Wednesday April 15th, 2020

As the global coronavirus cases surpassed +2mio, the IMF said yesterday that it expects the global economy to shrink 3% in 2020. The US$ rebounded overnight amid increasing concerns that the impact from the coronavirus will be long and protracted. US$ index vs a basket of major currencies rallied almost 1% as investors returned to safe haven buying.  IEA forecast a 29m bpd drop demand for April saw Petro currencies come under renewed pressure with RUB, MXN & NOK all dropping +2% vs US$. Intraday investors will focus on US Retail sales, industrial production and EIA crude oil stocks change for direction today.

Oil prices drop 4% as demand levels falls to levels not seen in 25 years as analysts predict further downward pressure without a demand recovery. C$ weakened 1% overnight vs US$ with the falling oil prices. Bank of Canada meeting today, having already cut interest rates to 0.25%, injected C$150bln in stimulus measures and actioned an asset purchase program. Investors will focus on BoC’s asset purchases and clarity on longer-term interest rate direction. Oil prices & BoC will provide direction to the markets today. Resistance sits at 1.4180 and support is building at 1.3940. 

The Euro’s rally came to a grinding halt with the IMF economic forecast driving investors back to the US$. Italy and Spain are gradually unwinding their lockdown restrictions, but it is unlikely Germany or France will follow suit. The BoFrance reported retails sales plunged 24% in March, and fell 7.2 in Q1. Fears that the ½ trillion stimulus may be insufficient, the president of the Eurogroup said he hasn’t ruled out “corona-bonds”. 1.0880 remains a key support, if breached look for 1.0750 next with 1.1050 remaining major resistance level. US Data releases today will provide intraday direction.

GBP dropped 1% from yesterday’s high of 1.2640 level vs US$. Coronavirus cases in the UK are rising quickly hitting 95k with deaths surpassing 12k. As the UK PM remains sidelined in recovery the British government is expected to extend lockdowns to the first week in May. Estimates are that the UK economy could shrink 35% in Q2 2020 with 13% drop in GDP for 2020. A break of 1.2480 could see a retest of 1.2165 next, resistance remains at 1.2650.