Last Friday’s US non-farm payrolls report revealed that 20.5 million Americans lost their job in April. The unemployment rate more than tripled, rising to an eye-watering 14.7%. Joblessness now stands at the worst levels since the Great Depression. President Trump defended himself, highlighting that he cannot be blamed for this. However, for someone who has prioritised the strength of the economy and stock market throughout their presidency, this downturn risks making recession part of his legacy.
The greenback weakened mildly following the report. As the new week commences the pound finds itself trading above the $1.24 level while EURUSD continues in its broad $1.07 to $1.10 range, currently at $1.0840. The week ahead will provide more US data to keep a close eye on. April retail sales will be the highlight, which is set to fall a further 11%. Fed Chairman Powell will be speaking on Wednesday which will also gain a lot of attention as he talks about the economy getting back on its feet.
From Europe, both the UK and Germany will release GDP prints from the 1st quarter. The UK economy is forecast to shrink by 2.5%. The worst damage will likely arrive in the 2nd quarter which has seen a much larger impact from the virus. The Bank of England has estimated the UK economy may contract by up to 14% this year which would be the worst for over 300 years!
Have a good week.
Written by Viv Savani. 8:31am, May 11th 2020
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