April Nonfarm Payrolls Puts Trump and the Greenback in the Spotlight

Earlier in the Day:

It was a busy start to the day on the economic calendar this morning. The Japanese Yen and Aussie Dollar were in focus in the early part of the day.

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 191,233 to 3,912,106. On Wednesday, the number of new cases had risen by 87,960. The daily increase was far higher than Wednesday’s rise and a 75,118 increase on the previous Thursday.

France, Germany, Italy, and Spain reported 16,103 new cases on Thursday, which was up from 9,651 new cases on Wednesday. On the previous Thursday, 7,182 new cases had been reported. All 4 member states saw a rise in new cases, with France and Spain reporting the highest increases on the day.

From the U.S, the total number of cases rose by 56,348 to 1,291,804 on Thursday. On Wednesday, the total number of cases had risen by 20,715. On Thursday, 30^th April, the total new number of cases had risen by 30,883.

For the Japanese Yen

Household spending fell by 6% in March, year-on-year, following on from a 0.3% decline in February. Economists had forecast a 6.7% decline.

According to the Statistic Bureau,

• Spending on clothing & footwear (-26.1%), culture & recreation (-20.6%), and education (-17.4%) weighed heavily.
• There were also marked declines in spending on food (-2.4%), furniture & household utensils (-2.3%), and other consumption expenditures (-8.3%).
• Spending on housing (+1.8%), and fuel, light, & water charges (+1.0%) saw more modest declines.
• Elsewhere, spending on medical care rose by 0.4%, while spending on transportation & communication fell by 0.7%.

The Japanese Yen moved from ¥106.312 to ¥106.351 upon release of the figures.

Service sector figures were also disappointing, with the finalized April PMI coming in at 21.5, which was below a prelim 22.8. In March, the PMI had stood at 33.8.

According to the finalized Markit Survey,

• A survey-record decline in demand led to a more marked contraction in the sector. New orders fell at the fastest pace on record, with export demand also falling at the fastest pace on record.
• Output fell at an unprecedented rate, outpacing the declines seen during the global financial crisis and 2011 Tsunami.
• Firms reduced employment levels, with business confidence falling to its lowest level since January 2009.

The Japanese Yen moved from ¥106.402 to ¥106.364 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.04% to ¥106.32 against the U.S Dollar.

For the Aussie Dollar

The RBA Monetary Policy Statement garnered further interest following Tuesday’s RBA Rate Statement.

Salient points from the Statement of Monetary Policy included.

• While the exact size of the contraction is uncertain, a decline in GDP of around 10% from peak to trough is expected.
• The size and timing of the contractions depend on the duration of containment measures.
• Expectations are that many economies outside of China will see their largest contractions in the June quarter.
• Gradual economic recoveries should follow in the 2^nd half of the year. Fiscal and monetary policies and easing in lockdown measures should provide support.
• Australia’s unemployment rate could hit 10%, with total hours worked likely to contract by around 20% over the first half of 2020.
• Borrowing rates for businesses and households have declined to record low levels in response to the RBA’s policy moves.
• Initial stages of recovery could start quite soon as previously restricted activities become permissible.
• It will take time for a full recovery, however, with households and businesses having reduced spending amidst the uncertainty.
• Beyond the next few months, the speed and timing of the economic recovery are very uncertain, with the effectiveness of containing the virus key.
• Household consumption is expected to contract by around 15% before recovering over the next couple of years.
• Uncertainty over future demand prospects will also curtail business investment intentions.
• Inflation is projected to turn negative in the June quarter before gradually increasing.

The Aussie Dollar moved from $0.65289 to $0.65365 upon release of the Statement. At the time of writing, the Aussie Dollar was up by 0.62% to $0.6535.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.53% to $0.6119.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Germany’s trade figures for April are due out later this morning.

Following particularly disappointing factory orders mid-week, could Germany see a trade deficit in April?

With nonfarm payrolls due out of the U.S, risk aversion could ultimately weigh pin back the EUR later in the day.

There’ is also the issue of the German court ruling on the ECB’s bond-buying program and then there’s U.S – China relations…

The end of the week has tended to be a Trump favorite time to send threatening messages…

At the time of writing, the EUR was up by 0.13% to $1.0848.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

Brexit uncertainty, tough trade talks with the U.S, and the continued rise in COVID-19 cases remain negatives for the Pound.

At the time of writing, the Pound was up by 0.31% to $1.2400, with the markets responding further to the BoE’s hold on Thursday.

Across the Pond

It’s a busy day ahead on the U.S economic calendar.

April’s nonfarm payrolls, participation rate, and the unemployment rate will be a key driver later in the day.

Following the ADP numbers mid-week and the weekly jobless claims figures in recent weeks, it’s not going to be pretty.

A 20m slide in nonfarm payrolls seems a little light, which suggests a market shock later today… An unemployment rate of 14% or more is unlikely to be much of a comfort blanket either.

Outside of the numbers, expect chatter from the Oval Office to also be in focus on the day… Trump’s Twitter account could get active going into the weekend. The NFP numbers will certainly give the U.S President reason to deflect.

The Dollar Spot Index was down by 0.23% to 99.656 at the time of writing.

For the Loonie

It’s a relatively busy day on the economic calendar, with April employment and March building permit figures due out later today.

Expect the April employment figures to influence, with forecasts pointing to another marked jump forecasted.

Anything close to March numbers and expect the Loonie to pay the price.

Outside of the numbers, however, expect market risk sentiment and crude oil prices to remain a key driver.

At the time of writing, the Loonie was up by 0.27% to C$1.3935 against the U.S Dollar.