GLOBAL NEWS:
The dollar slipped on Friday as investors defied a broader sense of doom around upcoming U.S. employment data and found reasons to buy riskier currencies with more governments slowly reopening their economies for business. The mood got a lift after China and the United States said their top trade negotiators had held a phone call and agreed to strengthen economic and public health cooperation. The talks come as tensions have flared up between Washington and Beijing in recent days over the origins of the coronavirus. The greenback was undermined by a further hit to its yield attraction as U.S. money markets priced in a small chance of negative interest rates next year. The dollar’s index against a basket of six other major currencies slipped 0.2% to 99.673 =USD from Thursday’s high of 100.40. The euro edged up 0.1% to $1.0847, bouncing back from Thursday's near two-week low of $1.07665 though it was down about 1.2% on the week. The Australian dollar gained 0.6% to $0.6534, nearing a seven-week high of $0.6570 marked on April 30. Australia will ease social distancing restrictions implemented to slow the spread of the coronavirus in a three-step process, Prime Minister Scott Morrison said on Friday, with the aim of removing all curbs by July. On top of aggressive monetary easing around the world, hopes of economic normalisation are supporting the mood as some countries in Europe and parts of the United States ease restrictions on economic activity. Against the safe-haven yen, the dollar bounced back to 106.38 yen, above a seven-week low of 105.985 touched on Wednesday.
Australia’s central bank on Friday predicted the country is facing its biggest economic contraction on record and said it was committed to support jobs and incomes as the government announced plans to relax pandemic-related restrictions by July. In its quarterly statement on monetary policy, the Reserve Bank of Australia forecast the A$2 trillion economy would shrink by 10% in the first half of the year, marking the first recession in three decades. Australia saw a rapid spike in the number of COVID-19 cases from less than 100 in March to over 6,900 now. In a bid to contain the spread, it closed its borders and announced strict mobility and “social distancing” restrictions, prompting many businesses to close down and announce massive layoffs. To support activity, the RBA cut interest rates to a record low 0.25% in an emergency meeting in March and launched an unlimited quantitative easing programme to keep borrowing costs low for banks and consumers. However, despite the aggressive monetary and fiscal support measures, the RBA expects the unemployment rate to hit 10% by June and remain around 7.5% through 2021. The inflation rate is expected to turn negative in the June quarter before turning mildly positive by year-end. Indeed, Australia’s banks have deferred payments on at least A$200 billion in loans, reflecting the economic hit being felt by businesses and individuals, the country’s banking body said on Friday. With fewer than 20 new infections reported each day, Australia’s Prime Minister Scott Morrison on Friday announced a three-stage plan to fully reopen the economy by July if the virus remains contained.
Indian retail inflation eased to a five month low in April as the nationwide lockdown imposed to try to quell the spread of the coronavirus and subsequent sluggish demand drove price pressures down, a Reuters poll found. The May 5-7 poll median of more than 40 economists predicted India’s annual consumer price inflation fell to 5.68% in April from March’s 5.91%, still above the Reserve Bank of India’s medium-term target of 4.00%. Forecasts in the poll ranged between 4.50% and 7.00% and about 80% of participants expected inflation to be below the upper band of the RBI’s inflation target range of 2.00-6.00%. “Although food prices rose in the month - owing to larger supply side constraints - it was more than offset by weaker price pressures across all other components, including domestic fuel prices.” While the lockdown was extended to May 17, the government has allowed “considerable relaxations” in lower-risk districts, which might help lift the economic slowdown experienced since March. That inflation rate, if realised, would allow the central bank to keep policy loose to combat the unprecedented impact of the pandemic which has battered the economy. “Low inflation is definitely resulting in a more comfortable position for the RBI compared to the stagflation conditions seen at the beginning of the year and opens up possibilities for yet another significant cut this quarter,” said Hugo Erken, head of international economics at Rabobank. Moreover, expectations of average, or normal, monsoon rains this year raises the chances of higher farm output in Asia’s third largest economy.
Gold on Friday was hovering near a two-week high hit in the previous session as investors awaited the U.S. jobs report to gauge the health of the economy after grim economic indicators raised the prospects of more rate cuts by the Federal Reserve. Spot gold was steady at $1,715.23 per ounce, as of 0315 GMT, having hit its highest since April 27 at $1,721.76 in the previous session. U.S. gold futures added 0.1% to $1,727. The metal gained about 2% on Thursday on the back of bleak U.S. economic data, which along with uncertainties over global economic recovery and U.S.-China relations, lifted bullion higher by about 0.9% so far this week. “Gold is still bouncing around in the $1,650 to $1,750 an ounce range of the last month or so. Serious investors interest should not be piqued until gold comprehensively challenges either of those levels,” said Jeffrey Halley, senior market analyst at OANDA. “Funds futures fell overnight, signalling lower rates ahead that fed through to the U.S. dollar, which saw profit taking on longs overnight,” said Halley, adding that this created a positive environment for gold. The dollar index .DXY turned negative, while the U.S. Treasury yields fell from three-week highs, with the two-year yields dropping to record lows. Financial markets began pricing in a negative U.S. interest rate environment for the first time on Thursday, while the Bank of England kept the door open on Thursday for more stimulus next month. Gold tends to benefit from widespread stimulus measures because it is widely viewed as a hedge against inflation and currency debasement. Elsewhere, palladium jumped 1.8% to $1,889.57 per ounce, platinum rose 0.6% to $768.37. Silver fell 0.8% to $15.38 per ounce, after rising to a three-week peak in the previous session.
Oil prices rose on Friday as more countries began easing lockdowns set in place to stop the coronavirus spreading, giving hope that demand for fuels will pick up after the economic devastation caused by the pandemic. Brent crude was up 47 cents, or 1.5%, at $29.33 a barrel by 0121 GMT, having fallen nearly 1% on Thursday. U.S. oil gained 48 cents, or 1.5%, to $24.03 a barrel, after a decline of nearly 2% in the previous session. Both contracts are heading for a second week of gains after the depths plumbed in April, when U.S. oil crashed below zero. But crude is still being pumped into storage tanks on land and tankers at sea, raising the prospect that gains prompted by stronger demand will be capped. U.S. crude inventories at the Cushing storage hub in Oklahoma increased by around 407,000 barrels in the week through May 5, traders said on Thursday, citing Genscape data. Meanwhile Australia is set to be the latest country to begin easing restrictions on social contact and movement as the country’s infections from the virus slow to a trickle. The government will loosen curbs in stages over four weeks, sources told Reuters. France, parts of the United States including Michigan and other countries are also planning to ease the restrictions instituted to stop the spread of the world’s worst health crisis in a century.