Monex: Euro verder onder druk door tegenvallende eurozone data

6 mei 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 sharply fell against the dollar yesterday and has managed only a minor recovery since then, after a ruling from Germany’s Constitutional Court that the European Central Bank’s QE programme violates the ECB’s mandate under EU law, and called for German institutions such as the Bundesbank to cease participation unless the ECB could prove its actions were “proportional” within 3 months. This morning, the euro continued to trade on the back foot against the dollar during the build-up to April’s Markit Purchasing Managers’ Index releases. Spanish services PMI printed an unprecedented level at 7.1, well below the consensus of 10.0 and a prior reading of 23.0, while the composite PMI dropped to 9.2 from 26.7 in March, also below the consensus of 10.5. Given that restrictions were in place throughout the entire month of April, the single-digit PMIs may not come as a surprise. Markit estimates that “the economy is currently contracting at a quarterly rate of around 7%, and acknowledges that “job losses and great pessimism amongst firms about the future leads to notable concerns over the strength of any rebound”.

USD

While other safe-haven currencies advanced following US-China trade tensions, the dollar showed mixed performance against its G10 peers yesterday. A continuing rally in crude oil led to NOK and CAD posting solid increases against the dollar, while the euro slightly pared back losses following yesterday’s court ruling. The Office of the United States Trade Representative is considering a 12-month extension on the exclusion of some products that would otherwise be included in the series of tariffs imposed in 2018. Data released yesterday showed that the trade balance dropped to -$44.4bn in March from a revised $39.8bn in February, while the median forecast provided by Bloomberg wasn’t far off and estimated a widening of the overall gap to $44.2bn. US exports of goods and services showed a record drop in March while imports fell by the most in over 10 years. During a speech in Phoenix overnight, President Donald Trump stated the US must reopen as soon as possible, while acknowledging that reopening the economy would likely lead to more cases and deaths. He added that if cases do rebound, it would be like fire that could be extinguished fast, but criticised Johns Hopkins University model that showed new projections of what could happen in case containment measures are lifted too quickly. Another analysis by the University of Washington showed that the US death toll could reach 135,000 by the beginning of August if shutdown orders are lifted too soon, but President Trump stated that “these models have been so wrong from day one”.

GBP

Despite eye-catching headlines stemming from the government’s Scientific Advisory Group for Emergencies, little new information came out yesterday for the pound. UK Chancellor Rishi Sunak is reportedly examining ways to move millions of workers off of government support and back into the workplace as the Johnson administration is set to lay out exit plans in the coming days. With the Brexit extension clock also ticking away, the potential for a double whammy of damage to the UK economy is weighing on the pound, especially as European economies slowly start to resume activity. Yesterday’s final reading of the April PMIs saw a minor upward revision in the service and composite reading, while the construction PMI, which was released this morning, saw activity in April dip to 8.2 from 39.3 in March. The decline in the construction PMI to single digits means the construction sector saw the fastest decline in output since the survey began 23 years ago. All three main categories of construction work experiences a survey-record fall in April, says IHS Markit, with declines in house building (7.3) and commercial activity (7.7) exceeding that for civil engineering (14.6). The historic collapse in the construction data only exacerbated fears of the UK economy crumbling under lockdown, putting further pressure on the pound this morning. Sterling now sits over half a percentage point lower against the dollar compared to its opening price this morning.