The Greenback falls as we await the release of the Fed minutes and following Powell and Mnuchin’s presentation yesterday.

OFX Daily Market News

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USD – United States Dollar

The Greenback is falling versus all the majors, -0.5 vs the Euro, -0.2 vs the Loonie, and -0.9 vs the Aussie dollar. The most important piece of information, the FOMC meeting minutes, will be released at 2:00 pm EST and they may confirm the catalysts for a weaker US dollar in the short-term. Tomorrow, initial jobless claims will be released, but filings for jobless benefits in the May employment survey week will likely continue to trend down as most states gradually reopen their economies. Bloomberg Economics’ preliminary forecast for May assumes a decline in nonfarm payrolls of 7 million and a surge in the unemployment rate to 20 percent.

Fed of Atlanta President Raphael Bostic said he’s not clear how fast the U.S. economy will rebound from the current contraction and the pace of recovery will be dictated by the health-care response. After Bostic’s speech, Fed President James Bullard said that the virus policy response has been “sized” about right, adding that if the shutdown goes on too long, risks to banks will rise. He also said he expects the Fed rate to stay near zero for a quite a while. These comments have caused the US dollar to erase some of its losses over the last few minutes.

Yesterday, Fed Powell wasn’t as upbeat about unlimited fiscal stimulus. Powell and Treasury Secretary Steven Mnuchin were under fire in the Committee of Banking. Powell had been vocal about the need for additional fiscal stimulus if warranted, but he stopped short of asking Congress for any specific measures. Treasury Secretary Mnuchin warned that a prolonged business shutdown would pose long-term threats to the economy.

Key Movers

Australian MoM retail sales figures showed a fall overnight. The previous figure was at +8.5 percent, but the actual number for April was a fall of -17.9 percent. In spite of this, the AUD/USD pair has touched a new high since March 9th.

The CPI in Canada came in at -0.2 percent versus the -0.1 percent expected, which is setting the Canadian economy into deflationary territory. However, fundamentals stopped being followed a long time ago, maybe because Covid-19 is creating a challenge for Statistics Canada to collect and measure data in an environment of low response rates. Anyway, the driver of volatility *in currencies* appears to be the same thing that caused stocks to rise just 24 hours ago and then fall overnight: Moderna. This morning though, the market was cheering again over the possibility of the vaccine on the horizon, so the Loonie has been in a rally mode versus the Greenback.

Overall, commodity prices were supporting the Loonie’s strength. For example, crude oil with delivery in July went up 2.2 percent, rising the most since March 16th, and it is in a rally mode for a fifth day as investors weigh signs that the market is rebalancing against what’s still a precarious economic outlook. The Loonie however is mixed against its Group-of-10 peers. It is outperforming havens (Yen), while lagging high beta peers such as the Aussie dollar and Kiwi dollar. Canadian crude that normally travels to the U.S. is finding a market in China, where demand is almost back to pre-virus levels. The last piece of economic data came from wholesale trade sales month to month, which came in at -2.2 percent versus the -4.8 percent expected.

Expected Ranges

USD/CAD: 1.3867 – 1.3939 ▼

EUR/USD: 1.0944 – 1.1000 ▲

GBP/USD: 1.2168 – 1.2318 ▲

AUD/USD: 0.6500 – 0.6616 ▼

NZD/USD: 0.6068 – 0.6150 ▼


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