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The German trade data recorded a 24.0% decline in April exports compared with expectations of a 15.5% decline with a 16.5% decline in imports as the trade surplus dipped sharply to EUR3.2bn from EUR12.8bn the previous month. French data also recorded a decline in April exports of over 32% for the month.

The trade data undermined confidence in the near-term German and Euro-zone outlook and the Euro moved lower in early European trading with a retreat to lows below 1.1250. There was a small upward revision to the first-quarter Euro-zone GDP data with a contraction of 3.6% compared with the figure of 3.8% reported previously with an annual decline of 3.1%. There was some caution ahead of Thursday’s Eurogroup meeting and rhetoric surrounding the recovery programme.

The US NFIB small-business confidence index recovered to 94.4 for May from 90.9 and above consensus forecasts of 92.0 with increased confidence that there would be a short-lived recession. Sales expectations have rebounded from record lows while investment intentions registered only a minor improvement.

After finding support below 1.1250, the Euro recovered strongly in early US trading to push above 1.1350.

The US JOLTS data recorded a sharp decline in US job openings to 5.05mn at the end of April while separations eased to 9.9mn from 14.64mn the previous month, although this suggested net job losses of over 6.0mn on the month. The IBD consumer confidence index declined to 47.0 for June from 49.7 previously.

The dollar overall was unable to gain further support and the Euro secured fresh gains to the 1.1350 area. The Federal Reserve will announce its latest policy decision on Wednesday with markets monitoring comments on potential yield-curve control. There will also be a press conference from Chair Powell and fresh economic projections. The dollar will be vulnerable if there is a very dovish stance with the Euro just above 1.1350 in early Europe. 


Overall risk appetite remained slightly more vulnerable into the New York open with equity futures posting net losses. The yen was resilient on the crosses with a net advance against the Euro. With the US dollar also on the defensive, the US currency retreated to lows around 107.65.

China’s CPI inflation rate declined to 2.4% for May from 3.3% previously and below expectations of 2.7% while producer prices declined 3.7% over the year, the sharpest decline since May 2016. The data maintained unease over economic weakness, although it could also trigger further monetary and fiscal stimulus. Japanese core machinery orders declined 12.0% in the year to April compared with expectations of a 7.5% decline.

US equity markets edged higher on Wednesday, but the yen resisted selling pressure with the dollar retreating to weekly just 107.50 amid wider losses. 


Sterling remained on the defensive in early Europe on Tuesday with a more vulnerable risk tone the primary influence as global risk factors tended to dominate. The UK currency dipped to lows just below 1.2630 against the dollar before finding fresh support and rebounding.

Bank of England Deputy Governor Cunliffe stated that another sharp re-pricing of risk is still possible and there is likely to be a great deal of pain for the financial sector, but the first stage of the crisis is over. He also stated that it was too early to determine the outlook for the second half of the year, although there had been evidence of a slight recovery in April and May. The economy was unlikely to reach pre-crisis levels until mid-2021. As far as negative interest rates are concerned, Cunliffe stated that it was one possible tool, but there are mixed views and the MPC would have to consider the negative impact on the financial sector.

Cunliffe did not sound enthusiastic over negative rates and Sterling edged higher into the European close with a fresh move towards 1.2750 against the dollar, although the Euro held above 0.8900. The UK currency held steady on Wednesday and traded above 1.2750 against the weak dollar with the Euro marginally lower. 


The Swiss franc secured fresh gains ahead of Tuesday’s New York open amid a more defensive risk tone and the Euro dipped below the 1.0800 level. The Euro was unable to regain ground despite a wider advance against major currencies while the dollar initially dipped below the 0.9600 level and losses then accelerated with a retreat to 12-week lows near 0.9500 as the US currency came under wider pressure. Renewed yen and gold demand also provided net support for the Swiss currency.

The National Bank will be monitoring market developments closely and will not want to see a fresh round of strong franc gains. The Euro settled around 1.0780 on Wednesday with the dollar close to the 0.9500 level amid underlying US currency weakness.



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