Monex: Toenemende zorgen over tweede virusgolf drukken op valutamarkten

19 juni 2020

Hieronder volgt een commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

EUR

The euro continued to move lower against the dollar on Thursday, as soured risk sentiment over increased concerns of a second coronavirus wave weighed on currency markets. Today’s EU Summit during which EU leaders will hold their first talks about Brussel’s proposal for a €750bn stimulus package may further weigh on sentiment. The financing and distribution of funds has been a major point of division, with some countries raising concerns over the idea of grants and preferring a full loan system instead. While today’s meeting may be the first step towards a consensus on a joint agreement, diplomats said on Thursday that at least one other summit may be needed next month to get the deal across the line. They stated that they would like to reach consensus in July, and that in Q3, “the effects of the economic stagnation will be increasingly visible, including in the streets of EU cities”. The euro may find support in any reports about progress toward a consensus while headlines around the frictions or further acceleration in US coronavirus cases could weigh on the currency. The week ends with a light economic calendar for the eurozone, with a slightly sharper than expected contraction in German Producer Price Index of -0.4% in May compared to the prior fall of 0.7%, but the euro barely flinched at this morning’s data release.

USD

The US dollar was broadly bid in yesterday’s session as rising unemployment data in Australia, increased COVID-19 cases in Beijing and rising numbers in the southern states weighed on risk appetite. The dollar found another leg in the afternoon of the session too, also due to its status as a pandemic haven, as initial jobless claims came in above expectations. Yesterday’s data point out of the US highlighted that 1.5m US citizens filed fresh claims for unemployment benefits last week. The level still remains elevated and more concerningly for markets, the rate at which it is falling slowed substantially with the latest release. By comparison, the worst single week of insurance claims post-financial crisis was 665,000. The 58,000 drop in claims disappointed markets, with expectations suggesting the figure would come in around 1.29m. Google data shows that the decline in searches or insurance claims also slowed last week. Overnight, news that Beijing officials pledged to step up purchases of US goods after talks with Secretary of State Mike Pompeo in Hawaii has helped appease some of the risk-off trading this morning. With little data out from the US today, markets will focus on US equity markets as a quarterly event takes place; quadruple witching. On the third Friday of the last month of the quarter, options and futures on equities and indexes are set to expire, leading to heightened market activity. In the current climate, this may result in heightened volatility, although that isn’t a foregone conclusion.

GBP

Sterling weakened over the course of yesterday, despite enjoying a brief bid in the immediate aftermath of the announcement of the Bank of England’s latest monetary policy decisions. The Monetary Policy Committee kept rates unchanged, but expanded the stock of its Quantitative Easing program by £100bn, while noting that incoming data suggested the initial shock to the economy from coronavirus may not turn out to be as severe as originally feared. With an announced intention to complete these purchases by the end of the year, the decision represents a decrease in the pace of asset purchases, something Governor Andrew Bailey said that asset purchases were still “fast”, but were no longer at “warp speed”. There was no discussion of negative rates in the meeting minutes, which is telling as Andrew Bailey recently said that they were “under review” while emphasizing that the Bank would need to engage in a communications exercise to prepare for the measure. The lack of negative rates chat in the minutes suggests that the milder-than-expected shock to the economy and improving global risk appetite has meant the MPC sees no need to begin to lay the groundwork for the possibility of negative rates just yet. This morning’s data has included May retail sales, which rose 10.2% after a 15.2% contraction in April. Public sector net borrowing was 54.5 billion in May, slightly better but broadly in line with forecasts from the Office for Budget Responsibility. The borrowing brings the total public debt to £1,950 billion. This debt now exceeds the size of the economy’s gross domestic product - the first time this has been the case in more than 50 years. Net borrowing is on course to end the year at around £300bn, or roughly 15% of GDP and twice the size of the largest annual deficit during the 2008/2009 financial crisis.