Dollar higher, stocks lower in risk-off market
Investors began the week cautiously as they weigh the variety of approaches around the world to reopen economies. Asian equity markets were mixed, European markets were mostly lower, and the US will open lower. The UST 10Yr note yield is holding steady at 0.68%, as the Treasury Department begins a record $96 billion in quarterly refunding auctions. The dollar is higher across the board in this risk-off environment, the Australian and New Zealand dollars were hardest hit, falling by nearly 1%.
Tuesday: Small Business Optimism (May), Consumer Price Index (April)
Wednesday: Producer Price Index (April)
Thursday: Initial Jobless Claims
Friday: Empire State Manufacturing Survey, U of Michigan Consumer Sentiment Index, Job Openings and Labor Turnover Survey (JOLTS)
May 11, 2020
EUR/USD 1.0829 GBP/USD 1.2337 USD/CAD 1.3986 AUD/USD 0.6482 USD/JPY 107.45 USD/CNH 7.1088 USD/ILS 3.5133 USD/MXN 23.4982 USD/CHF 0.9716 USD/INR 75.7350
USDThe dollar index is up 0.35% and trading at the key 100 level amid the market’s risk-off sentiment. Gains were across the board, its biggest gains against the New Zealand and Australian dollars. All eyes will be on the record $96 billion in Treasury auctions, which begin today with $42 billion in 3-year notes. Investors also will be watching what happens in the White House, as President Trump urges states to reopen while at the same time Vice President Mike Pence is self-isolating after his press secretary was diagnosed with Covid-19 last Friday.GBP
The UK pound is lower against its peer currencies following Sunday’s announcement by PM Boris Johnson urging the country to reopen by first allowing manufacturers and construction workers to get back to work. According to The Guardian, his plan was “immediately condemned as being divisive, confusing and vague.”EURThe euro remains trading between $1.0800 and $1.0850. Two large EUR/USD options, one at each end of that range expire today, which should contain trading between them. The euro is still dealing with the fallout from last week’s German constitutional court accusing the EU Court of Justice of exceeding its powers when it supported the ECB asset-purchase program.CAD
The USD/CAD continues to trade around the C$1.40 level. Oil prices edged higher again, but the loonie is currently reacting more to the risk-on/risk-off environment than oil prices. Last week’s better-than-expected jobs data in Canada has been supportive. Canada’s economic calendar is light this week.ASIA/PACIFIC
The Chinese yuan has held steady despite pressures from the re-escalating US-China trade war. Investors are optimistic that the truce will broadly hold. Over the weekend, China’s central bank said they will begin “more powerful” policies to provide economic relief from Covid-19.
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