Wednesday May 6th, 2020

Despite the increasing US/Sino tensions, Chinese equity markets rallied as investors anticipate no immediate action by the US due to pandemic challenges its facing and as long as domestic economic growth pressures persist within the US. Oil prices continue to rally as lockdown restrictions ease, which is having a positive knock-on effect to equity markets. Eur fell to a 2-week low after the German court decision challenged German participation in the eurozone’s stimulus program. US$ index strengthens vs Eur, GBP & Asian currencies. Scandi currencies firm against a weakening Euro and Jpy hits a 7-week high vs US$.. Focus shifts to the US employment situation, today US employment change data is released, US Initial Jobless claims tomorrow and US Non-Farm payroll on Friday. 

Oil prices rally into a 6th straight session as lockdown restrictions continue to ease and hopes that demand will grow. Analysis agree that Oil prices have bottomed out but warn that a supply gluts remains which could cap oil prices longer-term. The C$ advance stalled as safe-haven US$ buying offset the impact of the Oil price rally. Intraday US employment data and the US EIA Crude oil stocks change announcement will provide direction. Support 1.4005, with resistance at 1.4150

Euro weakened to 1.08 vs US$ with concern over the German court ruling and continuing weak economic data results. The ECB is expected to be able to justify its bond purchases, so the German court decision is unlikely to derail the euro zones stimulus efforts. Eurozone Services PMI, German Factory Orders & Eur retails sales data fell below expectations adding further pressure to the single currency. A break of 1.0740 support could potentially see a test of 1.0387, the lows last seen Jan 2017. US Job’s data will take centre stage this week and will be a primary driver of US$ direction.

GBP slipped below 1.24 vs US as investors worry about the ongoing lockdown restrictions, weak domestic economic data and longer-term fear over the UK’s exit from Europe. Despite the government’s announcement that the UK has hit its “peak”, covid-19 related deaths in UK grew to the 2nd highest globally and virus cases are expected to breach 200k this week. The current lockdown restrictions expire on Thursday, a three-staged plan is emerging, and the UK PM is expected to announce his strategy on Sunday. GBP is pivoting at 1.2385, minor support 1.2245 and behind that 1.2165