Wednesday May 13th, 2020

Currency markets have remained stable despite increasing fears of a second wave of coronavirus and the upcoming Fed Chairs speech/webinar. US infectious disease expert Dr Fauci told congress yesterday that easing coronavirus lockdowns could set off new outbreaks of the virus in the US. On a positive note Gilead reaches licensing agreement for Remdesivir allowing production of the drug to increase. Sino/US tensions remain with the Senates possible move to advance a bill punishing China for its management of the crisis. Today’s focus will be on US PPI data and US Fed Chair Powell speaking at 9am EST. Fed Chair’s speech will be watched closely amid Increasing speculation of negative US interest rates and the US President pressing the Fed to adopt negative interest rates. 

Oil prices slip 1% as new outbreaks in S.Korea and China increase fears of a second coronavirus wave. Also weighing on Oil, EIA saying global demand to fall by 8.1bpd in 2020 and US Crude stockpiles increased by 7.6mio barrels last week. C$ strengthened marginally vs US$ despite lower oil prices but continues within its current trading range. Focus remains on Oil prices, Coronavirus updates and US Fed chair speech for direction.

Euro hold’ within 1.0780-1.0880 trading range as growing concerns of a second wave of coronavirus as lockdown restrictions are eased. ECB chief economist Lane is speaking today as tensions between the ECB and German constitutional court persist. EU industrial production YoY Mar fell further than expected, but within the current economic environment it had limited impact on Euro. Focus today will be on US PPI and the US Fed Chairs speech.

GBP is stable vs US$ despite weak GDP data and confusion over the UK PM’s message to reduce lockdown restrictions. UK GDP plummets by a record 5.8% in March, but the fall was better than the 8% expected and quarterly GDP fell 2% also beating expectations. The fear of a 2nd wave, June 2nd Brexit deadline and reports that the UK Chancellor is considering tax hikes could put additional pressure on GBP.