Outlook:

The big data release today is initial jobless claims. Horrifying estimates have been appearing for days, and that turned into a flood yesterday. Econoday estimates 1 million (vs. 281,000 for the March 14 week, itself a leap from 211,000 the week before). California alone is expecting 1 million. State unemployment website are crashing from excessive traffic. Bloomberg has 1.65 million. S&P Global Ratings says three million, which would be four times the record high set in 1982.

Nothing to going to show the stock market action on Tuesday and Wednesday better as the proverbial bear market rally. The big question is whether the FX market, which likes to anticipate perhaps more than others, has already priced it in or will pretend to be shocked! shocked! that it’s a terrible number.

After claims, we should worry about GDP itself. Based only on Jan and Feb, Singapore reported Q1 GDP down 10.6% q/q, more than 9.9% in Q1 2009. The Atlanta Fed GDPNow number released yesterday is for 3.1%, but with a warning (in bold and bright red) that the base data in the model does not and cannot include pandemic effects.

At some point governments are going to be tempted to withhold data. We already see that in the form of the Bureau of Labor Statistics proposing states stop reporting unemployment claims. In the UK, three financial watchdogs are proposing easing reporting rules by two months. The Financial Reporting Council says “companies can delay their accounts by another two months, meaning they have six months after year-end to get their numbers together. The FRC meanwhile says that everyone should get used to warnings in accounts that there is uncertainty about a company's ability to continue as a going concern while the fall-out from the virus develops.” (FT).

The absence of information is a Bad Thing and worse than information overload. We could have situations where ratings agencies are just making it up. Yesterday Moody’s and S&P Global took away Ford’s investment-grade credit rating. S&P also said the pandemic could wipe out a full year of profits in the US banking sector. Well, if nobody has to report, how will they know? Last week the FDIC (Federal Deposit Insurance Corporation) asked the Financial Accounting Standards Board to give large public lenders the option to defer implementing a new rule on expected future credit losses. Pretty soon we will all be flying blind—no economic data, no financial data.

Finally, it’s a misnomer to call it “stimulus.” The plans, whether the US’s $2 trillion or the ECB’s €759 billion or whatever the total sum is in Japan are really resuscitation—pumping oxygen into a critical patient. Remember that the right pace to perform CPU is the beat of “Stayin’ Alive.”

We expect the dollar to fly upward today on the really bad jobless claims, then recover on the House passing the $2 trillion bill, then fall again on something else. “Wave” and “cycle” are taking on new meanings. The one to watch is the AUD, seemingly the most sensitive to the shifting sentiment toward the USD, even if the CAD and peso have been moving the most.

 


 

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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This morning FX briefing is an information service, not a trading system. All trade recommendations are included in the afternoon report.

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