The Dow Jones[1] and S&P 500[2] rose last week despite the US accumulating a grand total of 22 million jobless claims over the course of four weeks. This is the equivalent of wiping out the progress in employment gains since the aftermath of the 2008 financial crisis. While the haven-linked US Dollar[3] saw some weakness, its downside progress has notably slowed.
Sentiment-linked crude was unable to capitalize on the rise in stocks as OPEC estimated oil[4] demand dropping to a 30-year low. Meanwhile the growth-linked Australian Dollar[5] cautiously rose despite China’s economy shrinking 6 percent y/y in the first quarter which was a historical downturn. Markets were able to look forward to slowing virus case growth globally.
With President Donald Trump presenting guidelines on reopening the economy and a couple of states taking measures to slowly ease travel restrictions, the possibility of a resurface in infections remains a risk. This is as first-quarter earnings season continues with tech, manufacturing, transport and health care companies ahead. Dismal reports from banking institutions[6] offer caution.
Sentiment may however remain bolstered amid aggressive easing efforts from monetary and fiscal authorities. But as conditions improve, expect that these measures could be gradually unwound. The Euro[7] is eyeing a virtual summit by EU leaders to discuss the budget as well as regional consumer confidence data. USD/CAD[8] has Canadian retail sales to watch. What else is ahead?
Fundamental Forecasts:
USD/MXN Outlook: Mexican President Fails to Secure Exchange Funding to Aid the Economy[9]
The Mexican Peso sees renewed volatility due to risk-off sentiment and debt downgrades due to the economic impact of Covid-19.
