Currency Market Analysis

May 20, 2020 | Currency Market Analysis

Global Themes

US dollar lower for a third straight day as equities surge around the globe

A news report late yesterday afternoon poured cold water on the announcement that Moderna’s phase one trials had been successful. Stat news said that many experts believe that ‘there is really no way to know how impressive or not, the vaccine may be’, as very little actual data accompanied the news release. The article lead to a 390-point loss for the Dow. Equities are trying to shake off that setback, up 1-2% in Asia and Europe with Dow futures pointing to a 300-point advance at the open. The US dollar, following risk, is lower across the board vs major currencies.

EUR

The Euro is challenging yesterday’s highs vs the dollar as well as major peaks achieved in early May and April. There should be major technical resistance at these levels, but should the Euro break higher, we could see prices not seen since March. Inflation is the Eurozone was reported at +0.3% in April m/m and just +0.3% year/year. The Covid-induced recession is really driving consumer prices lower around the world. Thursday brings the minutes from the last ECB meeting April 30th. And Friday will see the release of preliminary Manufacturing and Service Sector Purchasing Manager’s Indexes for May.

CAD

The Canadian dollar continues to challenge its post-Covid high for a second straight day, as the currency gains support from two-month highs in oil, and a rebound in other commodities. Canada reported Consumer Prices for April of -0.7% m/m and -0.2% y/y, both one tick lower than market expectations. Wholesale Trade for March also was reported -2.2%, which bettered consensus of a 3.8% drop. Friday brings March Retail Sales for Canada.

USD

At 2:00ET today the Minutes from the April 29th FOMC meeting are released. Equity and currency markets will be particularly sensitive to any indications of further actions being discussed by the members. Additional measures could be supportive of stocks which could send the dollar lower. Two Fed Presidents, Bostic and Bullard also speak today.

GBP

The British Pound continues its valiant recovery from 8-week lows versus the US dollar reached Monday. UK inflation for April fell 0.2% m/m, up 0.8% y/y. There is lots of important data ahead for the Pound with Manufacturing and Service Sector PMI’s for May released tomorrow morning and Retail Sales for April on Friday.


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