News & analysis


The loonie has traded within a broad but stable range against the US dollar this week, strengthening overnight as crude oil prices continued to react favorably to jawboning from US President Donald Trump. How credible the US president’s assertions of an impending breakthrough in the price war between Saudi Arabia and Russia will prove remains to be seen. With a historic demand shock hitting crude oil, any supply restrictions would need to be historically broad and sustained to have a chance of raising crude oil prices to sustainable levels for the US shale industry. Inventory data in the US showed a sharp weekly build of 13.8 million barrels, highlighting the astonishing scale of the supply overhand in crude oil markets.


The US dollar continued to appreciate against most major currencies yesterday but has seen its progress halted overnight, with significant losses coming against NOK and CAD. Today’s release of initial jobless claims at 13:30 BST will likely eclipse all other market developments and data releases, as it is expected to show an unprecedented increase in joblessness. After last week’s report showed almost 3.3m jobless claims, this week the median forecast submitted to Bloomberg is for 3.7m. Provided these forecasts are broadly correct, this would mean an unprecedented 6m or more people have made jobless claims in the US in recent weeks. Donald Trump continued open mouth operations aimed at raising crude oil prices, saying that he thought Saudi Arabia would “come up with something” to end their price war and save the US shale industry. The efforts succeeded again, with crude oil prices continuing their rally for a third day. A US intelligence report claiming China has drastically understated the severity of its domestic coronavirus outbreak was widely reported on by the media, citing anonymous intelligence officials. This development is unlikely to prove significant for markets – unless it becomes a reason for increased trade hostility from the US. Elsewhere, the Federal Reserve continued its crusade to flood markets with liquidity by relaxing capital adequacy rules such that US treasuries would be excluded from asset calculations – thus enabling banks to buy the securities without fear of inflating their asset base and needed to raise more capital.


The euro is trading as flat as a pancake against the dollar this morning after a sharp fall yesterday  following dismal PMI figures and broad selling in the euro. Lockdowns are being extended throughout the EU, although Italy, Europe’s epicenter of the coronavirus, is showing signs of stabilisation in its domestic outbreak. European Union countries have drafted plans on how to manage the economic turmoil following the corona crisis, but northern European governments still seem to be at odds over the details against the worst hit countries in the south. EC President Ursula von der Leyen acknowledged in a letter that Europe was slow in recognising the severity of the virus crisis in Italy and did not respond adequately, and stated that “too many” thought only about the problems in their own countries. Von der Leyen referred to the initial response as damaging and avoidable, and said that Europe’s subsequent response has significantly improved, bringing a bit of blue sky for an eventually harmonised decision. This morning’s data has included a 300,000 person increase in Spanish unemployment, and eurozone producer prices will be released at 10:00 BST.


Sterling has been relatively stable against the US dollar over the past two days, and as a result has extended its rally against the euro to a 7-day winning streak, lifting the GBPEUR cross above a 2-week high late last night. The scale of the economic shock to the UK and Europe is becoming clearer by day, and yesterday news broke that just under one million people had claimed universal credit between the 16th of March and the end of the month. The British Chambers of Commerce released a survey of UK businesses, which found that 44% of respondents were planning on furloughing at least half of their workforce, far higher than initial HM Treasury estimates. Mortgage lender Nationwide said that UK house prices rose 3.0% year-to-year, well above the consensus of 2.1% and the prior reading of 2.3%. The data related to March, and the release noted that the sample period excluded the current coronavirus lockdown. After the Prudential Regulatory Aurhority’s success in calling for bank dividend suspension, the Financial Conduct Authority has proposed a temporary payment freeze for credit card customers whose finances have been hit by the virus outbreak. The proposal envisages a three month payment freeze, as well as an interest free loan of £500.


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