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21.05.2020
23:30
Japan: National Consumer Price Index, y/y, April 0.1%
23:30
Japan: National CPI Ex-Fresh Food, y/y, April -0.2% (forecast -0.1%)
22:45
New Zealand: Retail Sales, q/q, Quarter I -0.7%
22:45
New Zealand: Retail Sales YoY, Quarter I 2.3%
19:50
Schedule for tomorrow, Friday, May 22, 2020
Time Country Event Period Previous value Forecast
00:00 Japan BoJ Interest Rate Decision -0.10% -0.10%
00:00 Japan BoJ Monetary Policy Statement    
06:00 United Kingdom PSNB, bln April -2.33 -35
06:00 United Kingdom Retail Sales (YoY) April -5.8% -22.2%
06:00 United Kingdom Retail Sales (MoM) April -5.1% -16%
11:30 Eurozone ECB Monetary Policy Meeting Accounts    
12:30 Canada Retail Sales YoY March 3%  
12:30 Canada Retail Sales, m/m March 0.3% -10%
12:30 Canada Retail Sales ex Autos, m/m March 0% -5%
17:00 U.S. Baker Hughes Oil Rig Count May 258  
19:00
DJIA -0.45% 24,466.51 -109.39 Nasdaq -0.81% 9,299.92 -75.86 S&P -0.73% 2,949.84 -21.77
16:01
European stocks closed: FTSE 100 6,015.25 -51.91 -0.86% DAX 11,065.93 -157.78 -1.41% CAC 40 4,445.45 -51.53 -1.15%
14:35
New York Fed president Williams: We will keep rates near zero until confident U.S. economy on track to meet full employment and price stability goals
  • Our economic future will be shaped by path of virus
  • Latest numbers do not reveal full extent of financial devastation face by American families
  • We don't know what the shape or timescale of the recovery will be
  • Fed has unwavering commitment to limit economic damage from pandemic
  • Fed's actions to support credit markets and economy are not at all inflationary
  • If anything, inflation is likely to run below trend
  • Goal of monetary policy is to try and minimize long-term damage to economy
14:34
U.S. Leading Economic Index drops less than forecast in April

The Conference Board announced on Thursday its Leading Economic Index (LEI) for the U.S. fell 4.4 percent m-o-m in April to 98.8 (2016 = 100), following a downwardly revised 7.4 percent m-o-m plunge in March (originally a 6.7 percent m-o-m decline).

Economists had forecast a drop of 5.5 percent m-o-m.

Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board, noted: that the US LEI continued on a downward trajectory in April, after posting the largest decline in its 60-year history in March. “The erosion has been very widespread, except for stock prices and the interest rate spread which partially reflect the rapid and large response of the Federal Reserve to offset the pandemic’s impact and support financial conditions. he added.

The report also revealed the Conference Board Coincident Economic Index (CEI) for the U.S. declined 8.9 percent m-o-m in April to 96.6, following a 1.5 percent m-o-m drop in March. Meanwhile, its Lagging Economic Index (LAG) for the U.S. increased 4.1 percent m-o-m in April to 115.3, following a 1.7 percent m-o-m advance in March.

“Business conditions may recover for some sectors and industries over the next few months,” suggested Bart van Ark, Chief Economist at The Conference Board, “But, the breadth and depth of the decline in the LEI suggests that an imminent re-opening of some sectors does not imply a fast rebound for the economy at large.”

14:23
U.S. existing-home sales plunge 17.8 percent in April

 The National Association of Realtors (NAR) announced on Thursday that the U.S. existing home sales tumbled 17.8 percent m-o-m to a seasonally adjusted rate of 4.33 million in April from 5.27 million in March, impacted by COVID-19. That was the lowest rate since July 2010.

Economists had forecast home resales decreasing to a 4.30 million-unit pace last month.

In y-o-y terms, however, existing-home sales plunged 17.2 percent in April.

According to the report, single-family home sales stood at 3.94 million in April, down 16.9 percent from March, and down 15.5 percent from one year ago. The median existing single-family home price was $288,700 in April, up 7.3 percent from April 2019. Meanwhile, existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 390,000 units in April, down 26.4 percent from March and down 31.6 percent from a year ago. The median existing condo price was $267,200 in April, an advance of 7.1 percent from a year ago.

“The economic lockdowns - occurring from mid-March through April in most states - have temporarily disrupted home sales,” noted Lawrence Yun, NAR’s chief economist. “But the listings that are on the market are still attracting buyers and boosting home prices.”

14:06
Rate of contraction of U.S. private sector business activity slows in May - IHS Markit's survey

Preliminary data released by IHS Markit on Thursday pointed to a slightly slower rate of contraction of the U.S. business activity in May, as the economy began to reopen.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 39.8 in May, up from 36.1 in April, but nonetheless pointing to a further substantial deterioration in operating conditions midway through the second quarter. Economists had expected the reading to increase to 38. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, significant contractions in production and new orders drove the deterioration, as businesses slowly returned to work amid challenging domestic and foreign demand conditions. The rates of reduction were among the most marked since the depths of the financial crisis.

Meanwhile, the Markit flash services purchasing manager's index (PMI) rose to 36.9 in May from the record low of 26.7 in the prior month but nonetheless signaling one of the most severe contractions in service sector activity on record. Economists had expected the reading to rise to 30.0. According to the report, the contraction in the headline index was driven by further weakness in domestic and foreign client demand.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 36.4 in May, up from 27.0 in April, but nonetheless indicating the second-sharpest decline in business activity since the series began in late-2009.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at HIS Markit, noted: “Encouragement comes from the survey indicating that the rate of economic collapse seems to have peaked in April. In the absence of a second wave of COVID-19 infections, the decline should moderate further in coming months as measures taken to contain the coronavirus are steadily lifted.”

14:02
U.S.: Leading Indicators , April -4.4% (forecast -5.5%)
14:00
U.S.: Existing Home Sales , April 4.33 (forecast 4.3)
13:45
Canada’s new housing prices unchanged in April

Statistics Canada reported on Thursday the New Housing Price Index (NHPI) was unchanged m-o-m in April, following a 0.3 percent m-o-m advance in the previous month.

Economists had forecast the NHPI to increase 0.1 percent m-o-m in April.

According to the report, new home prices rose in 13 of the 27 census metropolitan areas (CMAs) surveyed in April, led by gains Guelph (+0.6 percent m-o-m), Kitchener–Cambridge–Waterloo (+0.5 percent m-o-m) and Ottawa (+0.4 percent m-o-m), which were supported by favourable market conditions. In contrast, new home prices dropped the most in Edmonton (-0.3 percent m-o-m), Calgary and Regina (both down 0.2 percent m-o-m) in April, with the decreases primarily attributable to weak market conditions.

In y-o-y terms, NHPI rose 0.9 in April, the same pace as in the previous month.

13:45
U.S.: Manufacturing PMI, May 39.8 (forecast 38)
13:45
U.S.: Services PMI, May 36.9 (forecast 30)
13:34
U.S. Stocks open: Dow -0.17%, Nasdaq -0.08%, S&P -0.16%
13:28
Before the bell: S&P futures -0.28%, NASDAQ futures -0.17%

U.S. stock-index futures fell slightly on Thursday, as tensions between the U.S. and China over the origin of coronavirus increased, while the latest jobless claims figures showed the pace of filings had declined from previous weeks.


Global Stocks:

Index/commodity

Last

Today's Change, points

Today's Change, %

Nikkei

20,552.31

-42.84

-0.21%

Hang Seng

24,280.03

-119.92

-0.49%

Shanghai

2,867.92

-15.81

-0.55%

S&P/ASX

5,550.40

-22.60

-0.41%

FTSE

6,051.58

-15.58

-0.26%

CAC

4,469.46

-27.52

-0.61%

DAX

11,122.48

-101.23

-0.90%

Crude oil

$34.36


+2.60%

Gold

$1,740.20


-0.68%

13:07
PBoC keeps extra easing on the table – UOB

FXStreet reports that economist at UOB Group Ho Woei Chen, CFA, gives her opinion on the latest decision by the PBoC.

“The People’s Bank of China (PBoC) kept its benchmark 1Y Loan Prime Rate (LPR) and the 5Y & above LPR unchanged at 3.85% and 4.65% respectively at the monthly fixing...”

“Last Friday also saw the PBoC inject CNY100 bn liquidity into the banking system via the MLF while the second part of the reserve requirement ratio (RRR) cut announced in April kicked in. The 50 bps reduction in RRR for small and medium-sized banks released an additional CNY200 bn liquidity into the financial system.”

“The central bank’s targeted measures and liquidity injections, rather than broad-based aggressive loosening of the monetary policy, are expected to continue in the coming months so long as domestic economic risks remain contained. This will help to maintain the recovery momentum in the domestic economy. Easing inflation as seen in the April CPI and sharper PPI deflation will create room for further monetary policy measures as signaled in the PBoC’s Monetary Policy Implementation Report for 1Q20.”

“The annual National People’s Congress (NPC) that opens this Friday (22 May) is likely to reaffirm the need to continue with counter-cyclical measures given the economic challenges. We expect the PBoC to resume easing monetary policy after the NPC. As such, we maintain our forecast for the 1Y LPR to be cut by 10 bps in June and expect another 20 bps rate reduction in the second half of the year. This will bring the 1Y LPR to 3.55% by end-4Q20.”

“We also see room for another one to two rounds of RRR cut in the next 3-6 months to reduce funding costs and increase the room for banks to expand credit and absorb higher government bonds issuance.”

12:54
Wall Street. Stocks before the bell

Wall Street. Stocks before the bell

(company / ticker / price / change ($/%) / volume)


3M Co

MMM

148.22

0.01(0.01%)

5802

ALCOA INC.

AA

8.33

-0.02(-0.24%)

9718

ALTRIA GROUP INC.

MO

37.8

0.03(0.08%)

5216

Amazon.com Inc., NASDAQ

AMZN

2,505.00

7.06(0.28%)

49031

American Express Co

AXP

90.63

-0.10(-0.11%)

4098

AMERICAN INTERNATIONAL GROUP

AIG

27.95

-0.09(-0.32%)

634

Apple Inc.

AAPL

318.94

-0.29(-0.09%)

174729

Boeing Co

BA

135.99

2.67(2.00%)

470176

Caterpillar Inc

CAT

115.5

-0.19(-0.16%)

2986

Chevron Corp

CVX

92.83

-0.17(-0.18%)

11336

Cisco Systems Inc

CSCO

45.25

-0.19(-0.42%)

21004

Citigroup Inc., NYSE

C

45.33

-0.14(-0.31%)

45888

Deere & Company, NYSE

DE

142.08

-0.23(-0.16%)

604

Exxon Mobil Corp

XOM

45.5

0.13(0.29%)

47410

Facebook, Inc.

FB

233.51

3.54(1.54%)

528517

FedEx Corporation, NYSE

FDX

116.85

-0.16(-0.14%)

2692

Ford Motor Co.

F

5.45

-0.04(-0.73%)

398004

Freeport-McMoRan Copper & Gold Inc., NYSE

FCX

9.1

-0.02(-0.23%)

6728

General Electric Co

GE

6.43

0.01(0.16%)

342324

General Motors Company, NYSE

GM

25.53

0.05(0.20%)

11687

Goldman Sachs

GS

180.55

-0.89(-0.49%)

4574

Google Inc.

GOOG

1,406.67

-0.05(-0.00%)

3997

Hewlett-Packard Co.

HPQ

17.27

-0.03(-0.17%)

16342

Home Depot Inc

HD

237.74

-0.45(-0.19%)

4175

HONEYWELL INTERNATIONAL INC.

HON

137.44

1.41(1.04%)

623

Intel Corp

INTC

63.07

-0.03(-0.05%)

32012

International Business Machines Co...

IBM

121

-0.38(-0.31%)

6251

Johnson & Johnson

JNJ

147.75

0.07(0.05%)

6588

JPMorgan Chase and Co

JPM

91.12

-0.21(-0.23%)

25401

McDonald's Corp

MCD

184.5

0.40(0.22%)

4773

Microsoft Corp

MSFT

185.46

-0.20(-0.11%)

115049

Nike

NKE

92.82

-0.13(-0.14%)

10065

Pfizer Inc

PFE

37.65

0.02(0.05%)

22597

Procter & Gamble Co

PG

113

-0.28(-0.25%)

6400

Starbucks Corporation, NASDAQ

SBUX

79.36

1.60(2.06%)

100115

Tesla Motors, Inc., NASDAQ

TSLA

815.12

-0.44(-0.05%)

68947

The Coca-Cola Co

KO

46.02

0.13(0.28%)

20109

Twitter, Inc., NYSE

TWTR

32.19

-0.04(-0.12%)

122433

UnitedHealth Group Inc

UNH

285.71

-2.28(-0.79%)

2784

Verizon Communications Inc

VZ

54.45

0.19(0.35%)

31406

Visa

V

193.67

-0.19(-0.10%)

5700

Wal-Mart Stores Inc

WMT

125.28

-0.17(-0.14%)

16692

Walt Disney Co

DIS

119.74

-0.18(-0.15%)

99502

Yandex N.V., NASDAQ

YNDX

41.6

0.29(0.70%)

1634

12:50
Initiations before the market open

Initiations before the market open

Boeing (BA) initiated with an Outperform at RBC Capital Mkts; target $164

12:49
Weakness in Philadelphia-area manufacturing activity continues in May

The Manufacturing Business Outlook Survey, released by the Federal Reserve Bank of Philadelphia on Thursday, revealed the weakness in the region's manufacturing activity continued in May.

According to the survey, the diffusion index for current general activity rose from its 40-year low of -56.6 in April to -43.1 this month.

Economists had forecast the index to increase to -41.5.

A reading above 0 signals expansion, while a reading below 0 indicates contraction.

According to the report, the indexes for new orders surged 45 points out of an all-time low for the series last month, from -70.9 to -25.7. The current shipments index climbed 44 points out of an all-time low last month, from -74.1 to -30.3. The current employment index increased 31 points to -15.3, and the average workweek index rose 47 points to -7.1. Elsewhere, unfilled orders held steady at -13.7, while delivery times dropped 11 points to -6.7, suggesting shorter delivery times. On the price front, prices paid index increased 13 points to 3.2, while prices received index rose 8 points to -3.1, its second consecutive negative reading.

12:35
U.S. weekly jobless claims hit 2.438 million

The data from the Labor Department revealed on Thursday the number of applications for unemployment reduced last week to the lowest level since the U.S. economy went into lockdown made to fight the COVID-19 pandemic, but still remained evaluated.

According to the report, the initial claims for unemployment benefits totaled 2,438,000 for the week ended May 16. That brings the number of job losses over the past nine weeks to 38.6 million.

Economists had expected 2,400,000 new claims last week.

Claims for the prior week were revised downwardly to 2,687,000 from the initial estimate of 2,981,000.

Meanwhile, the four-week moving average of claims fell to 3,042,000 from a revised 3,543,000 in the previous week.

12:31
U.S.: Philadelphia Fed Manufacturing Survey, May -43.1 (forecast -41.5)
12:30
Canada: New Housing Price Index, YoY, April 0.9%
12:30
Canada: New Housing Price Index, MoM, April 0% (forecast 0.1%)
12:30
U.S.: Initial Jobless Claims, May 2438 (forecast 2400)
12:30
U.S.: Continuing Jobless Claims, May 25073 (forecast 24765)
12:20
European session review: EUR strengthens as poor PMI data are not enough to outweigh investors' optimism over EU joint recovery fund

TimeCountryEventPeriodPrevious valueForecastActual
07:15FranceManufacturing PMIMay31.536.140.3
07:15FranceServices PMIMay10.227.829.4
07:30GermanyServices PMIMay16.226.631.4
07:30GermanyManufacturing PMIMay34.539.236.8
08:00EurozoneServices PMIMay12.02528.7
08:00EurozoneManufacturing PMIMay33.43839.5
08:30United KingdomPurchasing Manager Index Manufacturing May32.63640.6
08:30United KingdomPurchasing Manager Index ServicesMay13.42527.8
10:00United KingdomCBI industrial order books balanceMay-56-59-62


EUR rose against other major currencies in the European session on Thursday as weak Eurozone PMI data, which again revealed the devastating impact of the COVID-19 pandemic on the region’s economy, were not enough to outweigh investors' cheer over the EU recovery fund plan.

IHS Markit reported that its latest survey revealed the Eurozone's private sector remained stuck in its deepest downturn ever in May due to ongoing measures taken amid Covid-19 pandemic. However, the rate of contraction eased as parts of the economy started to emerge from lockdowns. The flash IHS Markit Eurozone Composite PMI increased from an all-time low of 13.6 in April to 30.5 in May, its highest since February. The service sector business activity index picked up from 12.0 in April to 28.7 this month, its highest since February, while manufacturing output index rose from 33.4 in April to 39.5, its two-month high. Nonetheless, all three indicators remained well below the 50.0 no-change level, indicating a rapid rate of decline.

On Monday, the leaders of France and Germany, Emmanuel Macron and Angela Merkel, proposed the creation of a EUR500 billion recovery fund "to support a sustainable recovery that restores and strengthens growth in the European Union". According to a joint statement of German Chancellor and French President, the fund is meant to be "ambitious, temporary and targeted" financed by money borrowed by the European Commission (EC) on capital markets "on behalf of the European Union" with guarantees from the Member States on favorable terms. The money would be distributed in the coming years as "budgetary expenditure" to the Member States and "the sectors and regions most affected". The EC's chief Ursula von der Leyen welcomed the proposal, which she said "acknowledges the scope and the size of the economic challenge that Europe faces". The EC is to present its proposal for the recovery fund next week.

12:15
USD/CAD: Support at 1.3856/3793 ideally floors the market for a rebound back higher - Credit Suisse

FXStreet notes that USD/CAD saw another test and hold of the pivotal support zone seen at the current range lows, 50% retracement of the 2020 surge and ‘neckline’ to the large base at 1.3856/3793, which analysts at Credit Suisse continue to look to provide a solid floor the market.

“We look for a renewed swing higher within the range, with resistance initially seen at 1.3961/70, above which would complete a small base to confirm the range bottom has held, with next resistance then seen at 1.4080/89, ahead of 1.4114/17.” 

“A clear and conclusive break below 1.3793 would turn the trend back lower and see weakness extend further, with support seen at 1.3734 next.”

11:19
EUR/USD: Frugal Four opposition to Merkel-Macron deal to limit upside potential – Westpac

FXStreet reports that according to analysts at Westpac, EUR may gain from the initial rush of enthusiasm over the Macron/Merkel Recovery Plan and easing of lockdown restrictions, but upside is likely to be limited.

“The recent Macron/Merkel proposals for a shared responsibility COVID-19 Recovery Fund for the region has heralded talk of the EU’s Hamiltonian moment, which brings forth genuine fiscal union, but the realities of EU politics mean that this is far from a secured deal.”

“Germany’s legal rulings against ECB and ECJ as well as potential for the Frugal Four to lead opposition against a Recovery Fund may not be key issues at present, but they will return and dampen current EUR rebounds.”

“Markets are currently focusing upon marked improvements in sentiment and so EUR/USD may breach its recent 1.07-1.10 range for a push to 1.12.”

11:04
USD/JPY: Current move higher to stretch above 109.50 after BoJ announcement – Westpac

FXStreet reports that economists at Westpac are hoping that the current move higher extends above 109.50 post the BoJ announcement. MUFG Bank also expect the BoJ’s measures to support the USD/JPY pair.

“We hope and expect to see a meaningful injection of liquidity designed to target cash-strapped small businesses. Key will be the incentives to encourage banks to take up the liquidity.”

“We see an inevitable deterioration in US-China trade relations and disappointment about the speed of economic improvement as countries reopening as factors that will support the yen on a medium-term basis.”

“Sub 107.50/108 is not the level to be establishing shorts near-term. We remain frustrated sellers of strength and are hoping that the current move higher extends above 109.50 post the BoJ announcement.”

10:50
IMF's managing director Georgieva: halt bank dividends and buybacks now – Financial Times

  • One of steps needed to reinforce bank buffers is retaining earnings from ongoing operations
  • 30 global systemically important banks distributed about $250bn in dividends and share buybacks last year; this year they should retain earnings to build capital in system
  • This has unpleasant implications for shareholders, including retail and small institutional investors
  • All stakeholders will ultimately benefit if banks preserve capital instead of paying out to shareholders during pandemic
  • Protecting the banking sector’s strength now means that, once the recovery picks up, shareholders can expect large payouts

10:37
EUR/JPY: Looking for a test of the 200-day ma at 119.30 – Commerzbank

FXStreet reports that EUR/JPY has eroded the 55-day moving average at 117.55 and the late April high at 117.77. The important base noted by Credit Suisse has been marked. 

“We look for a challenge of the April high and also the 200-day moving average at 119.03/119.30. Further up the 55-week ma lies at 119.85 and the 2019-2020 resistance line lies at 121.06.” 

“Minor support lies at the 116.86 12th May high and the 116.15 March low. Below here lies the 115.34 mid-May trough. Further down sits the current May low at 114.44. This is viewed as an interim low.”

10:18
UK manufacturers’ order book balance drops to lowest level since October 1981 in May

The latest survey by the Confederation of British Industry (CBI) revealed on Thursday the UK manufacturers' order books deteriorated further in May.

According to the report, the CBI's monthly factory order book balance fell to -62 in May from -56 in the previous month. That was the lowest reading since October 1981. Economists had forecast the reading to come in at -59. Export order books dropped to their lowest since October 1998 (-55 from -49 in April).

The CBI also reported that output in the quarter to May (-54 from -21 in April) fell at the fastest pace on record since 1975 and is expected to decline at a slightly slower pace in the next three months (-49). Meanwhile, the average selling prices for the next three months (-20 from -11 in April) are expected to decrease at the fastest pace since April 2009.

Anna Leach, CBI Deputy Chief Economist, noted: “These results show that UK manufacturers are still grappling with the impact of the pandemic. Production levels have fallen even more sharply as firms experience collapsing demand and supply chain disruption, leading some to temporarily shut down their factories. The sector is bracing for what will be a challenging period.”

10:00
United Kingdom: CBI industrial order books balance, May -62 (forecast -59)
09:41
AUD/USD: Another probe above 0.66 – Westpac

FXStreet reports that the Aussie was stopped out of our short on the pop above 0.6600 but can’t see the case for sustained further gains while China’s trade threats to Australia are having a major impact, per Westpac. OCBC Bank prefers to short the AUD/USD pair after the retreat from the 0.66 level.

“China announced 80% tariffs on Australian barley imports, alleging dumping. This followed a partial ban on Australian beef imports and of course the Chinese ambassador to Australia’s threats to a range of Australian exports.” 

“There is no disputing the economic pain of barley growers and beef producers but iron ore remains Australia’s dominant merchandise export to China and this week spot prices reached highs since Aug 2019 as Brazilian supply faltered.”

“Global risk appetite still threatens AUD/USD multi-week but near-term we can’t rule out another push above 0.66.”

09:19
Ex-Goldman chief economist says China’s economic response to the coronavirus crisis has been ‘timid’

CNBC reports that compared to many countries, China has rolled out little additional support for its economy that’s been hit by the coronavirus pandemic, said former Goldman Sachs chief economist, Jim O’Neill.

“It is striking when you look at China’s contrast to so many other countries in the rest of the world so far, how little fiscal expansion China has introduced,” O’Neill, now the chair of U.K. think tank Chatham House, told CNBC.  

“I think they’re being both prudent and very cautious and certainly, given the scale of the supply and the demand shock, China’s policy has been quite timid so far,” he added.

According to the International Monetary Fund, China has announced around 2.6 trillion yuan ($365.97 billion) worth of fiscal measures to counter the impact of the coronavirus, as of May 14 this year.

The amount includes unemployment insurance payouts and some tax relief and accounts for about 2.5% of its gross domestic product, according to the fund.

That’s far lower than many other major economies.

O’Neill explained that China is more cautious in stimulating the economy this time because the country does not want debt rising to unsustainable levels. Debt levels in China rose rapidly in the years after the global financial crisis, as Chinese authorities expanded debt to kickstart economic activity.

But China will have to do more, especially now that consumers have become a much more important growth driver, he said. He added that measures that help to support income, such as tax cuts, may eventually be “inevitable.”

09:00
RBNZ: Call for a negative OCR in April 2021 – Westpac

FXStreet reports that economists at Westpac Institutional Bank now expect the RBNZ will reduce the OCR to -0.5% in April 2021 (previously November 2020). The kiwi tends to rise when global risk sentiment improves and risk sentiment will indeed improve as the Covid crisis fades over a number of years.

“The Reserve Bank revealed that it has asked the trading banks to ready themselves to implement a negative OCR by December 1 this year. We now expect that the RBNZ will cut the OCR to -0.5% in April 2021.”

“We expect that the RBNZ will expand its Large Scale Asset Purchase (LSAP) programme to $70bn at the June OCR Review, and $80bn at the August MPS.” 

“We forecast that the weekly pace of LSAP bond purchases will average $1.1bn until April 2021, slowing to $0.8bn after a negative OCR is introduced. We calculate that the LSAP will eventually total $100bn by June 2022.” 

“We are not forecasting foreign bond purchases, but if there is another big negative economic shock this year then the RBNZ could use that option.”

08:44
Rapid downturn in UK private sector output continues in May

According to the report from IHS Markit / CIPS, UK private sector output remained on a steep downward trajectory in May. The rate of decline in overall business activity eased since April, but was much faster than at any other time since comparable data were first compiled in January 1998.

The headline seasonally adjusted UK Composite Output Index – which is based on approximately 85% of usual monthly replies - registered 28.9 in May, to remain well below the crucial 50.0 no change threshold. Although the index was up from 13.8 in April, the latest reading still signalled a far steeper pace of contraction than at the worst point of the global financial crisis (index at 38.1 in November 2008). Lower volumes of business activity were again almost exclusively linked to business shutdowns, cancellations of customer orders and a general slump in demand amid the coronavirus disease 2019 (COVID-19) pandemic.

May data also signalled rapid declines in new work and employment across the UK private sector, with both rates of contraction the second-fastest in more than 20 years of data collection (exceeded only by that seen in April). 

Average prices charged were cut again in May, largely reflecting discounting strategies across the service economy in response to a slump in sales volumes. 

Meanwhile, the index measuring business expectations for the next 12 months continued to improve from the series record low seen in March. Survey respondents nonetheless widely commented on concerns that customer demand would take a long time to recover to levels seen before the public health crisis, with some service sector companies still deeply pessimistic about their near-term prospects.

08:31
United Kingdom: Purchasing Manager Index Manufacturing , May 40.6 (forecast 36)
08:31
United Kingdom: Purchasing Manager Index Services, May 27.8 (forecast 25)
08:15
Eurozone economic downturn shows signs of easing as lockdowns lift

According to the report from IHS Markit, the eurozone economy remained stuck in its deepest downturn ever recorded in May due to ongoing measures taken to control the coronavirus disease 2019 (COVID-19) outbreak. However, the rate of decline eased as parts of the economy started to emerge from lockdowns.

The flash Eurozone Composite PMI rose from an all-time low of 13.6 in April to 30.5 in May, its highest since February. By remaining well below the 50.0 no-change level, the PMI registered a third successive monthly fall in output and continued to indicate a rate of contraction in excess of anything seen prior to the COVID-19 outbreak. The prior low of 36.2 was seen during the peak of the global financial crisis in February 2009.

The pandemic was again by far the most commonly cited cause of falling output, resulting in widespread closures of non-essential businesses, disrupting supply chains and hitting demand for a wide variety of goods and services. The rise in the PMI nevertheless indicated a markedly slower pace of contraction compared to April’s record collapse. Rates of decline eased in manufacturing and services, reflecting both a reduction in the number of companies reporting lower activity and an increase in the number of firms reporting an improvement.

The service sector business activity index picked up from 12.0 in April to 28.7, its highest since February, but social distancing and other virus related lockdown measures continued to hit businesses such as hotels, restaurants, travel and tourism and other consumer-facing firms especially hard, resulting in the third-steepest decline ever recorded.

08:00
Eurozone: Manufacturing PMI, May 39.5 (forecast 38)
08:00
Eurozone: Services PMI, May 28.7 (forecast 25)
07:44
Decline in German business activity eases in May - IHS Markit

According to the report from IHS Markit, business activity continued to fall across Germany’s private sector in May, albeit with the rate of decline easing from the record pace seen in April. Meanwhile, despite being less pessimistic about the outlook, firms continued with further steep job cuts and discounting of prices charged for goods and services.

The headline Flash Germany Composite PMI Output Index recorded a reading of 31.4 in May, up sharply from April’s record low of 17.4 but still the second-lowest figure since comparable data were first compiled in 1998. Underlying data showed similarly steep falls in manufacturing production and services business activity, though in both cases the rates of contraction were discernibly slower than in April amid the reopening of parts of the economy. In the majority of cases lower activity was attributed to restrictions on business operating capacity and reduced demand, linked in turn to the coronavirus disease 2019 (COVID-19) outbreak. Indeed, firms across both monitored sectors reported sustained (albeit much slower) downturns in inflows of new business in May, with export sales showing particular weakness. 

The easing of lockdown restrictions and growing hopes of a recovery in domestic and international demand saw the survey’s measure of future output improve further from March’s series record low. That said, business sentiment remained firmly in negative territory and lower than at any point prior to March (since this particular series began in July 2012). Manufacturers remained more downbeat about the longer-term outlook than their service sector counterparts. 

07:31
Germany: Manufacturing PMI, May 36.8 (forecast 39.2)
07:30
Germany: Services PMI, May 31.4 (forecast 26.6)
07:17
France: Manufacturing PMI, May 40.3 (forecast 36.1)
06:59
Asian session review: the dollar rose against most of the world's currencies

TimeCountryEventPeriodPrevious valueForecastActual
00:30JapanManufacturing PMIMay41.9 38.4
00:30JapanNikkei Services PMIMay21.5 25.3
02:30AustraliaRBA's Governor Philip Lowe Speaks    


During today's Asian trading, the US dollar was trading higher against the euro, yen and pound. On Wednesday, the euro rose against the dollar for the fourth day in a row. This week, the euro's growth was supported by optimism about the Franco-German initiative to restore the European economy after the crisis caused by the COVID-19 pandemic.

Federal reserve (Fed) leaders discussed the next stage of monetary policy - to convince markets that rates will remain low for a long time, according to the minutes of the April meeting of the Federal open market Committee (FOMC). It says that the Central Bank may want to clarify its intentions regarding interest rates at upcoming meetings.

On Thursday, traders expect the release of data from the US Department of labor on the change in the number of applications for unemployment benefits last week. As reported last week, since the introduction of restrictive measures in the country to prevent the spread of COVID-19 coronavirus infection, about 36.5 million Americans have applied for benefits.

Meanwhile, Japan's Finance Ministry on Thursday reported that the country's exports fell 21.9% year-on-year in April. Japanese exports fell for the 17th month in a row last month amid weak global demand and the ongoing COVID-19 coronavirus pandemic, which caused a number of businesses to suspend operations.

The ICE Dollar index, which shows the value of the US dollar against six major world currencies, rose 0.27% compared to the previous trading day.

06:40
USD/JPY now looks to the 108.50 level – UOB

FXStreet reports that FX Strategists at UOB Group still see USD/JPY attempting a move to the 108.50 in the next weeks.

24-hour view: “Yesterday, we expected USD to ‘rise to 108.15 first before a pullback can be expected’. Our expectation did not materialize as USD drifted lower from a high of 107.98. Momentum indicators have turned ‘neutral’ and for today, USD is expected to consolidate and trade between 107.35 and 108.00.”

Next 1-3 weeks: “After trading in a quiet manner for about a week, USD was jolted awake as it surged past the major 107.80 resistance (high of 108.08) before closing at 107.68 in NY (+0.33%). While we would prefer a daily closing above 107.80, the rapid pick-up in momentum suggests USD could head higher towards 108.50 in the coming days. At this stage, the prospect for a move to the next resistance at 108.90 is slim. Overall, the outlook for USD is positive as long as the ‘strong support’ at 107.15 is not taken out.”

06:20
Japan exports fall most since 2009 as pandemic wipes out global demand

Reuters reports that Japan's exports fell the most since the 2009 global financial crisis in April as the coronavirus pandemic slammed world demand for cars, industrial materials and other goods, likely pushing the world's third-largest economy deeper into recession.

The ugly trade numbers come as policymakers seek to balance virus containment measures against the need to revive battered parts of the economy, with the risk of a second wave of infections only complicating this challenge.

Ministry of Finance (MOF) data on Thursday showed Japan's exports fell 21.9% in April year-on-year as U.S.-bound shipments slumped 37.8%, the fastest decline since 2009, with car exports there plunging 65.8%.

The fall in overall shipments was the biggest since October 2009 during the global financial crisis, but slightly less than a 22.7% decrease seen by economists in a Reuters poll. Exports fell 11.7% in March.

Exports to China, Japan's largest trading partner, fell 4.1% in the year to April, due to slumping demand for chemical materials, car parts and medicines.

Shipments to Asia, which account for more than half of Japanese exports, declined 11.4%, and exports to the European Union fell 28.0%.

06:00
GBP/USD seen within 1.2100/1.2400 in the next weeks – UOB

FXStreet reports that in opinion of FX Strategists at UOB Group, Cable is now expected to trade within the 1.21/1.24 range in the short-term horizon.

24-hour view: “Our view for GBP to ‘test 1.2310 first before a more sustained can be expected’ did not work out as GBP retreated after touching 1.2287. While downward momentum is not exactly strong, the pull-back has scope to extend lower. From here, a dip below 1.2200 would not be surprising but the next support at 1.2175 is likely out of reach. On the upside, the 1.2287 high is acting as a solid resistance for today (minor resistance is at 1.2265).”

Next 1-3 weeks: “GBP took out 1.2230 ‘key resistance’ and as highlighted yesterday (19 May, spot at 1.2205), a break of this level would indicate that the weak phase that started earlier last week (see annotations in chart below) has run its course. The current movement is viewed as the early stages of a consolidation phase. For the next couple of weeks, GBP is likely to trade sideways within a relatively broad range of 1.2100/1.2400.”

05:55
Coronavirus: Apple and Google release contact tracing technology, University of California institutes pay freeze
  • CNBC reports that the global number of confirmed coronavirus cases is nearing 5 million, according to data compiled by Johns Hopkins University. 

  • Now, the Federal Reserve is concerned that a second wave of infections around year’s end will result in another round of social distancing and further damage to the economy

  • WHO made clear Wednesday that the pandemic is far from over after countries around the world collectively reported the largest daily increase in coronavirus cases so far. 

  • Apple and Google have released contract tracing technology and three U.S. states have committed to using it.


  • Global deaths: At least 328,079

  • U.S. cases: More than 1.55 million 

  • U.S. deaths: At least 93,416

05:51
Options levels on thursday, May 21, 2020 EURUSD GBPUSD

EUR/USD

Resistance levels (open interest**, contracts)

$1.1038 (1248)

$1.1022 (1512)

$1.1003 (618)

Price at time of writing this review: $1.0953

Support levels (open interest**, contracts):

$1.0904 (783)

$1.0870 (1379)

$1.0831 (2224)


Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 5 is 92227 contracts (according to data from May, 20) with the maximum number of contracts with strike price $1,0700 (5204);


GBP/USD

Resistance levels (open interest**, contracts)

$1.2319 (317)

$1.2286 (262)

$1.2265 (405)

Price at time of writing this review: $1.2190

Support levels (open interest**, contracts):

$1.2112 (1062)

$1.2045 (658)

$1.1966 (992)


Comments:

- Overall open interest on the CALL options with the expiration date June, 5 is 23674 contracts, with the maximum number of contracts with strike price $1,3500 (3420);

- Overall open interest on the PUT options with the expiration date June, 5 is 29189 contracts, with the maximum number of contracts with strike price $1,3500 (3095);

- The ratio of PUT/CALL was 1.23 versus 1.23 from the previous trading day according to data from May, 20

 

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

00:46
Japan: Nikkei Services PMI, May 25.3
00:30
Stocks. Daily history for Wednesday, May 20, 2020
Index Change, points Closed Change, %
NIKKEI 225 161.7 20595.15 0.79
Hang Seng 11.82 24399.95 0.05
KOSPI 9.03 1989.64 0.46
ASX 200 13.5 5573 0.24
FTSE 100 64.93 6067.16 1.08
DAX 148.42 11223.71 1.34
CAC 40 38.82 4496.98 0.87
Dow Jones 369.04 24575.9 1.52
S&P 500 48.67 2971.61 1.67
NASDAQ Composite 190.68 9375.78 2.08
00:30
Schedule for today, Thursday, May 21, 2020
Time Country Event Period Previous value Forecast
00:30 Japan Manufacturing PMI May 41.9
00:30 Japan Nikkei Services PMI May 21.5
02:30 Australia RBA's Governor Philip Lowe Speaks
07:15 France Manufacturing PMI May 31.5 36.1
07:15 France Services PMI May 10.2 27.8
07:30 Germany Services PMI May 16.2 26.6
07:30 Germany Manufacturing PMI May 34.5 39.2
08:00 Eurozone Services PMI May 12.0 25
08:00 Eurozone Manufacturing PMI May 33.4 38
08:30 United Kingdom Purchasing Manager Index Manufacturing May 32.6 36
08:30 United Kingdom Purchasing Manager Index Services May 13.4 25
10:00 United Kingdom CBI industrial order books balance May -56 -59
12:30 U.S. Continuing Jobless Claims May 22833 24765
12:30 Canada New Housing Price Index, YoY April 0.9%
12:30 Canada New Housing Price Index, MoM April 0.3% 0.1%
12:30 U.S. Philadelphia Fed Manufacturing Survey May -56.6 -41.5
12:30 U.S. Initial Jobless Claims May 2981 2400
13:45 U.S. Services PMI May 26.7 30
13:45 U.S. Manufacturing PMI May 36.1 38
14:00 U.S. Leading Indicators April -6.7% -5.5%
14:00 U.S. FOMC Member Williams Speaks
14:00 U.S. Existing Home Sales April 5.27 4.3
17:00 U.S. FOMC Member Clarida Speaks
18:30 U.S. FOMC Member Brainard Speaks
18:30 U.S. Fed Chair Powell Speaks
22:45 New Zealand Retail Sales YoY Quarter I 3.3%
22:45 New Zealand Retail Sales, q/q Quarter I 0.7%
23:30 Japan National CPI Ex-Fresh Food, y/y April 0.4% -0.1%
23:30 Japan National Consumer Price Index, y/y April 0.4%
00:15
Currencies. Daily history for Wednesday, May 20, 2020
Pare Closed Change, %
AUDUSD 0.65939 0.98
EURJPY 118.063 0.35
EURUSD 1.09773 0.52
GBPJPY 131.581 -0.22
GBPUSD 1.22358 -0.05
NZDUSD 0.61375 1.13
USDCAD 1.39012 -0.36
USDCHF 0.96434 -0.72
USDJPY 107.537 -0.18

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