The U.S. Dollar gained ground and is standing strong in comparison to most, but ADP Employment figures this morning suggests the damage to the economy could be more severe than thought.
Overview
April’s private payrolls fell by over 20.0MM, the worst on record beating the February 2009 previous low of 834,655.
Additionally, pressure remains on other currencies as Purchasing Managers Index across the world are showing deep contractions as well as cases in which the producers explain some disruptive inflation in some raw materials and shipping. The situation is not a good one as reports are also showing concern that while there are some plans to partially re-open economically, the virus’s deadliness remains a powerful element that has not significantly decreased. The uncertainty only keeps feeding the buck.
The Institute of Supply Management’s PMI was a reading of 41.8 explained that business investment is not expanding, yet the surveyed said they paid the highest prices they had paid since January. Fed officials said the damage to employment and production will make a turnaround in the second half of the year. The Reserve now holds assets equivalent to 34.0% of the country’s Gross Domestic Product. We will monitor headlines regarding diplomacy as well since the tensions between the U.S. and China is sparking concern of retaliatory measures and only further downgrading any hopes for global growth.
What to Watch Today…
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EUR
The Euro continues to pay for the devastation in PMIs, the magnitude of Germany’s concerns with QE, and the reality that the virus may not leave us anytime soon. As countries in the bloc opened up some, many medical experts say personal safety measures must be enhanced as projections show potential for a second wave of the condition and in some circles, saying the virus has mutated and could be deadlier still.
Each country has also experienced the first wave differently and economic activity has halted eradicating almost all production in some sectors. The EU Commission explained that the continent may contract by 7.7% instead of its GDP going up by 1.2% as originally though at start of 2020.
GBP
Pound Sterling is seeing a dip as well based on the major change from slight contraction to severely deep as PMIs were released. As mentioned, a PMI reading of 50.0 or higher represent expansion while 49.9 and below contraction. The U.K.’s March 39.3 is quite a monster compared to April’s single-digit reading of 8.2. Chancellor of the Exchequer Rishi Sunak is looking into more ways to fund the economy, but his calculations may also need to start baking in the struggles to arrive from businesses trying to navigate a post-COVID recovery and Brexit.
