Flow of negative news continued last week as U.S. consumption shrank significantly, recession was recorded in Germany, and political tensions between the U.S. and China continued to rise as Donald Trump threatened to cut ties between nations.
Economic indicators in the U.S. remained poor. The number of new jobless claims has fallen to 3.0 million, but overall has remained high and is still quite far from neutral, suggesting that the situation in the country remains tense. Retail sales fell -21.6% in April compared to last year. Industrial production decreased by as much as -15% compared to last year. Annual inflation fell to 0.3% and remained above 1.4% after eliminating energy and food prices.
The situation of the virus did not change significantly. In Europe, the situation has improved, especially in Italy, Spain and France. The U.S. has begun to see a moderate decline in new cases, which have dropped to 20,000 a day. Meanwhile, Russia remains the new epicenter of the virus, with more than 10,000 cases per day, and Brazil, whose curve is rising rapidly to 15,000 per day.
The main currency pair EUR/USD fluctuated insignificantly and traded in a relatively narrow channel between 1,080 and 1,085 points. Economic data was poor, especially for March. Italian industrial production contracted by as much as -29% in March compared to last year, and for Europe as a whole by -12.9%. According to preliminary data, the European economy contracted by -3.2% in the first quarter and Germany by -1.9%. The economy of Europe is gradually opening up and activity is recovering, but the biggest question remains how consumer behaviour will change and whether they will consume boldly or remain cautious, as has happened in China. The EUR/USD pair closed the week with depreciation of -0.2%.
The most important Asian pair, USD/JPY, rose slightly to 107 points. There were no important economic data, but investors' attention was drawn to changes in industrial production prices, which recorded a fall of -2.3% per year, which suggests increasing deflationary pressures in the economy due to falling economic activity and falling commodity prices. USD/JPY has ended the week appreciating +0.4%.
The British pound has consistently depreciated over the past week, reaching its lowest level since the last week of March. The virus situation gradually improved as the number of new infections fell to almost 3,000 a day from about 4,000 previous week. Among the news was a change in the country's economy in the first quarter, which stood at -1.6% year-on-year. In March, industrial production fell by -8.2% and construction volumes by -7.1% compared to the same period in 2019. GBP/USD has ended the week depreciating -2.5%.
This week will start with data from the first quarter of the Japanese economy. Data on Japanese industrial production, U.K. labor market indicators and the results of the German and European ZEW index will be published on Tuesday. Wednesday will start with inflation data for U.K. and Europe, followed by the announcement of the minutes of the last U.S. Federal Reserve meeting. Investors will monitor Japan's export volumes on Thursday morning, followed by preliminary results from the manufacturing PMI index. Inflation in Japan and retail sales data in England are expected on Friday.
According to Admiral Markets market sentiment data, 64% of investors have long positions in the EUR/USD pair (down -6 percentage points from last week). In the main Asian pair USD/JPY, 48% of investors have long positions (decreased by -12 percentage points). In the GBP/USD pair, 69% of participants expect a rise (increased +7 percentage points). Such market data is interpreted as contraindicative, therefore EUR/USD and GBP/USD are expected to fall and USD/JPY may appreciate. Positioning data analysis should be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.