Dollar Decline Quickens, US Jobless Claims Blow-out, Pound Soars

Summary: It was just another day in the markets as with multiple events and data occurring over the course of a trading session. Weekly US Unemployment Claims, already expected to rise, blew out to 3.283 million, a record high, overwhelming median forecasts of 1.50 million. The Dollar tumbled against all of it’s rivals, majors and EM currencies alike. Sterling skyrocketed 3% to 1.2185 in late New York after the Bank of England left its current policy unchanged but kept the doors open for additional stimulus. The Australian Dollar, down to 2002 lows just a week ago, soared 2.6% to 0.6065 on the broadly weaker Greenback. The Euro advanced beyond 1.1000 to 1.1049 before easing to settle at 1.1030, up 1.4%. Against the Yen, the Dollar slid to 109.205 overnight and near 2-week lows, closing at 109.50 (111.20 yesterday). USD/CAD slumped to 1.4010 from 1.4205 yesterday, settling at 1.4120. The Dollar Index (USD/DXY) slumped 1.73% to 99.296 (100.96). US stocks rose after the Senate unanimously approved the USD 2.2 trillion economic aid bill. The US House is expected to pass the stimulus bill when they meet tonight.

The blowout in US Jobless Claims stirred hopes of more stimulus measures.
The Dow finished 6.3% higher at 22,500 (21,240). The S&P 500 rallied 5.9% to 2,635 at the close (2,480 yesterday). Global bond yields fell. The key US 10-year treasury rate closed at 0.84% from 0.86%. Germany’s 10-year Bund yield dropped 10 basis points to -0.37%. Japanese 10-year JGB’s yielded -0.02% from +0.03% yesterday. The BOE kept its Official Bank Rate unchanged at 0.10%.

Other data released yesterday saw UK Retail Sales slump to -0.7% in March, underwhelming forecasts at 0.2%. Germany’s GFK Consumer Sentiment Climate Index slumped to 2.7 from a downward revised 9.3 and median forecast of 7.4. US Final GDP matched forecasts at 2.1%. The US Goods Trade Deficit improved to -USD 59.9 billion in March from -USD 65.9 billion in February, beating forecasts of -USD 64.5 billion. It was the lowest deficit since October 2016.

Related:Asian Stocks Lower As Risk-Off Sentiment Returns to Markets

On the Lookout: While claims for unemployment benefits in the US blew out to an unprecedented 3.283 million, a record high, many economists had predicted the rise to as high as 5 million. This has cushioned the Dollar’s fall. The US Goods Trade Deficit improved to the lowest deficit since 2016, also below the USD 60 billion mark. In Europe, Germany’s GFK Consumer Climate Sentiment Index slumped to 2.7 from a downward revised 8.3 and below forecasts at 7.4.
Confirmed Covid-19 cases in the US surpassed that of China and Italy, with a recorded 82,353 (China 81,782). Spain’s coronavirus death toll topped China’s, rising to 4,000.
Today sees mostly second tier economic data. Japan reports its Tokyo Core CPI. The G20 continue their satellite meeting on measures to deal with the Covid-19 outbreak. US reports today are: Core PCE Index, Personal Income, Personal Spending and the revised University of Michigan Consumer Sentiment and Inflation Expectations Indexes.

Trading Perspective: The Dollar traded lower against all the major and Emerging Market currencies after US Unemployment Claims blew out to unprecedented levels, at 3.283 million. The median forecast was 1.5 million claims. Economists had expected the claims to jump as high as 5 million so to a certain extend the Dollar’s drop was cushioned.
Across the Atlantic Germany’s GFK Consumer Climate Sentiment dropped to its lowest level since 2009. Spain’s Covid-19 death toll rose to worlds second highest, next to that of Italy. We can expect the economic toll in both countries, and thus the Eurozone to be severe.
The benchmark US bond yield was 2 basis points lower to 0.84%. Those of its global rivals fell more than that of the US. Germany’s 10-year bond yield dropped 10 basis points to -0.37%.
The Dollar’s sharp downtrend may slow with consolidation the order of the day.

EUR/USD – Sharp Bounce off 2020 Lows on USD Weakness, 1.11 Next

The Euro advanced on the US Dollar’s broad-based drop as a result of the blow-out in US Unemployment Claims to almost 3 times median forecasts. EUR/USD finished at 1.1045 in late New York, advancing to a 6-day high from 1.0880 yesterday. Despite the weaker-than-forecast German GFK Consumer Climate Sentiment to 2009 lows, and a rise in Spain’s coronavirus death toll, the Euro benefitted from the weaker Greenback.

Immediate resistance for today lies at 1.1060 followed by 1.1100 which should be strong. The next resistance lies at 1.1160. Immediate support can be found at 1.1000 and 1.0950.
There are no major data releases from the Euro area today. Next week sees Eurozone Business Climate and German CPI. The economic toll of the Covid-19 outbreak in Spain and Italy has yet to be seen.

We also highlighted a few days ago that speculators turned long of Euro bets in the latest Commitment of Traders report. We can expect consolidation today. Look for a likely trading range of 1.0940-1.1060. No strong views at current levels, just trade the range.

AUD/USD – The Battler Grinds Higher, Time for a Breather

The Aussie Battler continued its impressive grind higher after plummeting to fresh 2002 lows just a week ago (0.55062. AUD/USD rallied to an overnight and near 10-day high at 0.60875 before easing to settle at 0.6047 in early Sydney. The Aussie benefitted from the US Dollar’s drop against all its major rivals and Emerging Market currencies.

The blowout in US Jobless Claims coupled with a decline in global company short-term US funding boosted the Aussie Battler. Risk assets also climbed after Federal Reserve Chairman Jerome Powell reassured investors that the Fed will not run out of bullets to deal with further fall-out in the US economy. The US 2.2 trillion aid bill is virtually assured to be passed by the House of Representatives when they vote tonight. All are supportive factors for the Australian Battler.

That said, expect the AUD/USD pair to take a breather today as FX consolidates its climb against the Greenback. AUD/USD has immediate resistance at 0.6080 followed by 0.6110 and 0.6170. The next resistance at 0.6200 is formidable. Support for the Aussie Battler comes in at 0.6020 followed by 0.5970. Look for a likely trading range today of 0.5985-0.6085. Preference is still to buy dips, not rallies.

GBP/USD – Skyrockets Past 1.20, Recovery on Hand, 1.2230 Resists

Sterling skyrocketed against the US Dollar after the Bank of England kept its rates policy unchanged. Policymakers were unanimous in their decision. GBP/USD jumped to an overnight and near 10-day high at 1.2228 before easing to settle at 1.2186 currently. The stronger US Dollar saw the British currency plunge to a low of 1.1410 earlier this week.

GBP/USD has immediate resistance at 1.2230 followed by 1.2280. Immediate support can be found at 1.2130 followed by 1.2060. The strong upward move was a result of the sharp fall as demand for the US Dollar peaked earlier this week. That demand has eased. We can expect Sterling to consolidate its gains. We may see a corrective move lower to close the gap on the GBP/USD sharp up move.

Look to trade a likely 1.1980-1.2240 range today. No strong views here, although the Pound may have found a base. This is not the time to fall in love with any strong view. Get your levels right, be flexible and quick and trade away.