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Market watch - 9th July 2020

There is news that the government is considering sending out more cheques to individuals in the US in an attempt to revitalise the economy. However, the real news is, of course, the virus with the US producing another record high of 60k coronavirus cases yesterday and having some 3 million cases. There are rampant outbreaks in Arizona, California, Florida and Texas, which have accounted for almost 50% of all new cases in the US in the last week. There are reports of hospitals at full capacity. We have US unemployment claims today and expect new claims to be 1.3 million. With the monthly non-farm payrolls showing huge increases in jobs being filled, the employment data appears confused. However, it could well be that the increasing pandemic is seeing more sickness and layoffs again. In this case, it wouldn’t surprise if the non-farm payrolls followed the jobless claims and moved lower again in time.

With the negative pandemic news emerging from the US, USD/CAD slipped by 0.75%. We have housing starts for release today, and we expect 185k, slightly lower than 193k last month.

German Chancellor, Merkel, was in Brussels to add urgency to the negotiations over the EU support package. The focus now lies on Dutch Prime Minister, Rutte, who is still insistent that there will be conditions attached to the grants and loans. However, he is coming under increasing pressure with German Chancellor, Merkel, saying the EU ‘should rise to the biggest challenge.’ Today, the market is concerned that the Dutch intransigence will cause the EU to miss next week’s deadline and, as such, has been selling euros in European trading.

The market was nervous before the Chancellor spoke and sold the pound. He announced a range of measures, which totalled around GBP 30 billion of stimulus and support. Actions included a job retention scheme, where business receives GBP 1k for any employer who retains furloughed staff between November and January. A kick-start scheme encouraging employment of 16-24 year olds. Stamp duty on property purchases up to GBP 500k will be zero (time limited). A VAT cut from 20% to 5% in the hospitality and leisure industries (time limited) and finally, eat out vouchers giving 50% discounts to everyone who eats out on Monday to Wednesday. The Chancellor has been on the wires already this morning, saying that ‘hardship lies ahead’ and that he is ‘absolutely anxious’ about the state of the economy. Regardless of his comments, the market likes his support package, with GBP/USD rising 1% over the last 24 hours.

As the negative pandemic news continues in the US, so the AUD continued to creep higher gaining 0.5% in the last 24 hours.

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