· Dollar keeps safe-haven bid as resurgent virus threatens recovery
The dollar held firm on Friday as caution over rapid rises in U.S. coronavirus cases cast doubt over the reopening of the economy, keeping demand for the safe-haven currency intact.
The dollar index =USD stood at 97.360, having pared a large part of this week’s losses.
Against the yen, the dollar traded at 107.09 yen JPY=, having gained 0.5% in the overnight session. It has held gains of 0.2% so far this week.
The euro eased to $1.1223 EUR=, losing steam after hitting a one-week peak of $1.1348 on Tuesday though the currency has maintained weekly gains of about 0.4%.
Sterling slipped to $1.2422 GBP=D4, off this week's high of $1.2541 touched on Wednesday.
Also supporting the greenback was the broader rise in corporate demand towards the end of quarter.
That helped the dollar stay firm despite the stubbornly upbeat risk appetite seen in global equity markets, which comes even as new coronavirus infections surge.
· Treasury yields fall on virus worry and disappointing jobs data
The yield on the benchmark 10-year Treasury note fell about 3 basis points to 0.663% and the yield on the 30-year bond was 4 basis points lower at 1.406%. Yields move inversely to prices.
Yields remained lower after data showed an additional 1.48 million Americans filed for unemployment benefits last week. Economists polled by Dow Jones expected a print of 1.35 million.
This marks the second straight week that U.S. jobless claims data were worse than expected.
Still, the total of those receiving benefits continued to fall as continuing claims fell by 767,000 to 19.52 million.
Hopes of a quick economic recovery from the coronavirus pandemic have been dampened by a surge in new cases across a number of states.
· U.S. sets one-day record for COVID-19 cases, Texas pauses reopening
The governor of Texas temporarily halted the state’s reopening on Thursday as COVID-19 infections and hospitalizations surged and the country set a new record for a one-day increase in cases.
“This temporary pause will help our state corral the spread until we can safely enter the next phase of opening our state for business,” Governor Greg Abbott, a two-term Republican, said in a statement.
· Effects of U.S.-China tensions could ‘spread throughout the world,’ says expert
The ramifications of a U.S.-China cold war can be “potentially very serious” given the two countries’ inter-dependency, said Alan Dupont, chief executive of risk consultancy Cognoscenti Group.
The U.S. and China are heading into a new “cold war” that could be more damaging to the world compared to the geopolitical contest between the U.S. and Soviet Union at the end of World War II, a consultant said on Friday.
Dupont added that the U.S.-China contest “is becoming more systemic and it’s really becoming a winner-takes-all kind of contest so that’s the worst potential outcome.”
· ECB’s Lagarde says we’ve probably passed the lowest point of the crisis
Christine Lagarde, the president of the European Central Bank, believes the world may be passed the worst of the coronavirus crisis but said a return to the status quo is unlikely.
“That recovery is going to be incomplete and might be transformational,” she said.
“It is likely that trade will be significantly reduced ... We need to be extremely attentive to those that are most vulnerable,” she added.
The European Central Bank announced earlier this month an expansion in size and duration of its emergency bond-buying program. The central bank has committed to buying 1.35 trillion euros in government debt at least until June 2021.
Meeting minutes released Thursday showed the ECB debated the effectiveness of its monetary policy — in an attempt to address concerns raised by the German constitutional court, which ruled in May that some aspects of the ECB’s policy were not legal.
· Japan's May factory output, retail sales to extend slump as coronavirus bites: Reuters poll
Japan’s factory output and retail sales likely contracted again in May as the coronavirus pandemic disrupted supply chains and triggered a sharp drop in domestic and global demand, a Reuters poll showed on Friday.
Slumping exports and weak private spending due to the health crisis underscore risks that the world’s third-largest economy has slipped into deep recession and may only see a modest recovery in the second half of this year.
Industrial production was seen down 5.6% in May from the previous month, a Reuters poll of 17 economists found, falling for a fourth straight month but less sharply than a revised 9.8% drop in April.
· Exclusive: Support dips for Hong Kong democracy protests as national security law looms - poll
Support for year-long pro-democracy protests in Hong Kong has slipped, now getting the backing of a slim majority, as the city braces for the imposition of Beijing-drafted national security legislation, a survey conducted for Reuters showed.
The poll also showed support for protests dropping to 51% from 58% in a previous poll conducted for Reuters in March, while opposition to them rose to 34% from 28%.
Protests escalated last June over a since-withdrawn bill that would have allowed extraditions of defendants to mainland China. They later morphed into a push for greater democracy, often involving violent clashes with the police.
· Oil prices creep up on demand recovery, tempered by virus outbreaks
Oil prices rose on Friday, extending gains from the previous day on optimism about recovering fuel demand worldwide, despite a surge in coronavirus infections in some U.S. states and indications of a revival in U.S. crude production.
U.S. West Texas Intermediate (WTI) crude futures gained 42 cents, or 1.1%, to $39.14 at 0150 GMT but were on track for a slight drop for the week.
Brent crude futures similarly rose 1.1%, or 47 cents, to $41.52, but were also heading towards a small decline for the week.
Overall, commodities markets were taking a positive view on the global recovery on Friday despite worries about coronavirus flare-ups, said Michael McCarthy, chief market strategist at CMC Markets.
· US shale could take years to recover from the oil price crash
US oil production will probably take more than two and a half years to return to its record 13 million barrels per day (bpd) production from February.
US crude oil production could still be some 16 percent below its February 2020 peak, according to the average of five major forecasters Bloomberg has polled.
By June, production is expected to drop to 10.9 million bpd, with nearly 1.1 million bpd of the drop coming from shut-ins, and another 800,000 bpd from completion deferrals and rig activity reductions.
analysts at Enverus and IHS Markit told Bloomberg that production would likely take until at least 2023 to return to the pre-oil price crash levels as the companies who will survive this price rout will have to earn back the trust of Wall Street, which is all but closed for financing for the oil industry, which has borrowed heavily to grow production over the past decade and a half.
Reference: CNBC, Reuters
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