The loonie fell against the dollar yesterday as the greenback was pushed along by renewed safe haven demand. While a torrid earnings season weighs on investor sentiment, even at a time when G10 economies begin to open up their economies again, oil markets have found a firmer footing. WTI futures for June delivery have remained stable above $20 a barrel for six sessions now. Extra support was reinforced yesterday as Saudi officials stated that the oil-producing nation would unilaterally cut an extra 1m barrels per day in June, helping to ease some of the supply pressures at a time when demand conditions are tentatively improving. In Ottawa, Prime Minister Justin Trudeau laid out a new loan program for large firms hit by coronavirus that aren’t able to get financing by conventional means. The Large Employer Emergency Financing Facility is a fund for firms with annual revenue over C$300m a year, of which there are at least 3,000 in Canada, who were in a viable financial position prior to the coronavirus outbreak. The announcement of the fund just adds to the measures implemented by the Trudeau administration to project the domestic economy, and especially the labour market, from the collapse of social consumption. The results were somewhat evident in the April labour market report where the unemployment rate printed at a much lower rate than expected, but there is still a long way to go for the Canadian economy.
The dollar opened the week with a weak spot yesterday, as risk appetite seemed adequate, but then began to rally in the mid-morning, ultimately closing the day higher against all of the G10 group of currencies. Some currencies such as JPY and EUR managed to regain some momentum overnight. Equities closed higher in the US, despite ongoing concerns about poor corporate earnings. Senior Federal Reserve policymakers Raphael Bostic and Charles Evans both made comments suggesting they were opposed to or did not anticipate negative interest rates in the US, ahead of a major speech from Fed Chair Jerome Powell tomorrow that may touch on the subject. The Fed also confirmed the start of asset purchases by the Secondary Market Corporate Credit Facility, which will begin to buy assets including exchange-traded funds today. The release said that the “preponderance” of holdings will be of investment grade corporate debt, with the remainder in higher yielding, non-investment grade debt. US inflation data will be released today at 13:30 GMT, followed at 15:00 by a speech from Philadelphia Fed President Patrick Harker and senate testimony from Fed Governor Randal Quarles.
The euro gradually weakened against the dollar yesterday as risk appetite reversed and renewed safe haven flow was sparked. This morning, the euro edged higher, and attention remains on the reopening of economies. France and Italy reported the fewest coronavirus deaths since March, but concerns over a second wave of infections saw European stocks trade lower on Monday. The German Constitutional Court ruling still poses a major downside risk to the euro but no news on the ECB’s response has been announced yet. Today is a calm day on the economic calendar for the eurozone and the EURUSD pair remains in the clutches of US CPI figures later today, while Greek central bank head Yannis Stournaras will participate in an online debate at 17:30 BST where he will address the German Court’s decision.
Like many of its peers sterling traded lower against the US dollar yesterday, as the Government offered more details on its plan to re-open parts of the economy. The phased plan in essence prioritised the allocation of increased contacts to workers unable to work from home, and schoolchildren. A number of senior ministers will set out further details on the Prime Ministers “baby steps” plan today after Johnson’s speech received widespread backlash due to its lack of clarity. Health Secretary Matt Hancock is set to do the broadcast rounds this morning to clear up some of the communication errors, while Transport Secretary Grant Shapps will lay out how to get to work safely in the age of corona. Elsewhere this morning, Bank of England Deputy Governor Ben Broadbent spoke to CNBC, and hinted that the Bank’s long held position against negative rates was not likely to change, saying that if rates were too low they risked doing more harm than good. Later today, Chancellor Rishi Sunak will also appear in the House of Commons where he is expected to unveil plans for winding down the wage support scheme which is currently paid out to millions of furloughed workers.