Forex Today: Dollar dominates after Powell's push back, darkening global clouds, ahead of claims


Here is what you need to know on Thursday, May 14:

The market mood has soured after Jerome Powell, Chairman of the Federal Reserve, rejected calls for negative interest rates. Ongoing Sino-American tensions, gloomy forecasts, and also disappointing Australian jobs figures are weighing on the mood. 

Powell painted a gloomy picture of the economy and vowed to add additional policy measures to prevent long-term damage to the economy, also calling the government to do more.  

However, he rejected the idea of setting negative rates and said that also his colleagues' position is unchanged. That sent stocks down and the dollar up.

See Powell Analysis: Doom, gloom, and no negative rates set to tank stocks, boost dollar

Bond markets' pricing has been flirting with the sub-zero borrowing costs and President Donald Trump also wanted this "gift." While the president called Powell the "Most Improving Player" he also criticized the chairman for not setting negative rates.

Trump also kept up the pressure on China by saying that coronavirus's impact is 100 times stronger than the trade deal with the world's second-largest economy. Global COVID-19 cases have topped 4.3 million and deaths are nearing 300,000. US mortalities are above 84,000 according to Johns Hopkins.

Anthony Fauci, the White House's leading doctor on coronavirus, repeated his warnings that reopening the economy too quickly could trigger flare-ups. Trump said these comments are unacceptable and that the expert is playing "both sides of the equation." Firing Fauci could add another drag on the economy. 

US economy: Goldman Sachs has updated its forecasts, warning that the unemployment rate could leap to 25%. Treasury Secretary Steven Mnuchin expressed optimism that with safely opening the economy, a rebound is on the cards. Weekly jobless claims for the week ending May 8 are expected to show an increase of 2.5 million claims, fewer than the previous week yet still staggering numbers.

See Initial Jobless Claims Preview: Marking time on the bottom

GBP/USD has been one of the biggest losers amid an ongoing UK lockdown and as the nation is getting ready for a long recession. Chancellor of the Exchequer Rishi Sunak extended the furlough scheme and Andrew Bailey, Governor of the Bank of England, opened the door to further bond-buying. Moreover, Bailey did not rule out directly funding the government. He will speak again later on Thursday. 

 

EUR/USD has dropped in range but has yet to test the lows. Italy approved a new €55 billion stimulus budget and bond markets seem to accept it,  despite tensions between the German constitutional court and the European Central Bank, which is supporting the government. 

Australia reported a loss of 594,300 jobs in April, worse than expected. While the Unemployment Rate rose to only 6.2%, participation fell sharply to 63.5%. The Aussie and the kiwi both dropped in response. 

Oil prices have remained stable after inventory data showed a surprising drawdown and amid speculation that other countries will follow Saudi Arabia with additional, voluntary cuts. Demand from China is on the rise. 

Cryptocurrencies are edging higher with Bitcoin trading around $9,300, several days after the halving event.

More Move fast and leverage trades, what to buy low and what to sell high – Interview with Steve Ruffley

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