· Dollar slips, commodity currencies gain as risk sentiment improves
The U.S. dollar fell and commodity currencies gained on Monday, as risk appetite increased on optimism about recovery from the coronavirus pandemic amid a blockbuster May U.S. jobs report last Friday.
The safe-haven Japanese yen rose against the dollar, reversing losses the past several days as risk sentiment gained with growing recovery hopes.
In afternoon trading, the dollar index dipped 0.1% to 96.641 in choppy trading, after having gained overnight.
The dollar fell sharply against the yen, down 1.1% at 108.33 . It also dropped 0.6% against Swiss franc, another safe haven, to 0.9566.
The euro was higher against the dollar despite data showing German industrial output plunged the most on record in April as the pandemic forced companies in Europe’s largest economy to scale back production.
The euro was last up 0.2% at $1.1303. It reached a three-month high of $1.1384 last week after the European Central Bank announced it was expanding its stimulus program.
Investors are now focused on the U.S. Federal Reserve policy meeting this week. The Fed will need to balance signs that economic fallout from the pandemic is past its worst against evidence the virus itself is not yet under control.
· The U.S. entered a recession in February, according to the official economic arbiter
The worst U.S. downturn since the Great Depression is now officially a recession, according to the National Bureau of Economic Research.
Though it seemed a foregone conclusion, the NBER, the official arbiter of recessions, made the declaration Monday as the nation tries to recover from the coronavirus pandemic.
“The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions,” the NBER’s Business Cycle Dating Committee said in a statement. “Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.”
In making the declaration, the committee determined that a “clear peak in monthly economic activity” occurred in February. The peak in quarterly activity happened in the fourth quarter of 2019.
As a rule of thumb, recessions are thought to entail two consecutive quarters of negative GDP growth. However, that isn’t always the case, and it’s generally the NBER’s decision to determine recessions.
U.S. gross domestic product fell at a 4.8% annualized rate in the first three months of the year. The outcome for the April to June period is expected to show an even worse annualized decline of perhaps 20% or more. The unemployment rate rose from a record low of 3.5% in February, hitting 14.7% in April and 13.3% last month.
Since World War Two recessions have lasted from six to 18 months, nothing close to the 43-month downturn of the Great Depression that began in 1929.
The U.S. Federal Reserve meets this week, and officials will issue new economic projections that show how quick a recovery they expect.
· Trump campaign rallies to start up again in next two weeks
U.S. President Donald Trump plans to start holding campaign rallies again in the next two weeks, a Trump campaign official said on Monday, ending a three-month hiatus brought on by the coronavirus pandemic.
· UK and Japan aim for free trade deal this year as negotiations begin
Britain will begin negotiating a post-Brexit trade agreement with Japan on Tuesday which the government said both sides hoped would enter into force by the end of this year.
Trade deals typically take years to complete. Britain is also hoping to reach a trade agreement with the EU by the end of the year.
· Oil drops 3% as Saudi Arabia says it won’t extend voluntary cuts
Oil fell more than 3% on Monday after Saudi Arabia said an extension of output cuts by OPEC+ nations would not include additional voluntary reductions by a trio of Gulf producers.
After rising for seven consecutive session, Brent oil futures fell $1.30, or 3.1%, to $41.00 a barrel. West Texas Intermediate crude, meanwhile, fell $1.36, or 3.44%, to settle at $38.19 per barrel.
Both benchmarks rose to their highest since March earlier in the session with WTI topping $40 a barrel.
Reference: CNBC, Reuters
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