CFD Markets News and Forecasts — 08-05-2020

On Tuesday, at 01:30 GMT Australia will publish the NAB Business Confidence Index for April. At 01:30 GMT China will present the consumer price index and producer price index for April. At 05:00 GMT, Japan will release an index of leading economic indicators for March. At 12:30 GMT, the United States will publish a consumer price index for April. At 13:00 GMT, UK will release NIESR GDP Estimate for April. At 18:00 GMT the US will release a monthly budget report for April. At 23:50 GMT, Japan will announce a change in the volume of bank lending for April, as well as the volume of orders for machinery and equipment and the current account balance for March.

On Wednesday. at 00:30 GMT Australia will present the Westpac Consumer Confidence Index for May, and at 01:30 GMT - the labor cost index for the 1st quarter. At 02:00 GMT, in New Zealand, the RBNZ interest rate decision will be announced, and at 04:00 GMT a press conference of the RBNZ will be held. At 06:00 GMT, UK will announce a change of GDP for the 1st quarter, as well as the volume of industrial production, manufacturing production and the balance of visible trade for March. At 09:00 GMT, the eurozone will report a change in industrial production for March. At 12:30 GMT the US will release producer price index for April. At 14:30 GMT, the US will report changes in oil reserves according to the Ministry of energy. At 22:45 GMT New Zealand will report a change in the visitor arrivals for March.

On Thursday, at 01:00 GMT Australia will announce a change in consumer inflation expectation for May, and at 01:30 GMT - a change in unemployment and the number of employees in April. At 06:00 GMT Germany will release a consumer price index for April. Also at 06:00 GMT Japan will report a change in the volume of orders for equipment in April. At 06:30 GMT Switzerland will publish producer and import price index for April. At 08:00 GMT in the eurozone, ECB Economic Bulletin will be released. At 12:30 GMT Canada will announce a change in the volume of industrial supplies for March. Also at 12:30 GMT the US will present an import price index for April and report a change in initial jobless claims. At 22:30 GMT New Zealand will release the index of business activity in the manufacturing sector for March.

On Friday, at 02:00 GMT, China will announce a change in investment in fixed assets, industrial production and retail sales for April. At 06:00 GMT Germany will report a change in GDP for the 1st quarter. At 06:45 GMT France will release a consumer price index for April. At 09:00 GMT, the eurozone will announce a change in the balance of foreign trade for March, as well as GDP and employment for the 1st quarter. At 12:30 GMT Canada will report a change in the volume of transactions with foreign securities in March. Also at 12:30 GMT the United States will announce a change in retail sales for April and will release an index of activity in the manufacturing sector from the Federal Reserve Bank of New York for May. At 13:15 GMT the United States will announce a change in capacity utilization and industrial production for April. At 14:00 GMT the United States will release a consumer sentiment index from the University of Michigan for May and JOLTs Job Openings for March, as well as report changes in business inventories for March. At 17:00 GMT the US will release a Baker Hughes report on the number of active oil rigs. At 20:00 GMT the United States will announce a change in the total and net purchases of long-term US securities by foreign investors for March.

On Sunday at 23:50 GMT, Japan will announce a change in GDP for the 1st quarter.

FXStreet reports that Emily Doak from Charles Schwab apprises that investors should proceed with extreme caution when purchasing oil-linked ETPs.

“For anyone not willing and able to take delivery, negative prices did not create an attractive, arbitrage opportunity.”  

“Investors should know the benchmark (WTI, Brent, or other type of oil), the term structure (front-month, longer-dated, or some combination), and the process used to roll contracts as they approach expiration.”  

“Although volatility is currently impacting oil markets, investors should be aware that other commodity markets could also be at risk for Covid-19 disruptions.”

FXStreet reports that analysts at TD Securities note that U.S. payrolls were -20.5mn in April, not quite as weak as forecast, but still dismal. FX market had a tepid reaction given a well anticipated bad report.

“Payrolls were -20.5mn in April, not quite as weak as the -22mn consensus, but still dismal; the TD Securities forecast was -25mn. The unemployment rate rose to 14.7% from 4.4%, below the 16.0% consensus (TD: 15.0%).” 

“Our bias coming into this print was that FX would observe rather than react. We think this remains the case as much of the FX spectrum has barely budged.” 

“We remain focused on EUR/USD which looks vulnerable to break below the 1.0770/00 pivot; while we do not expect that to occur today, we remain downside focused in the pair.”

• Says he would not advise Fed to do anything
• Respects Fed's independence
• Unemployment numbers are heartbreaking
• Almost all unemployed expect to be re-hired by employer
• Next report could show 25% unemployment
• Payroll tax cut would only be a part of next package

The Commerce Department announced on Friday the U.S. wholesale inventories fell 0.8 percent m-o-m in March instead of declining 1.0 percent m-o-m as previously reported. That was the biggest decline in inventories since September of 2011.

Economists had forecast the reading to drop 1.0 percent m-o-m. In February, wholesale inventories dropped 0.6 percent m-o-m.

In y-o-y terms, wholesale inventories decreased 1.7 percent in March.

• U.S. jobs report full of heartbreak, hardships
• Reopening phase will be intimate, spill into June
• Jobs numbers will continue to deteriorate
• Appropriate policies can make roaring economy in 2021
• Will see positive numbers and second half of year
• Having meetings with lawmakers of both parties
• President Trump weighing making business expenditures to make changes for coronavirus safety tax deductible
• 3/4 of today's numbers are temporary layoffs.
• President Trump will meet with congressional Republicans to discuss stimulus measures today
• He wants an infrastructure and broadband expansion package

Statistics Canada announced on Friday that the value of building permits issued by the Canadian municipalities tumbled 13.2 percent m-o-m in March, following a revised 8.4 percent m-o-m decline in February (originally a drop of 7.3 percent m-o-m). The March decrease was the largest since August 2014.

Economists had forecast a 20.0 percent decrease in March from the previous month.

According to the report, the value of residential permits plummeted 13.1 percent m-o-m in March, as single-family permits fell by 15.3 percent m-o-m, while permits for multi-family dwellings declined by 11.1 percent m-o-m.

At the same time, the value of non-residential building permits dropped 13.3 percent m-o-m in March, as declines in commercial (-19.7 percent m-o-m) and institutional (-15.7 percent m-o-m) permits more than offset a gain in industrial permits (+14.9 percent m-o-m).

In y-o-y terms, building permits decreased 11.4 percent in March.

Statistics Canada reported on Friday that the number of employed people fell by 1,993,800 m-o-m in April (or -11.0 percent m-o-m), while economists had forecast a drop of 4,000,000 and after an unrevised decline of 1,010,700 in the previous month. The employment decline in April was the biggest on the record.

Meanwhile, Canada's unemployment surged to 13.0 percent in April from 7.8 percent in March, exceeding economists' forecast for 18.0 percent. Over the period since comparable data became available in 1976, the April unemployment rate was second only to the 13.1 percent observed in December 1982.

According to the report, full-time employment decreased by 1,472,000 (or -9.7 percent m-o-m) in April, while part-time jobs declined by 521,900 (or -17.1 percent m-o-m).

In April, the number of public sector employees fell by 76,800 (or -2.0 percent m-o-m), while the number of private sector employees tumbled by 1,874,000 (or -16.2 percent m-o-m). At the same time, the number of self-employed dropped by 43,100 (or -1.5 percent m-o-m) last month.

Sector-wise, employment plunged both in goods-producing (-15.8 percent m-o-m) and service-producing (-9.6 percent m-o-m) businesses.

U.S. stock-index futures rose Friday even after the worst monthly jobs report ever as investors hoped that coronavirus' impact on the economy had passed and weighed signs of easing of the U.S.-China tensions.

Global Stocks:

Wall Street. Stocks before the bell

(company / ticker / price / change ($/%) / volume)

Uber (UBER) upgraded to Buy from Neutral at DA Davidson

The U.S. Labor Department announced on Friday that nonfarm payrolls plunged by 20,500,000 in April after an upwardly revised 870,000 gain in the prior month (originally a decrease of 701,000), reflecting the effects of the coronavirus and efforts to contain it. That was the largest monthly decline in payrolls in the history of the series and brought employment to its lowest level since February 2011.

According to the report, job drops in April were widespread, with the largest employment decline occurring in leisure and hospitality (-7.7 million jobs, or 47 percent).

The unemployment rate climbed to 14.7 percent in April from 4.4 percent in March. That was also the highest level in the history of the series.

Economists had forecast the nonfarm payrolls to fall by 2,200,000 and the jobless rate to surge to 16.6 percent.

The labor force participation rate decreased by 2.5 percentage points to 60.2 percent in April (the lowest rate since January 197), while hourly earnings for private-sector workers rose 4.7 percent m-o-m (or $1.34) to $0.01, following an upwardly 0.5 percent m-o-m gain in March (originally, +0.4 percent m-o-m). Economists had forecast a 0.4 percent m-o-m advance in the average hourly earnings. Over the year, average hourly earnings have increased by 7.9 percent, following a revised 3.3 percent rise in March (originally, +3.1 percent).

The average workweek increased by 0.1 hour to 34.2 hours in April, exceeding economists' forecast for 33.1 hours.

The Canada Mortgage and Housing Corp. (CMHC) reported on Friday the seasonally adjusted annual rate of housing starts was at 166,415 units in April, down 14.8 percent from un upwardly revised 195,420 units in March (originally 195,174 units).

Economists had forecast an annual pace of 110,000 for April.

According to the report, urban starts declined 12.5 percent m-o-m last month to 159,130 units, as multiple urban starts fell by 1.8 percent m-o-m to 120,849 units, while single-detached urban starts plunged by 34.9 percent m-o-m 38,281 units. At the same time, rural starts were estimated at a seasonally adjusted annual rate of 7,285 units, down 46.5 percent m-o-m.

USD fell against most of its major counterparts in the European session on Friday, as investors weighed signs of easing of the U.S.-China tensions and the reopening of the economy, while awaiting the U.S. jobs report for April. The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.13% to 99.76.

It is expected that the report, which is set to be published at 14:30 GMT, will show that the U.S. nonfarm payrolls tumbled 22 million jobs last month, pushing the unemployment rate up to 16 percent.

Top trade negotiators from China and the U.S. held a phone call late on Thursday to discuss the phase one trade deal, signed by two countries in January. Both sides agreed that "good progress" was being made to meet the agreement and said that they expected the obligations to be met "in a timely manner". Reports about the latest U.S.-China trade talks eased concerns that U.S. President Donald Trump would "terminate" the trade deal with China if Beijing wasn't adhering to the terms.

FXStreet reports that economists at ANZ Bank do not see potential for the euro due to global uncertainty and strains in the Eurozone. 

“Given the euro area’s high beta to global trade, we expect more global uncertainty around the pandemic to keep any upside capped.” 

“Politically, the European Union is hamstrung, further restricting the region’s ability to appropriately respond to the current crisis.”    

“Spot: 1.08 ANZ Fair value: 1.07”.

• Common European fiscal response is highly desirable
• It needs to be swift, sizeable and symmetrical
• Bank lending in March was the largest on record
  
• Government financing need may exceed 10% of GDP this year
• ECB will play its full part within its mandate

FXStreet reports that, according to economists at Westpac Institutional Bank, it is hard to make the case for a sustained global recovery against that global Covid-19 trend and therein lies the Aussie’s Achilles heel.

“We suspect COVID-19 outperformers like Australia will need to demonstrate sustained growth recovery and outperformance over several quarters. That would mean traditional drivers of currencies such as interest rate and growth differentials won't weigh on the US dollar and help the Aussie until late 2020, at the earliest. Time will tell.”

“Ongoing pressure on households and corporates to repair balance sheets, not to mention likely high structural unemployment as some industries are very slow to recover such as tourism, will likely thwart any meaningful global activity reboot. The next few months will surely see a continuing run of brutal global activity data.”

“Our end-June forecast is 0.62. Confirmation of a huge drop in employment on 14 May could be one catalyst for renewed A$ decline.”

• It is very possible the existence of euro is now put into question
• Because every national constitutional court can decide for itself
• It is difficult if German court cannot accept ECJ's decision
• But it is also not easy to refute the German decision

Uber (UBER) reported Q1 FY 2020 loss of $1.70 per share (versus -$2.26 per share in Q1 FY 2019), worse than analysts' consensus estimate of -$0.90 per share.

The company's quarterly revenues amounted to $3.534 bln (+14.0% y/y), beating analysts' consensus estimate of $3.350 bln.

Uber's gross bookings grew by 10% y/y on a constant currency basis to $15.8 bln in Q1, with Rides declining 3% y/y and Eats climbing 54% y/y.

UBER rose to $33.18 (+7.27%) in pre-market trading.

FXStreet reports that economist at UOB Group Ho Woei Chen, CFA, gives her opinion on the outlook for the trade balance in China.

"China's exports (in USD-terms) unexpectedly rose 3.5%y/y in April vs. consensus forecast of - 11.0% and -6.6% in March. However, imports declined by a larger -14.2% y/y in April vs. consensus forecast of -10.0% and -0.9% in March. As such, the trade surplus widened to US$45.3 bn in April from $19.9 bn in March."

"By markets, China's exports rose across most destinations in April, led by Japan (+33.0%), Australia (+32.0%) and Taiwan (+20.9%) while exports to India fell sharply due to the worsening COVID-19 pandemic situation. Its shipments to the US rebounded sharply to 2.2% y/y in April from -20.8% y/y in March while exports to ASEAN maintained growth at 4.2% y/y."

"In the four months of the year, China's exports and imports contracted by -9.0% y/y and -5.9% y/y respectively. In the period, its imports from the US had fallen by a comparable -5.6% y/y but exports to the US fell a larger -18.1% y/y, reflecting the demand fallout in the US. Thus, China's trade surplus with the US narrowed to US$63.57 bn YTD compared to US$83.54 bn in the year ago period."

"Overall, both external demand and the global supply chain have suffered severe disruptions from the scale of the worldwide pandemic lockdowns. Despite the unexpected gains in April's exports which was boosted by shipments of medical supplies, the sharp pullback in new export orders in China's April manufacturing PMI suggests that near-term trade outlook remains tilted to the downside."

Reuters reports that China posted a $29.7 billion current account deficit for the first three months of the year, the foreign exchange regulator said on Friday.

The preliminary capital and financial account for the same period registered a surplus of $29.7 billion.

China's international payments was affected by the coronavirus outbreak in the first quarter, the regulator said, adding that it is expected to remain balanced overall in the future.

FXStreet reports that available forecasts show a greater decline in GDP in 2020 in the eurozone than in the United States. The reality may be different, in the opinion of analysts at Natixis.

"The lasting deterioration in important US industries, such as automotive and aeronautics, which will suffer from the fall in demand for durable goods and in air transport, and which are important industries in the US."

"The surge in unemployment, caused by the very rapid adjustment in employment in companies, is leading to a sharp rise in household defaults on loans, which will lead to a crisis in the banking system as in 2009."

"The sustained decline in global GDP, and therefore in global energy consumption, may lead to oil and natural gas prices that are permanently lower than those required for profitable oil and shale gas production in the US. We will, therefore, see a sharp decline in oil and gas investment and production in the US, resulting in a sharp decline in employment in this very important sector."

FXStreet reports that FX Strategists at UOB Group suggested USD/CNH could slip back to the 7.035 level in the next weeks.

24-hour view: "After closing little changed for several days, USD plunged and dropped sharply to 7.0909 before extending its decline this morning. Strong downward momentum suggests further weakness towards 7.0680. Resistance is at 7.0950 followed by 7.1020."

Next 1-3 weeks: "After USD surged strongly last Friday, we indicated on Monday (04 May, spot at 7.1370) that the 'rebound in USD has room to test the March's peak near 7.1650'. We added, 'the odds for USD to move above this level in a sustained manner are not high'. USD subsequently traded in a quiet manner for a few days before lurching lower yesterday. The risk has shifted quickly to the downside and from here; USD could test the end-April low of 7.0535. On the upside, only a move above 7.1180 would indicate the current downward pressure has eased."

CNBC reports that April's jobs report will be horrific, and with the worst job losses ever, it should provide a critical look into the depths of the crater the economy has fallen into.

Economists expect a record 21.5 million jobs were lost last month, sending the unemployment rate sharply higher to 16% from just 4.4%, according to Dow Jones. But economists concede that unemployment rate could be as low as 11% or higher than 20%, because of the way the government collects the data in its survey.

At 16%, it would be the highest rate of unemployment since 1939, the tail end of the Great Depression and just before World War II.

"This is the biggest and most acute shock that we've seen in post-war history. It's a dramatic loss of output in a very short period of time," said Michelle Meyer, head of U.S. economics at Bank of America. When states began to shut down in March, among the first casualties were jobs in the restaurant and leisure industries, retailers, and at airlines.

Economists say the job losses in Friday's report could mirror what was in ADP's April payroll report, released Wednesday.

The government data should reveal the breadth of the job losses and detail the demographics of those who are now out of work, even if it is just temporarily.

"It's understood leisure and hospitality and retail have seen a large displacement of workers, and that's apparent in the claims numbers. The extent that has spread across the economy will tell us a lot, and the more it has spread, the more challenging it will be to return to normal," said Meyer.

"I think it will be concentrated in those industries, but I think it will be fairly broad-based. It's hard to escape this recession," she said.

FXStreet reports that sentiment in the base metal markets continues to improve, with strong import demand from China fuelling hope that the worst is behind us, according to ANZ Bank.

"Tighter scrap regulations in China, mine supply disruptions in South America, and a revival in business activities kept refined copper imports strong."

"Total imports of copper rose 12.2% y/y in April to 460kt. This set the tone for the rest of the base metals sector, with zinc prices leading the gains."

"Treatment charges fell to their lowest level in China since January 2019. This normally suggests supply of concentrate is tight."

Reuters reports that Danish museums, amusement parks and cinemas will be allowed to reopen from June 8, the government said on Friday, after it struck a deal with parliament on how restrictions to curb the spread of COVID-19 could be eased further.

FXStreet reports that economists at Deutsche Bank have smoothed the EUR/USD forecast for this year due to the instability in Europe.

"But questions around Europe's systemic stability linger and newsflow on this front in recent weeks has been disappointing, including ECB reluctance to deploy OMT; the German Constitutional Court decision and delays in putting together a Recovery Fund."

"We flatten our EUR/USD forecast for this year, with a 1.10 year-end target."

"Beyond this year, our assumption is that Europe moves closer to further integration and EUR/USD is able to recover closer to estimates of purchasing power parity, also helped by monetary policy convergence and a turn in the broader dollar cycle."

• One third of Germans see their financial situation worsening in the next 12 months

FXStreet reports that economists at Deutsche Bank have updated their prospects for the global economy and look gloomier.

"We see world GDP falling 11% below its end-2019 level in Q2, and recovering to about the end-2019 level by the end of next year."

"The projected drop this year is 6%, compared with the consensus projections of half that amount or less and a previous record decline of 0.1% during the GFC."

"This economic shock, while falling well short of the Great Depression thanks to massive monetary and fiscal policy intervention, nevertheless results in immense increases in unemployment that will put a major strain on national treasuries for some time to come."

• 43% of firms are facing cancelled orders

• ~50% of all German firms had to partly/completely stop business during lockdown

• ~25% of these firms restarted business when lockdown was eased at end-April

• 80% of firms see decline in revenue this year

• ~33% of restaurants, ~50% of travel firms fear insolvency

eFXdata reports that Bank of America Global Research discusses its expectations for US jobs report for the month of April.

"The April employment report will reveal unprecedented job losses as the economy has been shutdown to control the spread of COVID-19. We forecast 22 million in nonfarm payroll losses and a massive spike in the unemployment rate to 15% from 4.4% in March," BofA notes.

"Meanwhile, average weekly hours should plunge to a new record low of 33.5, though this should have a side effect of boosting wage growth by 1.0% mom or 3.9% yoy as impacted workers will skew towards low-to-medium wage," BofA adds.

FXStreet reports that cable is forecasted to extend the consolidative mood likely between 1.2280 and 1.2500 in the next weeks, noted FX Strategists at UOB Group.

24-hour view: "GBP had a 'wild day' yesterday, as it rose to 1.2418, plunged to 1.2266 before snapping back up to end the day slightly higher at 1.2364 (+0.18%). The robust bounce from the low has picked up some momentum and from here, GBP could edge yesterday's 1.2418 peak. That said, the next resistance at 1.2450 is unlikely to come into the picture. Support is 1.2360 followed by 1.2330."

Next 1-3 weeks: "The break of the 'strong support' level at 1.2370 on Wednesday (06 May) suggests that last week's 1.2644 high could be a short-term top. That said, downward momentum is lackluster and it is too early to expect a sustained decline. From here, GBP is more likely to consolidate and trade between 1.2280 and 1.2500 for a period."

CNBC reports that as markets begin pricing in the possibility of the Federal Reserve bringing interest rates into negative territory, JPMorgan Asset Management's David Kelly argues that such a policy move makes little sense.

"There is no point ... at all in going to negative rates," Kelly, who is chief global strategist at JPMorgan Asset Management, told CNBC.

"Negative rates have not helped the Japanese economy, they haven't helped the European economy," Kelly said, in reference to the well-documented economic challenges in those places despite the adoption of such policies. "All they do is clog up the banking system, make it more difficult for everybody to operate."

Furthermore, that's not needed at a time when the government is "essentially enabling and monetizing unlimited fiscal .. expansion," he said.

"If you want to stimulate the economy directly, just put more money into the hands of consumers and businesses, Congress doesn't seem to have any shyness about doing that," Kelly said, adding that he expected an additional $2 trillion of stimulus "before this is over."

That's on top of the more than $2 trillion already approved. The historic amount of stimulus comes at a time when economies worldwide have been ravaged by extensive restrictions implemented to stem the spread of the coronavirus pandemic.

Coupled with reports of the Federal Reserve stepping in to buy bonds, some of which include those in the high-yield space, Kelly said: "That's tremendous monetary expansion right there, you don't ... need to go to negative rates ... to try and help that along."

According to the report from Federal Statistical Office (Destatis), Germany exported goods to the value of 108.9 billion euros and imported goods to the value of 91.6 billion euros in March 2020. Destatis also reports that exports declined by 7.9% and imports by 4.5% in March 2020 year on year. Compared with February 2020, exports were down 11.8% and imports 5.1% after calendar and seasonal adjustment.

For exports, this was the strongest month-on-month decline after calendar and seasonal adjustment since the beginning of the time series in August 1990. Imports saw the largest month-on-month decrease since January 2009 (-6.5%).

The foreign trade balance showed a surplus of 17.4 billion euros in March 2020. In March 2019, the surplus was 22.3 billion euros. In calendar and seasonally adjusted terms, the foreign trade balance recorded a surplus of 12.8 billion euros in March 2020.

The German current account of the balance of payments showed a surplus of 24.4 billion euros in March 2020, which takes into account the balances of trade in goods (+18.0 billion euros), services (-0.3 billion euros), primary income (+9.5 billion euros) and secondary income (-2.7 billion euros). In March 2019, the German current account showed a surplus of 30.9 billion euros.

• The total number of global cases of coronavirus have exceeded 3.8 million while the total number of deaths is about 270,000.

• A reignition in U.S.-China trade tensions would be the "the last thing" anyone needs when the world is already reeling from the economic impact of the coronavirus pandemic, said JPMorgan Asset Management's Alexander Treves.

• Most cases reported: United States (1,254,740), Spain (221,447), Italy (215,858), United Kingdom (207,977), and Russia (177,160).

EUR/USD

Resistance levels (open interest**, contracts)

$1.1000 (1295)

$1.0951 (1062)

$1.0903 (1275)

Price at time of writing this review: $1.0842

Support levels (open interest**, contracts):

$1.0795 (1701)

$1.0748 (1556)

$1.0699 (2108)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 8 is 72741 contracts (according to data from May, 7) with the maximum number of contracts with strike price $1,1200 (2957);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2600 (1004)

$1.2501 (1815)

$1.2452 (1415)

Price at time of writing this review: $1.2395

Support levels (open interest**, contracts):

$1.2351 (676)

$1.2330 (705)

$1.2293 (882)

Comments:

- Overall open interest on the CALL options with the expiration date May, 8 is 18570 contracts, with the maximum number of contracts with strike price $1,3000 (1441);

- Overall open interest on the PUT options with the expiration date May, 8 is 18488 contracts, with the maximum number of contracts with strike price $1,2850 (1070);

- The ratio of PUT/CALL was 1.00 versus 1.07 from the previous trading day according to data from May, 7

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.