Economic contraction woes outweigh Oil rebound, eyes on German IFO
Fundamental Forex Analysis

Economic contraction woes outweigh Oil rebound, eyes on German IFO

Forex today in Asia was a quiet affair this Friday, with most majors stuck in tight ranges while the US dollar showed a bit of a strength broadly amid a tepid market mood.

The Asian equities traded mostly lower while the US stock futures also flashed red on steeper global economic contraction. The reports that Gilead’s anti-coronavirus drug Remdisivir flopped during the clinical trials also added to the gloom.  

The passage of the additional coronavirus relief package by the US House as well as the ongoing oil-price rebound also failed to lift the sentiment. Oil prices rose for the third straight session and jumped nearly 8% to test $18 mark. Gold, on the other hand, slipped but managed to stay above the 1700 level.

Within the G10 currency markets, USD/JPY traded in a 20-pips range around 107.65, as the yen traders paid little heed to the slowdown in the Japanese inflationary pressures. AUD/USD corrected to 0.6350 despite the PBOC targeted MLF rate cut and upbeat Australian fundamentals. The kiwi slipped back below 0.6000 while USD/CAD traded modestly flat, divided between broad dollar demand and higher oil prices.

EUR/USD remained pressured near four-week lows sub-1.0800 amid a lack of details offered on the European Union (EU) joint economic recovery plan.  The cable, however, defied the bearish UK PMIs and traded better bid around 1.2350.

Main topics in Asia

CME hikes crude oil future NYMEX (CL) margins by 17.6%

Coronavirus update: US CDC reports an increase of 25,858 new cases, 1,804 deaths as of April 22

Federal Reserve: Working to expand PPPLF for additional SBA-qualified lenders as soon as possible

US House clears $484 billion coronavirus relief package in 388-5 vote

NZ Finmin: Some distance from opening the border – BBG TV

Mnuchin weighs lending program for struggling oil companies

Japanese CPI: Rising 0.4 percent in line with estimates

Banco de México: Drop in commodity prices, in particular oil, has reduced emerging economies’ room for maneuver

Mainland China reported 6 new coronavirus cases as of end-April 23, down from 10 reported a day earlier

PBOC cuts targeted 1-year MLF rate by 20 bps, injects 56.1 bln yuan

COVID-19 vaccine may be developed by September – Global Times

Japan’s Nishimura: New economic stimulus package estimated to boost real GDP by about 4.4 %

US Pres. Trump to sign COVID-19 stimulus in noon ceremony on Friday

Fed’s balance sheet expands to record $6.62 trillion

Key focus ahead        

Following a busy macro calendar Thursday, markets gear up for another eventful day, starting out with the UK Retail Sales report for March, due at 0600 GMT. Markets are already pricing-in a steep drop in consumer spending, given the virus led lockdown. Next of relevance remains the German IFO Business survey and an upside surprise cannot be ruled after the German ZEW survey improved drastically this month.

In the NA session, the US Durable Goods data will drop in at 1230 GMT, followed by the Michigan Consumer Sentiment gauge at 1400 GMT. The data could have a significant impact on the dollar trades.  

For the oil and CAD traders, Baker Hughes US Oil Rig Count data, at 1700 GMT, could offer some fresh cues, as the coronavirus-related developments will continue to influence the overall market sentiment.

EUR/USD on the back foot, eyes German IFO survey

EUR/USD remains pressured ahead of German IFO Business Expectations data. EUR gains, if any, on the back of a big beat on data, may be short-lived, as the EU nations are yet to reveal the details of the fiscal stimulus package.

When are the UK retail sales and how could they affect GBP/USD?

Considering the BRC Like-for-Like Retail Sales data, -3.5 versus -0.4 prior, the figures may come out as devastating as expected and could keep the downside pressure on GBP/USD. The cable, however, shrugged-off the downbeat PMIs and Gfk Consumer Confidence data.

US Durable Goods Orders March Preview: Ominous portents for consumption

Durable goods orders to fall the most in six years. Business spending retreat to be the worst since the financial crisis. Dollar will retain safety edge as economy sinks.


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