but still trades above the midline, suggesting the bulls still have some chance to regain the baton.

Should the 21-HMA support give way, the corrective slide will pick up pace to test the rising trendline support at 108.62.

Selling pressure will intensify below the aforesaid support, as the pattern will get confirmed. The bears will then aim for the pattern target at 107.86. However, fresh bids could emerge at 108.51, the bullish 50-HMA, before attempting a break towards sub-108 levels.

On the flip side, only a daily closing above the 109 handle will open doors for further upside.

· Japanese yen offers stability in the medium term: Strategist

Mazen Issa of TD Securities says that the currency markets have largely ignored economic data in the past few months. He says the Japanese yen offers more stability in the coming months, and expects to see USD/JPY consolidating at the 109-110 level.

· U.S. new weekly jobless claims seen falling below 2 million

The number of Americans filing for unemployment benefits likely dropped below 2 million last week for the first time since mid-March, but remains astonishingly high as companies adjust to an environment that has been significantly changed by COVID-19.

Nevertheless, the weekly jobless claims report from the Labor Department on Thursday would suggest the worst is over for the labor market, combined with data on Wednesday that showed a smaller-than-expected drop in private payrolls in May.

Surveys have also shown consumer confidence, manufacturing and services industries stabilizing albeit at low levels in May, indicating the downturn triggered by a near shutdown of the country in mid-March to control the spread of COVID-19 was bottoming. Many businesses had reopened by mid-May.

Economists said the stubbornly high number of unemployment claims comes from a second wave of layoffs as businesses navigate weak demand, as well as some lingering backlogs at state unemployment offices overwhelmed by the flood of applications early in the shutdown.

The government’s closely watched employment report for May, scheduled for release on Friday, is likely to show nonfarm payrolls falling by 8 million in May after a record 20.537 million plunge in April, according to a Reuters survey of economists. The unemployment rate is forecast rocketing to 19.8%, a post World War Two record, from 14.7% in April.

· China eases flight curbs after United States targets its carriers

China said it will ease coronavirus restrictions to allow more foreign carriers to fly to the mainland, shortly after Washington vowed to bar Chinese airlines from flying to the United States due to Beijing’s curbs on American airlines.

· After long silence, Mattis denounces Trump and military response to crisis

After long refusing to explicitly criticize a sitting president, former Defense Secretary Jim Mattis accused President Donald Trump on Wednesday of trying to divide America and roundly denounced a militarization of the U.S. response to civil unrest.

The remarks by Mattis, an influential retired Marine general who resigned over policy differences in 2018, are the strongest to date by a former Pentagon leader over Trump’s response to the killing of George Floyd, an African-American, while in Minneapolis police custody.

“Donald Trump is the first president in my lifetime who does not try to unite the American people — does not even pretend to try,” Mattis, who resigned as Trump’s defense secretary in 2018, wrote in a statement published by The Atlantic.

· Euro holds firm as markets bet on ECB stimulus boost

The euro held near multi-month highs against its peers on Thursday, on expectations the European Central Bank will expand its bond buying programme later in the day to shore up the coronavirus-stricken economy.

The euro’s strength helped to push the dollar’s index against a basket of key currencies to the lowest in nearly three months while optimism over the reopening of economies around the world also reduced demand for the dollar.

The euro stood at $1.1220, down slightly on the day after having risen to $1.1258 on Wednesday, its highest levels since mid-March and the seven straight session of gains.

Against the Japanese yen, the common currency rose to a 4-1/2-month high of 122.625 overnight and last stood at 122.21 yen.

It also fetched 1.0793 franc on the safe-haven Swiss currency, having risen to as high as 1.0820, its strongest since Jan. 14.

The European Central Bank is widely expected to increase the size of its 750 billion euro ($669 billion) Pandemic Emergency Purchase Programme (PEPP) as early as Thursday.

The ECB delivers its policy decision at 1145 GMT and ECB President Christine Lagarde holds a news conference at 1230 GMT.

The currency has been bolstered by hopes for European Union-wide fiscal support measures after Germany last month threw its weight behind the idea of a European Union recovery fund, breaking away from its long-held tradition to resist moves towards fiscal integration in the currency bloc.

The dollar index stood at 97.450, having fallen about 1% so far this week as broad improvement in risk sentiment, underpinned by reopening of economies globally, reduced the allure for the greenback.

The safe-haven yen also weakened during much of this period, and was last trading at 108.96 yen, near a two-month low of 108.98 hit in U.S. trade previously.

Sterling was changing hands at $1.2576, near its strongest in more than a month, helped by signs that Britain might be willing to compromise on sticking points in Brexit negotiations with the European Union.

Britain is expected to indicate flexibility over fisheries and trade rules if the European Union agrees to lessen its demands regarding regulatory alignment and fishing access, the Times newspaper reported on Tuesday as a new round of talks kicks off.

The UK has until July 1 to ask for an extension to the current transition period, which ends in December.

· From wagyu beef to melons, Japan's $2.2 trillion virus rescue piques struggling firms

As the coronavirus jolts Japan, the government’s huge stimulus package has come under fire from hard-hit restaurant owners for channelling funds for items like wagyu beef, melons and tourism rather than accelerating help for firms with burning cash needs.

The restaurant industry’s struggles highlight a larger problem in Japan’s revival plan, which at $2.2 trillion is the size of Italy’s economy but is still falling short of sufficient support to an important segment - small businesses which employ 70% of the nation’s workforce.

That puts at risk Japan’s recovery from the worst postwar recession it is now facing. The $232 billion restaurant industry is crucial to boosting growth as it, together with lodging, creates about 1.3 million new jobs a year, or roughly 17% of all the new employment.

More than 190 small businesses including 30 restaurant operators have gone bust during the current health crisis.

· Bank of Japan sees no need now to buy municipal bonds: central bank official

The Bank of Japan does not see the need now to add municipal bonds to a list of assets it buys to pump money into the economy, a senior central bank official said on Thursday.

“We’re able to provide ample funds to the market with our purchases of Japanese government bonds (JGB),” Takeshi Kato, head of the BOJ’s monetary affairs department, told parliament.

· Japan's latest stimulus to boost real GDP by about 2.0%: economy minister

Japan’s latest stimulus package aimed at softening the economic blow from the coronavirus pandemic is estimated to boost real gross domestic product by about 2.0%, Economy Minister Yasutoshi Nishimura said on Thursday.

Japan’s government last month approved a new $1.1 trillion stimulus package that includes significant direct spending, as the hit to economic activity from the virus threatens to push the economy deeper into recession.

The 117 trillion yen stimulus followed another package of a similar magnitude rolled out in April. The government estimated the lift to real GDP from recent stimulus measures, including the latest package, to be about 6.4%.

· Bank of England asks banks to estimate pandemic loan losses

The Bank of England will gather more information from banks on their likely losses on loans due to the pandemic, its deputy governor Sam Woods said on Thursday.

The BoE’s Prudential Regulation Authority will gather the data ahead of banks’ second quarter earnings to compare the timing and amount of losses with those it modelled last month.

· WHO says anti-malaria drug hydroxychloroquine’s coronavirus trials to resume

The World Health Organization announced Wednesday that clinical trials of the drug hydroxychloroquine will resume as it searches for potential coronavirus treatments.

On May 25, the WHO announced it had temporarily suspended the trials to conduct a safety review, which has now concluded there is “no reason” to change the way the trials are conducted.

The UN health agency’s decision came after a study published in The Lancet medical journal suggesting the drug could increase the risk of death among COVID-19 patients.

The executive group of the so-called Solidarity Trial -- in which hundreds of hospitals across the world have enrolled patients to test several possible treatments for the novel coronavirus -- took the decision as a precaution.

· Australia April retail sales post record slump, backs grim outlook for second-quarter GDP

Australian retail sales suffered a historic plunge in April when much of the country was locked down to combat the corona virus, as markets and policymakers braced for the nation’s worst ever economic contraction in the current quarter.

Retail sales slumped a seasonally adjusted 17.7% in April, their biggest on record, from an 8.5% jump in March, data from the Australian Bureau of Statistics (ABS) showed on Thursday.

Australia implemented strict social distancing rules in mid-March to contain the COVID-19 pandemic, forcing many businesses to close. Though some restrictions have eased this month economists say it will be a while before activity returns to pre-crisis levels.

Analysts are predicting Australia’s gross domestic product (GDP) could fall roughly 8% in the current quarter, with the dive in April retail sales alone subtracting 2.1 percentage point off GDP.

That would leave the economy facing its first recession in nearly three decades following the 0.3% contraction last quarter.

· IMF chief says some countries may need debt restructuring, not just freeze

Some of the world’s poorest countries and emerging market economies may need to restructure their debt in the future, the head of the International Monetary Fund said on Wednesday, adding that simply freezing debt payments might not suffice.

IMF Managing Director Kristalina Georgieva said some emerging market countries that pursued prudent and sustainable debt policies were weathering the coronavirus crisis better than others, but a small universe of countries with high debt burdens would likely need help going forward.

She said the Fund had disbursed about $260 billion of its $1 trillion in lending power at this point, with emergency financing provided thus far to 63 of 103 countries that had asked for help since early March.

· UK car sales almost 90% below normal in May: SMMT

British car sales edged up in May after falling to their lowest since 1946 in April, but still remained almost 90% below their level a year earlier as coronavirus restrictions limited sales.

Preliminary figures from the Society of Motor Manufacturers and Traders (SMMT) on Thursday showed that around 20,000 new cars were registered last month, up from just 4,321 in April but just a fraction of the 183,724 sold in May 2019.

· Adidas says China sales back to growth faster than expected

German sportswear firm Adidas (ADSGn.DE) said on Thursday that sales had returned to growth in greater China faster than it had expected after the coronavirus lockdown, while the reopening of business in Europe and the Americas was going more gradually.

Adidas stuck by guidance it gave in April for at least a 40% fall in second-quarter sales and a drop in operating profit of more than 100 million euros ($112.05 million) and said it would give more details with results due on Aug. 6.

· Oil prices fall on doubts over output cuts, surging U.S. diesel inventories

Oil prices dropped on Thursday, reversing gains in the previous session, on concern over whether major crude producers will be able to agree to extend record output cuts, heightened by worries over a huge build in U.S. distillate inventories.

Brent crude LCOc1 futures fell 1.18%, or 47 cents, to $39.32 a barrel as of 0652 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 futures slid 1.80%, or 67 cents, to $36.62 a barrel.

Reference: CNBC, Reuters,Daily FX