The Pound made a promising start yesterday morning, making gains with a move above 1.2500 against the Dollar and 1.1500 on the Euro. Month end positioning brought volatility despite lacking the usual flows and Sterling rose further into the London fix, gaining most against the Dollar with highs above 1.2600 and the Euro held above 1.1500.
Boris Johnson stated that the UK was past the peak in this outbreak in his first daily update since returning from sick leave, adding that plans to ease restrictions would be outlined next week. Sterling derived a modest amount of support from the news but concerns remain that there would be a delay in easing lockdown measures. Social distancing measures will inevitably make it difficult to revive economic activity, and therefore maintain pressure on the budget deficit. The Pound kicks off near the 1.2560 area on the Dollar and the Euro has nudged back below the 1.1500 level.
US jobless claims declined to 3.84mn from a revised 4.44mn the previous week, although this was above consensus expectations of 3.50mn. Personal income declined 2.0% for March with a slide of 7.5% for spending. The Congressional Budget Office estimated that the US budget deficit for the current fiscal year could increase to $3.7trn and 17.9% of GDP before a decline to 9.8% next year while White House adviser Hackett stated that the April jobs report could show an unemployment rate of around 19%. The Federal Reserve (Fed) expanded the scope of its Main Street loan programme and US 2-year yields declined to 9-year lows.
Today the US economic docket highlights the release of the ISM Manufacturing PMI. Apart from this, developments surrounding the coronavirus and the broader market risk sentiment might influence the USD price dynamics.
The ECB made no changes to its interest rate at yesterday's policy meeting but President Lagarde did warn that second-quarter GDP figures would likely contract 5-12% amid extremely high uncertainty. The central bank have also introduced new facility measures to boost lending whilst looking at ways to lower the cost of existing lending programmes. President Lagarde also emphasised flexibility and reiterated that the central bank was prepared to take further action whilst pressing for Eurogroup governments to take more aggressive fiscal action.
The Euro initially lost ground during the press conference with a decline to 1.0830 against the Dollar but soon rallied to 1.0950 as the Dollar came into renewed month end selling pressure. As of writing, the Euro trades around the 1.0955 level against its US counterpart.
Data to watch
14:00 - USD - ISM Manufacturing PMI
Posted in Daily Market News on May 1 2020