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Stocks Fall, Risk Currencies Follow, CAD Employment Next

Published 07/09/2020, 05:58 PM
Updated 07/09/2023, 06:31 AM
The U.S. dollar finally came under some selling pressure on Thursday after the U.S. set another record high of more than 59,000 coronavirus cases on Wednesday. The numbers moderated a bit today but medical facilities across the nation are getting slammed, positivity rates are alarming and the death rate is rising. Jobless claims were better than expected, rising by 1.31 million versus 1.4 million the week prior. However, with new shutdowns announced across the nation these numbers could deteriorate in the coming weeks and even when they stabilize, firms won’t be rushing to hire any time soon.
 
Yet, the main reason why stocks have not collapsed is prospect of another coronavirus relief package and a second round of stimulus cheques. Another package is seen vital for the Trump administration as key parts of their economic stimulus plan expires at the end of this month. With only U.S. producer prices scheduled for release tomorrow, Friday could be another sleepy day for currencies. Bigger moves are likely next week when we have ECB, Chinese Q2 GDP, U.S. retail sales, the Empire and Philadelphia Fed surveys scheduled for release. USD/JPY has been trading in a very tight range, and if there are no positive stimulus headlines, we could see a break to the downside. 
 
Europe on the other hand continues to recover with Germany reporting an improvement in trade. The trade surplus nearly doubled in May, with imports and exports rebounding after double digit declines in April. With that said, the ECB remains vigilant with policy-maker Villeroy warning that they are ready to be innovative with policy tools if needed. The European Central Bank meets next week, and while it will be worried about economic risks in the U.S., data is improving with most countries in Eurozone maintaining a flat curve that will bolster economic activity.
 
Sterling extended its gains for the fifth day in a row but retreated after the UK government announced a major stimulus package that included a reduction in VAT for the travel industry and a cut in the tax on home purchases. Unfortunately, it remains to be seen whether the gains can be sustained as Brexit talks break down. According to the EU, there are significant divergences, but talks will continue next week in Brussels.  
 
The Canadian dollar pulled back despite stronger housing data. USD/CAD will be in focus tomorrow with Canada’s labor market report scheduled for release. Like many countries in the Eurozone, Canada has done a good job of flattening the COVID-19 curve allowing for business activity to reopen. However, according to the latest IVEY PMI report, there was very little improvement in the employment component, which suggests that while businesses have stopped firing, they have not been aggressively hiring. Weaker numbers would encourage USD/CAD to bounce off the 200-day SMA.
 
The best performing currency continues to be the New Zealand dollar. Unlike Australia, they are not dealing with a second wave. Data has been better with business confidence improving and global dairy prices rising. In contrast, Australia announced further border restrictions for Victoria residents. Home loans plunged and earlier this week, the PMI services index fell. AUD should continue to underperform NZD and other major currencies. 

Latest comments

Do what we can to help the vulnerable but #noturningback otherwise the flu epidemic will become a real hunger epidemic when no one has a job
Hi nasdaq will fall or it will rise please tell me
Great work!
precise analysis Kathy
Thank$ Kathy More EurUsd you're the great!!!
nicely done Kathy
great analyses thank u
great sharing
great work. thank u
Good observations and analysis
Thank you Miss Kathy Looking forward to trading the USD/JPY in next week sentiments. Thank you so much for the Analysis
Thank you for your commentary.
great analysis again ! Thanks
Important information, clear Explanation of facts.
looks like a second dip in stocks. Time to buy again soon!
COVID cases up because of testing. Death rate curve trending steadily downward.
I called this months ago. I would bet my savings that just about 50% - 75% of the population has or has had this virus. There are so many people that had it months ago that never even got tested or the doctor's told them off acting like it was nothing and refused to test. Now they go in and get tested and it's negative. Looks like the death toll is going to be less than 1%. It would require 3.5 million deaths in the US to reach 1% and we're still at less than 150k. That's not including the deaths of people who most likely died from other causes but because they happened to have this cold they were declared to have died from it. So many obese diabetics I've seen that supposedly died from Covid19 but apparently it had nothing to do with their overall health.
Thanks Kathy. Helpful roundup
Agreed she is as good analysis
Yea, stocks fall. Except Nasdaq.
Did you reas the whole article or just the headline?
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