Monday May 11th, 2020

Friday’s US Nonfarm payroll showed the unemployment rate leaped to 14.7%, its worst in 90 years, nevertheless the bad news was priced in and investors ignored the news.  The US dollar firms against a basket of major currencies this morning, as the focus shifts to the loosening of global lockdown restrictions. Possible signs of a second wave of infections in Wuhan China and South Korea also warning of a second wave of infections on Sunday. Equity markets and oil markets start the week slightly down with “risk-off” sentiment growing from concerns of a 2nd wave of infections. Intraday no key data releases so market will focus on loosening of lockdown restrictions and covid-19 updates.

Oil prices slipped about -2% this morning on fears of a coronavirus 2nd wave and the ongoing glut of oil with fuel demand down 30% worldwide. C$ weakened vs a stronger US$ and falling oil prices this morning but is holding below 1.4000 level. Friday’s 18% unemployment number appears to have been completely priced in by investors and had no impact on C$. Covid-19 related updates and oil prices will dictate direction today. Support sits at 1.3925 with minor resistance at 1.4050.

Euro remains under pressure but is managing to hold above 1.0790 support level. EU industrial output figures today saw output falling month over month for March to -28.4% vs -1 previously. The focus shifts to restarting the economies as countries loosen their lockdown restrictions, with Germany, Spain and Italy gradually unwinding lockdown restrictions. The EU commission said the German Judges overreached their authority in deeming part of the ECB bond-buying plan was illegal. A major threat for the EU is the potential of a 2nd wave of infections. No data out of the US today, markets will focus on covid-19 update and lockdown restriction updates. Support 1.0790 with resistance at 1.0880. 

GBP weakens after UK PM announces limited loosening of the UK’s current lockdown procedures and gets a negative response from Scotland/Wales/N.Ireland leaders. The looming June 2nd Brexit deadline which both sides can decide to extend the transition period beyond year-end is also a growing concern for investors. GBP looks vulnerable to further weakness, 1.2265 provides initial support and resistance is growing above 1.2425.