Another Week, Another Round of Bad Data


Eyes will to be on economic data, but don’t expect the releases to be very market-moving as expectations of awful prints is mostly priced in. This week's jobs figures are on Tuesday followed by inflation data on Wednesday. Manufacturing and services data published by Markit/CIPS will be on Thursday and then on Friday a big drop in March retail figures is expected. In total, the UK economy is anticipated to contract by 15-25% in Q2.

The price action in cable has settled down for now with it trading around the 200-day moving average. While there are no winners with the coronavirus, we look for the market to start parsing out who will lose the least/most, and as a result discernible trends in FX will develop. In Q1 we moved to an era of higher volatility, so we look for those trends in some cases to be quite strong – sterling certainly has the potential to be one of the more volatile and stronger trending currencies with the sticky EU/UK negotiations further complicating an already very uncertain backdrop.


The Euro-woe continues to flop around with little direction at the moment. From a technical viewpoint EUR/USD sits precariously on a trend support dating all the way back to 1985 if you reconstruct it from the constituent’s currencies pre-euro formation. A break could bring with it a strong move lower. Looking at the data flow this week there is a series of Markit data on Thursday that will underscore the damage done to the manufacturing and services sectors in France, Germany, and the Eurozone as a whole.

US Dollar

Last week brought a report of another 5.2 million jobs lost, with continuing jobless claims rising to almost 12 million. This week’s data is expected to show another 4.5 million jobs lost during the previous week. On Thursday, Markit data is expected to show even further deterioration in the services and manufacturing sectors. Plans to re-open economies on a state-by-state case are being discussed, so there could soon be some improvement soon. On balance the dollar has done little recently. The general bias still remains tilted towards a bullish path of least resistance, but we want to see a bit more before making a stronger commitment to this outlook.

Canadian dollar

Canada has been double-slighted with both the virus and oil gashing the economy. WTI crude oil is trading sub-20 for the first time in a very long time. It’s a tough road ahead, which makes it unlikely that we see a CAD rally gain too much traction even if the recent rise continues in the near-term. Retail sales figures will be released Tuesday and on Wednesday we will see inflation data per CPI readings.

Australian dollar

The jobs figures recently released were interesting even if the market knows the situation is about to change in a big way. It was anticipated that 30k jobs were lost in March, but the actual reading was +5.9k. The statistics agency cited, though, the fact that most surveys were done during the first half of March before the brakes were slammed on the economy. April data will be bad to quite bad. April RBA policy meeting minutes are due out tonight. Preliminary manufacturing and services data due out on Wednesday will likely reflect the sobering story of the virus impact that has been a bit delayed in Australia due to their slow response to the pandemic. AUD/USD is still maintaining its strong rebound after capitulating to 0.55 last month. More near-term strength is possible, but the long-term trend remains a significant headwind.