Marknadsövervakning - 6th May 2020

Even though Services PMI was a very poor 13.4, sterling held its ground against the dollar and gained against the euro. The UK and US started their trade talks yesterday. There was also news that the UK had suffered the most deaths in Europe and second only to the US on a global basis. The concern is that the country comes out of lockdown too early and experiences another spike higher. We have UK construction PMI for release today and expect 21.0.

There was surprise news that a German court had ruled that Germany must pull out of the ECB’s QE stimulus scheme in three months, unless it can satisfy German judges that the bond purchases are ‘proportionate’ to monetary policy objectives. This judgement was not expected at all and pushed EUR/USD down 0.6% on the day. It is also bad news for the eurozone as a whole with the European Union’s desire for ‘ever closer union’ now totally in doubt, and this doubt caused by a founder member. The EU has responded by saying that EU law has primacy over German law. Today, we have Eurozone economic forecasts and retail sales for release and before these releases EUR/USD is trading at its lowest for a week.

ISM Non-manufacturing PMI was not as poor as expected, although still pretty dismal at 41.8 and a 10.7-point drop from last month’s reading. A White House source said US employment could be as high as 16%, which was lower than last week’s 19% figure expected. Chicago Fed President Evans added to the positive mood and said it was ‘reasonable’ to expect the US to return to growth in the second half of this year.
The AUD stayed supported as there was good news on the pandemic with lockdowns being eased. Australian Treasurer, Frydenberg, said unemployment would get worse before it gets better and Australian retail sales confirmed a rush to buy household products before the lockdown, although this has little effect on the AUD.

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