The U.S. dollar fell slightly yesterday afternoon as the Federal Reserve expressed their concern of “considerable risks” over the “medium-term.”
Overview
The safe-haven currency has recouped some of those losses early today as European stocks fell for the first time in four days and American futures turned negative on poor data.
Despite the slight drop in risk sentiment this morning, riskier assets have had a stellar month. The S&P is on track to record its best single month since 1974. However, the index is still 13% lower than its all-time highs seen just a few months ago.
The fundamental data remains bleak in the U.S. Weekly jobless claims registered at 3.8 million, slightly worse than estimates. That means that nearly 30 million Americans have filed for initial jobless protection over the last six weeks. A simple calculation would show that the current unemployment rate in the U.S. could be has high as 20%. Separate reports showed that personal income and personal spending both fell worst than anticipated, painting a dreary picture of the current state of the economy.
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EUR
The Euro moved modestly higher late yesterday and early evening on the tail of an increasingly dovish Federal Reserve in the U.S. However, the common currency gave back those gains as risk sentiment turned and a slew of poor data was released in the Eurozone.
Euro-area GDP shrank 3.8% in the first quarter. Italy, who was perhaps hit hardest by Covid-19, saw output plunge 4.7% in the quarter. Spain and France also saw their GDP fall 5.2% and 5.8%, respectively. Similar to yesterday’s GDP print in the U.S., the worst is likely yet to come as the shutdown only started during the second half of the quarter.
In response, the European Central Bank announced new measures to support the 19-country bloc. The most impactful decision was to cheapen the cost of its emergency loan program to banks. At the time of writing, ECB President Christine Lagarde is holding a press conference to explain the decision.
GBP
It was a quiet day in the U.K. today, and thus the sterling maintained a fairly tight range against the U.S. dollar. Indeed, there was no data released in the U.K. compared with a slew of data in both the U.S. and Eurozone.
