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Geopolitics and Economic Data Put the EUR and the U.S Dollar in Focus

Bob Mason

Earlier in the Day:

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

Away from the calendar, risk sentiment improved following the late rebound across the U.S equities late on Thursday. The upside and shift in sentiment came despite lingering concerns over the economic outlook and COVID-19.

Mid-week, there was no chatter from Beijing or Washington to rock the boat, supporting Thursday’s shift.

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 93.671 to 4,521,174. On Wednesday, the number of new cases had risen by 88,941. The daily increase was higher than Wednesday’s rise, while down from a 191,233 spike on the previous Thursday.

France, Germany, Italy, and Spain reported 4,230 new cases on Thursday, which was up from 3,225 new cases on Wednesday. On the previous Thursday, 16,103 new cases had been reported.

From the U.S, the total number of cases rose by 26,397 to 1,456,745 on Thursday. On Wednesday, the total number of cases had risen by 21,774. On Thursday, 7th May, the total new number of cases had risen by 56,348.

For the Kiwi Dollar

In April, the Business PMI tumbled by 11.9 points to a record low 26.1. In March, the PMI had stood at 38.0.

According to the April survey,

  • The decline in April was attributed to the March and April lockdown across the country.
  • Looking at the sub-indexes:
    • The production sub-index tumbled from 31.4 to 19.8, with the new orders sub-index sliding from 36.6 to 17.8.
  • With level 3 measures in place since 28th April and upgraded to level 2 on 14th May, some improvement is anticipated.
  • There is some uncertainty, however, over how quickly demand can build to support activity across the sector.

The Kiwi Dollar moved from $0.60011 to $0.59995 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.18% to $0.5992.

Out of China

Industrial production rose by 3.9% in April, reversing a 1.1% decline from March. Economists had forecast a 1.5% increase. Fixed asset investments tumbled by 10.3%, however, following a 16.1% slump in March. Economists had forecast a 10.0% slide.

The Aussie Dollar moved from $0.64650 to $0.64559 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.05% to $0.6459.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.02% to ¥107.27 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include 1st estimate GDP numbers for Germany and 2nd estimate GDP figures for the Eurozone.

Finalized April inflation figures for France and Italy and March trade figures for the Eurozone are also due out.

Expect Germany and the Eurozone GDP figures to garner greater attention, with Germany’s GDP numbers the key driver.

Outside of the numbers, expect any negative chatter from Beijing or Washington or COVID-19 to be EUR negative.

At the time of writing, the EUR was down by 0.02% to $1.0803.

For the Pound

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

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

A continued rise in COVID-19 cases that have led to an extension to lockdown measures remains Pound negative. Brexit updates have certainly not helped the Pound this week, adding further pressure.

News of the EU launching legal action against the UK over freedom of movement reflects just how badly relations have become.

At the time of writing, the Pound was down by 0.14% to $1.2213.

Across the Pond

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

Key stats include May’s NY Empire State Manufacturing Index and consumer sentiment figures. With the continued surge in jobless claims across the U.S, April retail sales figures may have less of an impact than usual.

It is going to be grim reading, however, and could point to a more sizeable 2nd quarter contraction in the U.S economy

April industrial production could also spook the markets, while March business inventories and JOLTs job openings will likely have a muted impact on the Greenback.

Outside of the numbers, expect chatter from Capitol Hill to also influence. There is the prospect of further stimulus and also chatter on China sanctions to look out for.

The Dollar Spot Index was down by 0.14% to 100.327 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar, with economic data limited to March foreign security figures.

The numbers are unlikely to have a material impact on the Loonie, leaving crude oil prices and market risk sentiment as the key drivers.

At the time of writing, the Loonie was flat at C$1.4050 against the U.S Dollar.

This article was originally posted on FX Empire

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