The greenback opened weaker yesterday before gaining against a few of its counterparts. However, the U.S. dollar is on the back foot again this morning as risk appetite re-enters the market.
Overview
Breaking news early this morning has caused American equity futures to shoot higher. Drug maker Gilead said that they have positive data out of their initial trial for a Covid-19 drug. Details are slim at the time of writing, but it was enough to send stock futures over a percent higher.
On the fundamental front, the first reading of Q1 GDP showed that the American economy shrank 4.8%. The negative print disappointed estimates of a 3.5% contraction. -4.8% growth is the worst reading since March of 2009, the height of the financial crisis. Of course, the shutdown only started in earnest during the middle of March, so today’s reading highlights how fast the shutdown had a negative effect on the economy.
Attention will shift to the Federal Reserve’s meeting this afternoon. A policy decision will be released at 2 p.m., but because the Fed has announced a number of changes since their last scheduled meeting, it is unlikely they will add to their monetary stimulus package today. At 2:30 p.m., Fed chief Jay Powell will hold a press conference, which has a higher likelihood of being a market-moving event. Market participants will be looking for forward guidance for future policy and also how long the Fed expects to hold its current, historically easy policy.
What to Watch Today…
- Jerome Powell press conference at 2:30 p.m.
Complete Economic Calendar can be found here.
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EUR
The Euro came under pressure late yesterday after Fitch Ratings downgraded Italy’s debt to just one step above “junk.” The move was deemed a surprise as the next review was not scheduled until July. This will increase pressure on Italy’s political leaders to make sure fiscal deficits don’t balloon much farther.
The Euro is, however, a touch stronger this morning on renewed risk appetite.
A report showed that retail sales in Spain fell 14.1%, adding to the dreary data.
The European Central Bank will conclude their two-day meeting tomorrow.
CAD
The Canadian dollar is on the offensive again this morning, enjoying a rare rally in the price of oil. The loonie was also able to gain yesterday even as oil sank. The Canadian dollar has rallied for three days for a total of 1%, showing that USD/CAD may have found a top in the near-term.
