Last week, investors in the foreign exchange market withdrew from the U.S. dollar segment and the reserve world currency adjusted to a 1-month low. This position was fueled by both poor U.S. economic data and the very mild tone of the country's central bank due to further monetary policy.
The Federal Reserve held a members meeting on Wednesday, during which it was decided to keep interest rates close to 0% for at least a year and until full employment is reached again. Also FED decided to maintain an unlimited quantitative stimulus program, to purchase domestic and corporate debt securities and provide liquidity to financial markets.
Among the country's economic indicators, the number of new jobless claims was tracked, reaching 3.8 million, down from 4.4 million last week. Although the trend of lay-offs in recent weeks has been recording a slowdown, the overall scale is the highest in history. About 30 million jobs have been lost in the country since the virus began. The press mentions that the country's system is unable to process all the applications submitted and there are still a number of people who have lost their jobs but have still not received unemployment benefits. It is also important to note that workers are being laid off or are considering to by even the largest companies in the country, including Hertz or Boeing. Other economic indicators included the results of the first quarter of the country's economy, which showed a decrease of as much as -4.8% compared to the fourth quarter of 2019. The result of the ISM manufacturing PMI Index was also published, which was at 41.5 points. Meanwhile, consumer confidence index fell from 118.8 to 86.9 points, the lowest level since 2014.
The news about the coronavirus did not change significantly. Volumes in Europe continued to shrink, leaving only UK where growth was still recorded. Meanwhile, the situation in the U.S. did not improve and an average of about 30,000 new cases was recorded daily, and mortality also remained high at 2,000 per day.
The main currency pair EUR/USD appreciated to 1.10-point level and almost reached the 200-day moving average. Among the important and interesting economic indicators was the situation on the German labour market - 373 thousand workers were laid off in the country, and the unemployment rate rose from 5.0% to 5.8%. The European economy contracted -3.8% in the first quarter compared to the last quarter of 2019. EUR/USD has ended the week appreciating +1.5%.
The main Asian pair USD/JPY changed only marginally and traded at the 107-point level. The country's central bank did not change interest rates, but announced an unlimited quantitative stimulus program as expected. The employment rate rose slightly from 2.4% to 2.5%. Industrial production fell -5.2% year-on-year. The Industrial Managers Purchase Index stood at 41.9 points. USD/JPY ended the week dropping -0.5%.
The British pound appreciated against the U.S. dollar and had briefly reached the level of 1.26 points. There was little economic news, with the manufacturing PMI Index among the most important, falling to 32.6 points. GBP/USD ended the week appreciating +1.1%.
This week, on Monday, actual European manufacturing PMI Indices will be released, since a holiday took place last Friday. U.S. international trade data will be expected on Tuesday. No important news is planned on Wednesday. On Thursday, Bank of England meeting will be held, German industrial production in March will be released and U.S. unemployment applications data will be announced. German international trade results and U.S. labour market data, including unemployment, are expected on Friday.
According to Admiral Markets market sentiment data, 38% of investors have long positions in the EUR USD pair (down -6 percentage points from last week's data). In the main Asian pair USD/JPY, 58% of investors have long positions (increased +9 percentage points). In the GBP/USD pair, 63% of participants expect a rise (up 13 percentage points). Such market data is interpreted as contraindicative, so EUR/USD is expected to rise and USD/JPY and GBP/USD to drop. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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