COVID-19 Updates Support Riskier Assets as the RBA Stands Pat. ISM Numbers Be A Will Test Later

Earlier in the Day:

It was a relatively busy start to the week on the economic calendar this morning. The Aussie Dollar and Kiwi Dollar were in action in the early part of the day.

While geopolitical risk has returned to haunt the markets, COVID-19 numbers were market positive this morning.

Looking at the latest coronavirus numbers,

On Monday, the number of new coronavirus cases rose by 74,217 to 3,639,336. On Sunday, the number of new cases had risen by 80,636. While down from Sunday, this was up marginally from a 66,953 increase on the previous Monday.

France, Germany, Italy, and Spain reported 3,642 new cases on Monday, which was down from 3,938 new cases on Sunday. France and Germany reported just 769 and 473 news cases respectively.

From the U.S, the total number of cases rose by 22,145 to 1,210,267 on Monday. On Sunday, the total number of cases had risen by 27,348. On Monday, 27^th April, the total new number of cases had risen by 23,699.

For the Kiwi Dollar

Buildings consents slumped by 21.3% in March, month-on-month, reversing a 5.7% rise in February. According to NZ Stats, this was the largest monthly fall since October 2008.

The Kiwi Dollar moved from $0.60458 to $0.60475 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.17% to $0.6058.

For the Aussie Dollar

The RBA was in action in the early part of the day. In line with market expectations, the RBA left interest rates unchanged at 0.25%.

Salient points from the RBA rate statement included:

• The Bank has scaled back the size and frequency of bond purchases as a result of the improved functioning of the bond markets.
• In spite of the pullback, the Bank is prepared to scale-up these purchases. It will also do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year AGS.
• In support of maintaining low funding costs and deliver credit support, the Bank broadened the range of eligible collateral to include:
  • Aussie Dollar securities issued by non-bank corporations with an investment-grade credit rating.
• The Board considered a range of scenarios for the Australian economic outlook at the meeting. In the baseline scenario, output falls by around 10% over the 1^st half of 2020 and by 6% for 2020, followed by a 6% recovery in 2021.
• Fiscal and monetary policy measures have supported the 2021 bounce back forecast.
• Within the baseline scenario, the Bank forecasts unemployment to peak at around 10% and to remain above 7% at the end of 2021.
• Deviation from the forecasts will depend upon the speed with which containment measures are eased.
• Inflation is expected to turn negative in the 2^nd quarter and forecasted to pick up to between 1% and 1.5% in 2021.
• The board will not increase the cash rate target until progress is made towards full employment and it is confident that inflation will be sustainably within the 2-3% target band.

The Aussie Dollar moved from $0.64478 to $0.64353 upon release of the statement. At the time of writing, the Aussie Dollar was up by 0.19% to $0.6440.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.10% to ¥106.63 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Following some quite dire PMI numbers, Spanish unemployment change figures are in focus early in the session.

While the numbers tend to have a limited impact on the EUR, another surge in unemployment would be EUR negative.

Outside of the numbers, however, market risk sentiment will remain a key driver. Expect any chatter from Washington and Beijing to influence. There is also the latest COVID-19 numbers and any chatter from Brussels on an aid package to also consider.

At the time of writing, the EUR was down by 0.05% to $1.0902.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized April service PMI figures are due out later today.

Barring a material deviation from prelim, however, the finalized PMI should have a muted impact on the Pound.

We will expect chatter from the UK government on lockdown measures and any progress reports on trade talks with the U.S to be the key drivers.

At the time of writing, the Pound was up by 0.12% to $1.2458.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. Key stats include finalized Markit Service PMIs and the market’s preferred ISM Non-Manufacturing PMI for April.

March trade figures are also due out, though it will likely be brushed aside by the markets.

The markets are anticipating some dire ISM numbers for April. Avoiding sub-30 levels will be key, however…

Outside of the numbers, expect chatter from Beijing and Washington to continue to influence.

There are also lockdown easing plans and the latest COVID-19 numbers to also consider on the day.

The Dollar Spot Index was down by 0.02% to 99.465 at the time of writing.

For the Loonie

It’s a relatively busy day on the economic calendar, with March trade figures in focus.

While we continue to expect pre-April stats to have limited impact, there will be some interest in today’s numbers… A widening in the deficit ahead of April’s global lockdown would pressure the Loonie.

Outside of the numbers, crude oil prices and market risk appetite will remain the key drivers.

At the time of writing, the Loonie was up by 0.12% to C$1.4070 against the U.S Dollar.