SMATS FX Weekly Market Report | Monday 06 April 2020

USD

The US Dollar had a mixed week last week as the COVID-19 continues to tear through the United States. With 330 000 total cases and 10 000 deaths already, the economy is starting to feel the heat as last week’s non-farm payrolls showed a loss of 701 000 jobs out of the US market and the unemployment rate climbed to 4.4%. On Friday, the inflation rate is likely to drop from 2.3% to 1.5% for March YoY while the core figure is likely to drop to 2.3% from 2.4%. Most importantly, on Wednesday, the Federal Reserve will be releasing their meeting minutes after they announced extensive new measures to support the economy throughout the pandemic.

Influences on HKD, SGD & AED

With no meaningful data reports out of our exotic currencies this week, the currencies will be driven by US Dollar strength and COVID-19 updates. With these currencies pegged to the US Dollar they will be moving in line with the USD and its counter-currency action.

AUD

The Australian Dollar was in the red throughout last week, but it has an array of catalysts due out this week to turn things around. The most important driver for the AUD this week will be the Reserve Bank of Australia’s rate decision on Tuesday, they cut rates by 0.25% in March to an all-time low of 0.25%. We don’t expect any further changes to the interest rate or changes to the quantitative easing that was announced but traders are hoping for clues as to how the RBA are going to be combatting the virus. Data-wise, Tuesday sees the release of the trade data, the balance of trade is likely to narrow from A$5.21 B to A$3.75 B in February. At the end of the week China will be releasing their PPI and CPI reports which should have quite a substantial impact on the Aussie Dollar, the producer price index is expected to decline from -0.4% to -1.1% as a result of a hit in business activity from the virus. The consumer price is likely to slow down from 5.2% to 4.5% in March as limited supply from manufacturers kept a lid on prices.

NZD

The Kiwi Dollar suffered some heavily losses as its economy struggled against the fight with the pandemic, this week the NZD will be taking cues from important data releases out of Australia and China. Domestically, they will be releasing their NZIER business confidence report for the first quarter of this year, it is likely to drop from by 30% when it is released on Tuesday. With the extremely close trade ties with Australia and China, the NZD tends to take hints from Australian and Chinese major reports which will be released throughout the week.

EUR

Downbeat domestic data and horrific COVID-19 numbers caused the Euro to slide last week. This week the main driver for the Euro will be the transcript of the European Central Bank’s most recent monetary policy meeting where they announced they would be implementing Long-Term Refinancing Operations (LTRO) to provide liquidity for banks. Fortunately for the Euro, it is seen as a safe-haven, but market watchers will be focused on Coronavirus-related updates and stimulus efforts that impact risk-taking in the market. Traders should also pay attention to the group of EMU finance ministers that are going to be looking at options to help management the fiscal effects of the pandemic.

GBP

The Pound Sterling had an up and down week last week as counter-currency action drove its strength. This week we have a bunch of medium tier reports out of the United Kingdom. On Monday, we expect the construction PMI to drop drastically from 52.6 to 44.0 in March while the GDP for February is likely to show an expansion on 0.1% when it is released on Thursday. At the same time, we can expect a huge contraction in the balance of trade figure as experts have forecast the headline figure to read £2.2 B from the £4.2 B seen in January. Besides for all of that, as is the theme of this year, the rates are likely to move in line with the government’s battle against COVID-19 and its impact on the economy.