Fed Offers No Surprises, Next up, Initial Jobless Claims

Daily Update - 11th June 2020

Yesterday’s Market

• FOMC Meeting

Yesterday’s explained 

The dollar bounced against riskier currencies and the safe-haven yen hit a one-month high on Thursday as the U.S. Federal Reserve’s dour economic outlook spooked investors. The moves recouped the greenback’s initial losses after the Fed’s policy stance, projecting rates near zero for years, was welcomed as a sign of its continued support for asset prices.

The dollar extended losses, dropping to a fresh three-month low against a basket of major currencies on Wednesday after the Federal Reserve made no policy changes, as expected, and pledged to continue its asset purchases aimed at stabilizing a U.S. economy that has been ravaged by the novel coronavirus. The greenback fell to three-month troughs against the euro, sterling and Swiss franc after the Fed statement. It slid to a three-week low versus the yen.
The Fed, in its statement, on Wednesday after a two-day meeting, repeated its promise of continued extraordinary support for the economy as policymakers projected a 6.5% decline in gross domestic product this year and a 9.3% unemployment rate at year’s end.

Today’s Market

• US Unemployment Claims:
• AUD MI Inflation Expectation

Today’s Focus

For the EUR, t’s a quiet day ahead on the economic calendar. French non-farm payrolls for the 1st quarter are due out. While France had yet to enter a full lockdown, economic strife had already been evident and reflected in the 1st quarter GDP numbers. The markets will be prepped and ready for a further decline from the 4th quarter. We shouldn’t see too much influence on the EUR, with 2nd quarter numbers likely to be even more reflective of the impact of COVID-19 on the economy. Away from the economic calendar, the markets will be looking for any updates on the coronavirus bailout plan.

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 later today. On the geopolitical risk front, Brexit will remain center stage. Expect any chatter from the EU and from the UK to influence. Time is running out and both sides have dug their heels in. If the news wires are anything to go by, EU chief negotiator Barnier is getting a little hot under the collar.

Across the Pond, it’s another busy day ahead on the U.S economic calendar. Wholesale inflation figures for May and the weekly jobless claims figures are due out later today. While another slide in wholesale prices would raise more red flags, the jobless claims figures will be the key driver. Riskier assets got a boost last Friday, following better than expected nonfarm payroll figures. Another surge in jobless claims may make a large dent in the theory that a labor market recovery is afoot. As always, the markets will also need to keep an eye on Beijing and Capitol Hill as geopolitical risks linger.

This Melbourne Inflation is closely watched, as inflation expectations can translate into actual inflation figures. The April gain of 3.4% was well off the 4.6% clip seen a month earlier. Inflation levels have been soft, and this could be reflected in a smaller gain in May compared to April.