Buck Strong as More Joined Jobless Ranks, Globe Re-Opens
MAY 14, 2020
The U.S. Dollar is rallying today following a day in which Federal Reserve Chairman Jerome Powell explained that the committee is not looking into implementing negative interest rates as the rest of the globe continues to gauge activity while slowly re-opening.
Economic data is showing that indeed there are some deflationary pressures with Producer Price Index figures falling the most since 2009. Additionally, expect a move towards safe-havens as China and the United States try to figure out their issues with Chinese officials reportedly upset at COVID-19 legal action being pursued by a U.S. congressman. Combined with anxiety over Phase One and Huawei, the world is watching for 2019 -type friction and potential for solutions as well.
We also will watch for headlines that emanate from the Jobless Claims reading today that showed million-plus claims for the eighth consecutive week. Three million more filed last week joined the jobless benefits realm and as a reminder, the worst week on record previously was in 1982 with 695,000. Meanwhile, the Fed will make their case to Congress that central bank action has been exhausted and more fiscal aid will absolutely be needed. Expect buck to hold unless tomorrow we wake up to news of a meeting/phone-call that appeases relations between the two largest global economies.
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The shared currency dropped by the most it has this week suddenly as Europe works on getting its situation together as a unit and not per individual member nation. European Central Bank decision-makers said it looked like the continent had hit the lowest point economically from the virus crisis and EU Commission authorities are working on an ambitious recovery plan that addresses the growing wealth gap between northern and southern countries of the union.
France, the second biggest player after Germany saw its Unemployment Rate fall to an 11-year low at 7.8% since there were no jobs for people to apply to once they were found themselves jobless. There is room for Euro strengthening, but it will come only gradually if numbers improve and the deadliness of virus decreases in a major way.
The Canadian Dollar has swung plenty this week and is currently on its way to gains after the International Energy Agency made positive statements about oil for the first time in a while. There was a fall in inventories and the agency feels that there can indeed be a better short-term outlook for prices if demand picks up, which clearly they said has not yet. One thing to point out is that oil rigs have produced, but there has been a drop in refinery facilities use, meaning oil demand needs t grow to spark more energy economic activity. Again, things are looking better for petro than three weeks ago and along with a plan to restart productivity, the “Loonie” may be in for appreciation in Q2.