Daily Market Update

Dollar Moderates Losses; 1.8 Million More File Unemployment Claims

June 04, 2020

The U.S. dollar spent most of the evening enjoying the relative calm after falling for five consecutive days.

Overview

However, the greenback is back under selling pressure in early trading as European Central Bank actions improved market sentiment and reduced demand for safe-havens.

It is Thursday which means it is jobless claims day.  Initial claims fell to 1.88M last week from over 2M a week prior.  While the trend shows that job losses may be easing, the negative impact of COVID on the job market is still unprecedented.  Continuing claims also rose more than expected to 21.5 million Americans.  There is no more top tier data slated for release today so expect market participants to quickly shift their focus to tomorrow’s Non-Farm payroll print which is expected to show that the unemployment rate skyrocketed to 19.5% in May.

 

What to Watch Today…

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EUR

The Euro was initially lower against the U.S. dollar, snapping a week-long streak of gains.  But EUR/USD shot higher early this morning and touched fresh highs.  The European Central Bank surprised and surpassed market expectations by announcing a 600 billion Euro increase to their Pandemic Purchase Program.  Most economists expected a boost of 500 billion.  The ECB also said the program will be extended through June of next year. While the extra easing of policy would normally be a negative for a currency, today’s announcement is having the opposite effect.  ECB Chief Lagarde will begin her press conference soon.

The common currency is getting further support as Angela Merkel’s collation agreed on a 130-billion-euro aid package to boost Europe’s largest economy.

 

GBP

The British pound was under constant pressure overnight, falling for the first time in five days versus the U.S.  While GBP/USD did pop higher immediately after the ECB headlines broke, the sterling has begun to fall again.  Perhaps traders saw the potential for profit-taking or perhaps traders realized that very little has been accomplished on the Brexit front.  Indeed, the Bank of Canada has told lenders to prepare for a “no-deal Brexit.”

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