US stocks are starting this new trading week lower but for currencies its been a quiet morning with many European and Asian markets closed for Easter Monday. There was very little consistency in the US dollar’s performance – the greenback traded lower against the Japanese Yen and higher versus euro. Even the Canadian dollar which should have benefitted from the historic agreement by OPEC nations to cut production floundered as oil prices gave up earlier gains. The price war between Saudi Arabia and Russia ended with an agreement to reduce production by 9.7 billion a day. However with Mexico’s smaller reduction, this amount was shy of the market’s 10 billon forecast, explaining the lackluster reaction in crude - its simply not enough but still negotiations could have easily broken down with no cuts to production.
The Canadian dollar has bigger problems than oil. Last week, we learned that a million jobs were lost in Canada as manufacturing activity contracted sharply at the start contagion. The Bank of Canada meets this week and while there’s very little room to ease, there’s no question that they will maintain a dovish bias signaling more could be done with interest rates and their large scale asset purchase program. If you recall, in an emergency meeting two weeks ago the central bank lowered interest rates to 0.25% and announced for the first time ever that they were buying $5 billion a week in government securities to support the financial system and the economy.
The Bank of Canada’s monetary policy meeting is one of the top 5 most important events this week but it is not the only news flow that could move currencies. Here are the big events that we’re watching:
5 Most Important Events this week in order of release
China Trade Balance
US Retail Sales
Bank of Canada Rate Decision
Australia Labor Market Numbers
Chinese data could be better as the country rises out of the dark COVID-19 hole. US retail sales on the other hand should be weak with states shutting non-essential businesses and gas prices plunging. Australia is expected to report job losses but the numbers may also beat with PMIs reporting improvement in labor market conditions.
Earnings will also be a very important test for stocks. The first quarter earnings season kicks off this week (and will last for the next 3 weeks) with reports from banks, oil companies along with big names like Johnson & Johnson and Bed, Bath & Beyond. We’ll also get a look at how US policymakers feel vis a vis the Beige Book and comments from Federal Reserve Presidents. Earnings should be ugly and Fed Presidents should express ongoing concerns that could limit gains for the US dollar. Investors also don’t like the fact that President Trump retweeted a call to fire Dr. Fauci, a sign that he is losing patience with the country’s leading infectious disease expert. None of this is good news for the greenback or US markets in what could be a precarious week.
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