Risk Aversion Sweeps across the Markets as COVID-19 Realities Sink In

Earlier in the Day:

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

Away from the calendar, uncertainty over what lies ahead weighed on risk sentiment in the early part of the day. FED Chair Powell’s comments from Wednesday, rising tension between the U.S and China, and concerns over a 2^nd wave pandemic weighed.

Looking at the latest coronavirus numbers,

On Wednesday, the number of new coronavirus cases rose by 89,941 to 4,427,503. On Tuesday, the number of new cases had risen by 81,022. The daily increase was higher than Tuesday’s rise and an 87,960 increase on the previous Wednesday.

France, Germany, Italy, and Spain reported 3,225 new cases on Wednesday, which was down from 4,176 new cases on Tuesday. On the previous Wednesday, 9,651 new cases had been reported.

From the U.S, the total number of cases rose by 21,774 to 1,430,348 on Wednesday. On Tuesday, the total number of cases had risen by 22,740. On Wednesday, 6^th May, the total new number of cases had risen by 20,715.

For the Aussie Dollar

April’s employment figures were in focus through the early part of the day. Total employment tumbled by 594,300. Economists had forecast a fall of 575,000. Full employment slid by 220,500, with the unemployment rate rising from 5.2% to 6.2%. Economists had forecast an unemployment rate of 8.3%.

According to the ABS,

• The unemployment rate saw a relatively minor increase due to 489,800 people leaving the labor force. As a result, the participation rate slid by 2.4% to 63.5%.
• The total number of people in full-time employment fell by 220,500, with people in part-time employment decreasing by 373,800.
• Since April 2019, full-time employment decreased by 123,000 people, with part-time employment falling by 272,000 people.
• The employment to population ratio fell by 2.9 pts to 59.6% in April 2020.

The Aussie Dollar moved from $0.64581 to $0.64355 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.45% to $0.6426.

For the Kiwi Dollar

The government’s annual budget will draw attention this morning, with the budget aiming at delivering strong support to the COVID-19 stricken economy.

At the time of writing, the Kiwi Dollar was down by 0.30% to $0.5973.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.15% to ¥106.87 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. On the economic data front, finalized April inflation figures are due out of Germany and Spain.

While we expect the inflation numbers to have a muted impact on the EUR, the ECB’s Economic Bulletin will garner plenty of attention.

Does the ECB see April as the bottom of the Eurozone’s economic abyss? A 2^nd wave of the COVID-19 pandemic would certainly question any optimism.

Looking at the COVID-19 numbers, however, there has yet to be a noticeable increase in new cases, which should provide some support.

That will need to continue along with a further easing in lockdown measures to support the EUR.

In reality, however, there is far more to it than that… A jump in hiring and consumer spending is a must while the global supply chain remains broken…

At the time of writing, the EUR was down by 0.06% to $1.0811.

For the Pound

It’s a particularly quiet day ahead on the economic calendar following Wednesday’s data deluge.

A lack of stats leaves the Pound in the hands of Brexit chatter and COVID-19 news.

While Brexit remains an immediate concern, failure by the UK government to contain the spread of the virus is a greater issue.

An extended lockdown leaves the UK economy flagging for an extended period of time, which would take longer to recover from…

At the time of writing, the Pound was down by 0.19% to $1.2209.

Across the Pond

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

Key stats are limited to the weekly jobless claims figures that will have a material impact on risk sentiment.

While the markets may have stomached a string of quite alarming numbers it is likely to be a different story this time around…

Another sizeable surge in claims will spook the markets.

Outside of the numbers, expect chatter from Beijing and Washington and COVID-19 updates to also influence.

The Dollar Spot Index was up by 0.02% to 100.263 at the time of writing.

For the Loonie

It’s a busier day on the economic calendar, with March manufacturing sales figures in focus. We would expect the numbers to have a relatively muted impact on the Loonie, however.

Following the inventory numbers from Wednesday, the IEA’s monthly report will certainly influence.

Market sentiment towards COVID-19 numbers will also provide direction on the day.

At the time of writing, the Loonie was down by 0.03% to C$1.4105 against the U.S Dollar.