Risk Assets Had Upper Hand Overnight

Xe Corporate APAC

May 7, 2020 2 min read

The AUDUSD opens higher at 0.6504 and the NZDUSD opens higher at 0.6083 this morning.

Risk assets had the upper hand overnight. The AUD, NZD and global equity markets made solid gains, with the Nasdaq index now in positive territory for 2020 (who would have thought this in mid-March?), while bond yields fell.

Fuelling risk sentiment is speculation the worst of the economic damage to the US economy has passed. This is despite 3.2 million more Americans filing for unemployment benefits during the week ending 2nd May – taking total unemployment claims to over 33 million. The markets will get further insight into the US employment situation tonight on the release of the influential and closely watched non-farm payrolls employment data – the numbers will be ugly, only question is just how ugly?

Sentiment also received a boost on news top Chinese and US negotiators will speak, possibly as early as next week, on trade. This comes after President Trump threatened to ‘terminate’ the agreement if Beijing wasn’t fulfilling its obligations.

The Bank of England forecast UK GDP to plunge 14% in 2020, and unemployment to surge higher, as the Covid-19 pandemic is set to push their economy into one of their deepest ever recessions.

The EUR was under pressure after European Central Bank President Lagarde said that the ECB will do whatever is necessary to support EU economic growth and employment.

In Australia, yesterday’s March Trade Balance numbers were surprisingly strong as exports rose sharply. While in New Zealand, yesterday’s release of two-year ahead inflation expectations came in at a record low of 1.24% - down from 1.93% the previous quarter.

Local interest will be focused on the 11.30am (AEST) Reserve Bank of Australia Monetary Policy Statement, followed by tonight’s US non-farm payroll figures.

Global equity markets are higher across the board - Dow 0.9%, S&P 500 1.2%, FTSE 1.4%, DAX 1.4%, CAC 1.5%, Nikkei 0.3%, Shanghai -0.2%.

Gold prices jumped 1.8% higher to USD$1,719 an ounce, while WTI Crude Oil prices dropped 3.3% to US$23.30 per barrel.

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