Thursday April 30, 2020

The Federal Reserve left its policy rates unchanged yesterday and pledged to do whatever is necessary, which put additional pressure on the US$. The Fed Chair in his comments sent a sobering message on the potential longer-term impact from the virus. Yesterday’s devastating US GDP number has set the stage for today’s weekly jobless claims where the total number of job losses may exceed 30 million since mid-March. A promising result from the Gilead’s Remdesivir COVID-19 drug gave investors confidence and helped boost equity markets yesterday. CNY & Asian currencies strengthen overnight with analysists highlighting that investor’s are cutting their “Short” currency positions. Focus today will be on Coronavirus updates, the ECB and the US jobless claims.

Oil prices rally +12% on early signs of pick up in fuel demand and the US suggesting support for US Oil companies, including providing potential “several hundred million” barrels of storage. IEA commented Coronavirus will trigger the biggest ever plunge in energy demand up to 6%. C$ had its strongest day in almost a month, supported by a weaker US$ and the rebound in oil prices. Canada is adopting a more cautious tone vs other countries in lifting lockdown restrictions, a crowd sourcing survey said that two thirds of Canadian businesses say they cannot survive more than six months of physical-distancing restrictions. Intraday Canadian GDP for (MoM)Feb will be released and alongside US$ jobless claims will provide direction. A clean break of 1.3825 (Apr13th low), is significant and opens the potential for 1.3729 and then a possible extension to 1.3460 (Mar9th).

Euro has continued to gradually extend its gains vs US$ heading into the ECB meeting and despite worse-than-expected data results this morning. Q1 Eurozone GDP dropped 3.8%, unemployment rose, and CPI data fell below expectations. ECB rate decision meeting today where rates should remain on hold and expectations are that new economic support measures could be announced. The ECB president has been urging EU leaders to do more including a “corona bond” type product. Euro is sitting around the 1.0880 resistance level; a break could see 1.1050 next and 1.0740 remains intraday support. ECB meeting and a US Data out this morning will dictate intraday direction.

GBP benefiting from a weaker US$ retested 1.25 levels vs US$, but bearish signals are suggesting GBP could be toppish at current levels. Investor concern is growing that the UK will remain in lockdown for longer that first expected after seeing Germany’s virus infection rate rise. The UK has the 2nd largest mortality rates in Europe at +26k and its infection rate is 3rd in Europe equal with France. The PM will lead the daily coronavirus briefing today and may shed more light on the UK’s next steps. Intraday the PM lockdown comment’s and US data releases will dictate direction. 1.2645 remains the key resistance point, with support at 1.2360 and key support at 1.2160.