AFEX Market Watch - 29th May 2020
What Happened Yesterday
• 2.1m Americans applied for unemployment benefits for the first time last week, bringing the pandemic’s total to more than 40m. The number of new applicants fell for the eighth consecutive week. The number claimants who have been collecting for at least two weeks dropped by 3.9m to 21.1m, confounding expectations of an increase, as prior claimants returned to work.
• The RBA’s Governor Philip Lowe reiterated that they have no appetite for negative rates or private asset buying. This is in contrast to the US Federal Reserve which who, as a result of Hertz’s bankruptcy, now own several hundred million dollars of worthless debt. The economy will reduce the severity of the downturn but full employment is expected to be several years away.
• AUDUSD spent time above 0.6600 for the third day in a row but once again has fallen short at the March high of 0.6685. The US dollar remains under pressure against all currencies. This has translated into a fall below 0.6000 and 0.5400 for AUDEUR and AUDGBP respectively. AUDUSD is on track for a back-to-back monthly gain.
Major Risk Event
GDP figures, as well as other economic data points, are likely to be skewed against the real numbers. Many firms have stopped responding to the surveys which are used to calculate GDP. Statisticians are no longer allowed to wander around shops to collect information on prices. we can expect there to be several revisions in the short to medium term future.
Speeches from Fed Chair Powell and Trump will be the main known sources of market drivers. Headlines will therefore take precedence. The American ‘interference’ with the Hong Kong / China tensions could provoke an escalation in the war of words. From a markets perspective, the last trading day of a month can lead to exaggeration of movement.