Market watch - 22nd May 2020
US flash Services PMI at 36.9 was better than forecasted 32.6 and Manufacturing PMI also beat expectations of 39.3 to register 39.8. These helped support the dollar as did the latest increase in tension in the US-Chinese relations. Unemployment claims were 2.4 million bringing the total unemployed to over 28 million in about two months. Treasury Secretary, Mnuchin, added that he expected the economy to need more support. President Trump added that if there is a second wave of coronavirus, he will not shut down the economy.
As the dollar strengthened, so the CAD declined a touch. Bank of Canada’s Poloz said he believes the economic worries are a bit overblown, and we are in an era where rates are likely to stay low. Today, we have retail sales and expect them to fall 10% from last month.
EUR/USD succumbed to profit taking sellers around the psychologically important 1.1000 level. Flash Services and Manufacturing PMI were released today and were both better than expected, however, this didn’t help the single currency. Today, we have the release of the ECB monetary policy meeting minutes, which have the potential to move us.
Services PMI were better than expected and as such managed to keep GBP/USD and GBP/EUR supported. The news from the Brexit talks shows yet more disagreement, but at the moment the market is ignoring this. This morning, we have already had retail sales which fell by 18.1% and worse than the 15.8% expected, pushing GBPUSD lower.
The AUD slipped yesterday, as their relationship with China soured and the situation in the latter became more fractious. Yesterday, the South African Reserve bank cut interest rates by 0.5% to 3.75%. This was seen as supporting the economy and as such the ZAR strengthened against its peers. China announced plans to set up a National Security Law in Hong Kong, which would ban protest in the territory. This is not good news and the Hang Seng index has fallen 5% already with the market questioning whether the HKD peg to the USD can hold.