Daily Update - 4th June 2020
The euro strengthened for the seventh day yesterday as the prospects of more stimulus and hopes for economic recovery boosted euro across the board. The euro reached an 11-week high of $1.1125 on expectations policymakers will support the euro zone’s weakest economies with debt purchases. The common currency was last up 0.4%. The seven-day winning streak was the longest since December 2013. Sterling strengthened against a broadly weaker dollar Wednesday as Britain showed signs it might be willing to compromise on sticking points to reach a Brexit deal. The dollar fell against most currencies as investors pondered what the potential fallout might be from the mass protests against racism spreading across the United States. And prospects for more government stimulus and a global economic recovery emboldened investor to step up holdings of riskier assets. The dollar strengthened against the Japanese yen yesterday as government stimulus expectations support investor confidence in an economic recovery from the coronavirus. Markets await Friday’s U.S. Labor Department May jobs report, which is expected to show unemployment soaring to a post-World War Two high of nearly 20% from 14.7% in April. On Wednesday, a report showed that U.S. private payrolls fell less than expected in May, suggesting layoffs were abating as businesses reopen. Investors are also focused on whether the European Central Bank will increase the size of its 750 billion euro ($669 billion) Pandemic Emergency Purchase Programme, when it meets today. ECB Rate Decision: Policymakers are expected to maintain interest rates at a flat 0.00%. Investors will be keenly interested in the rate statement, given the severe economic conditions gripping the eurozone. Expectations are rising for ECB to expand its bond-buying programs on Thursday to add stimulus while the political impasse in Europe continues to put the recovery at risk. The current €750bn ECB bond-buying program PEPP (Pandemic Emergency Purchase Program) will run out of bonds to buy by October in which the recovery will still be in a fragile recovery. US Unemployment Claims: Unemployment claims have been falling, but the numbers remain staggering. Last week, 2.1 million new claims were made, and the upcoming reading could show a slight improvement if the recent trend continues. Nonfarm Payrolls and Non-manufacturing ISM for May this week are critical US macroeconomic data points that give the first indications of the severity of the job market loss and potential rebound trajectory.Yesterday’s Market
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