Dollar and equities drop after Powell's comments
In a speech this morning, Fed Chair Powell said the US economy faces unprecedented challenges and significant downside risks that could do long-lasting harm to businesses and households. US equities sold off from earlier highs, the dollar dropped, and UST 10-yr yields are at 0.65%. UK 1Q GDP fell less than expected, India announced a stimulus package of about 10% of GDP, and the Reserve Bank of New Zealand left its cash rate unchanged but doubled its monthly bond-buying program to NZD 60bn. Gold trades just above $1700 and oil is steady at $25.50.
May 13, 2020
EUR/USD 1.0859 GBP/USD 1.2274 USD/CAD 1.4052 AUD/USD 0.6483 USD/JPY 107.02 USD/CNH 7.1018 USD/ILS 3.5144 USD/MXN 24.1190 USD/CHF 0.9693 USD/INR 75.4700
USDThe dollar continued lower following Fed Chair Powell’s speech at the Peterson Institute this morning, where he painted a dire picture of the future for our country. He also pushed back on the idea of negative interest rates. Eurodollar options prices currently point to negative rates in mid-2021. US PPI for April fell by a record 1.3%, the decline led by a 19% drop in energy costs.GBP
The UK economy contracted by 2% in Q1 with March’s -5.8% MoM decline the worst on record. A slightly weaker dollar has pushed up the UK pound, but even at $1.23 it trades not far from its one-month lows at $1.2250. UK Chancellor Sunak forecasts further significant (economic and social) disruption and significant recession.EUR
Equity markets were lower in Europe following release of a troubling eurozone Industrial Production for March, which fell by 11.3% MoM. The euro is up, but primarily due to the weaker dollar.CAD
The Canadian dollar is higher following Fed Chair Powell’s impactful, upsetting comments this morning. There is no Canadian economic data scheduled for today.ASIA/PACIFIC
The New Zealand dollar weakened dramatically following the RBNZ meeting. Although there was no rate cut, an unexpected increase in QE was announced.
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