Apr 9, 2020, 4:17:50 PM
United States of America
The US currency is weakening today to the euro and the pound and has ambiguous dynamics with the yen.
Published yesterday, the minutes of the last Fed meeting showed that the regulator decided to bring the interest rate to zero and keep it at that level until the US economy overcomes the consequences of the coronavirus epidemic. Officials also agreed that the short-term economic prospects of the United States sharply worsened and became extremely uncertain. Under these conditions, rates should be kept low until the economy begins to steadily tend to high levels of employment and inflation target. Published today, data on initial jobless claims again disappointed investors. The indicator declined less than the market expected, from 6.867 to 6.606 million, thus, the state of the labor market continues to deteriorate.
The euro is moderately strengthening today against the dollar and the yen but has ambiguous dynamics with the pound.
February data on trade in Germany released today was positive. The trade balance, instead of the expected reduction to 17.5 billion euros, rose to 21.6 billion. Exports fell by 1.6%, while imports of German goods grew by 1.3%. However, February data does not show the full economic picture, since it was collected before the introduction of strict quarantine in most countries. Published today, the minutes of the last ECB meeting confirmed the negative attitude of the regulator. Officials noted that as a result of the coronavirus epidemic, market liquidity is deteriorating, and economic activity in the Eurozone is declining, which puts pressure on companies and increases the risk of lower inflation. Therefore, the ECB decided to put in place a new program for the purchase of temporary assets of securities of the private and public sectors in the total amount of 750 billion euros until the end of the year. Today, negotiations of EU ministers of economics should also continue; officials will once again discuss measures to support the economy in the amount of 500 billion euros. It was not possible to agree on them yesterday, as Germany opposed the joint issue of debt obligations. However, today the German Minister of Economics, Peter Altmaier expressed the hope that a compromise will be found.
Today, GBP is strengthening against USD and JPY and shows ambiguous dynamics with EUR.
Today, data on GDP and industrial production were published in the UK. In February, the economy contracted by 0.1%, and YoY, it grew significantly less than the market expected, by 0.3%. The volume of industrial production over the same period slowed down from 0.2% to 0.1%, and YoY, decreased by 2.8%. March data can be even worse because they will take the effect of quarantine into account. In view of this, the government announced its intention to directly borrow several billion pounds from the Bank of England to combat the effects of coronavirus.
JPY is today declining against the euro and the pound and shows ambiguous dynamics with the dollar.
Investors are focused on the comments of the Bank of Japan head, Haruhiko Kuroda, who said that the coronavirus epidemic is putting significant pressure on the economy, as it reduces production and consumption and increases uncertainty. The head of the Japanese regulator made it clear that the bank is ready for further mitigation measures to protect the economy. Also today, the BoJ has downgraded the economy of all nine country's regions for the first time in more than 11 years. It was stated that local economies were weakening and intensely pressured by the spread of COVID-19.
AUD is strengthening today against its main competitors – GBP, USD, JPY, and EUR.
Investors are focusing on the RBA financial stability report published today. It stated that Australian banks have every opportunity to withstand the economic downturn caused by the coronavirus, because now their profits are high and their assets are in good condition. But there are a number of risks for the banking sector, primarily because of the possible increase in household debts and a decline in the real estate market.
Today, oil quotes made an attempt to grow.
Investors still do not give up hopes for a deal to reduce production by countries belonging to OPEC+. A key meeting is due today. However, controversial issues still remain. According to Reuters, Russia and Saudi Arabia still disagree on the volume of the reduction in oil production. In addition, they hope to attract the United States, Canada, and Norway to the deal, but it is unclear whether these countries will accept it. US officials said that this year American companies will already reduce production by 1.2 million barrels per day for "natural economic reasons" without any contracts.