Treasury Announces Details Of Long-Term Securities Auctions

Trading 04 juin 2020 Commentaire »

The Treasury Department on Thursday announced the details of this month's auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury said it plans to sell $44 billion worth of three-year notes, $29 billion worth of ten-year notes and $19 billion worth of thirty-year bonds.

The results of the three-year note auction will be announced next Monday, the results of the ten-year note auction will be announced next Tuesday and the results of the thirty-year bond auction will be announced next Thursday.

Last month, the Treasury sold $42 billion worth of three-year notes, $32 billion worth of ten-year notes and $22 billion worth of thirty-year bonds.

The three-year and ten-year note auctions attracted above average demand, while the thirty-year bond auction attracted average demand.


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ECB Slashes Eurozone Growth Forecasts, Sees 8.7% Contraction This Year

Trading 04 juin 2020 Commentaire »

The European Central Bank slashed its growth and inflation projections for this year and expects the single-currency economy to contract sharply as the coronavirus, or Covid-19, hurt economic activity severely. ECB President Christine Lagarde presented the latest set of ECB staff macroeconomic projections on Thursday during her post-decision press conference. For this year, the ECB staff projected an 8.7 percent contraction versus the 0.8 percent growth seen in the previous round in March. However, the growth projections for the next two years were raised. The growth outlook for 2021 was increased to 5.2 percent from 1.3 percent, and the forecast for 2022 was raised to 3.3 percent from 1.4 percent. The inflation projections for all three years were lowered amid weaker energy price and an expected significant increase in economic slack. The forecast for this year was cut to 0.3 percent from 1.1 percent.

The outlook for next year was lowered to 0.8 percent from 1.4 percent and the projection for 2022 was eased to 1.3 percent from 1.6 percent. The June Eurosystem staff macroeconomic projections see growth declining at an unprecedented pace in the second quarter of this year, before rebounding again in the second half, crucially helped by the sizeable support from fiscal and monetary policy, Lagarde said in her introductory statement. "Overall, the Governing Council sees the balance of risks around the baseline projection to the downside," Lagarde said.

In the first quarter, the euro area shrunk 3.8 percent from the previous three months.

The ECB staff has projected a 13 percent slump in the second quarter. The economy is expected to rebound somewhat in the third quarter as lockdown restrictions are withdrawn. The baseline is surrounded by an exceptional degree of uncertainty, she said. Hence, the ECB staff presented two scenarios - a mild one and a severe one. In the mild scenario, the economic shock from the Covid-19 is seen as temporary, with a fast and successful containment of the virus allowing restrictions to be removed swiftly. Further, no resurgence of the virus is seen in this. Under this, real GDP would decline by 5.9 percent this year, followed by a strong rebound in 2021. By the end of the horizon, real GDP would almost reach the level of the March 2020 staff projections. Inflation is seen reaching 1.7 percent by 2022. The severe scenario, with a strong resurgence of infections, implies more stringent containment measures that significantly weigh on economic activity. Under this, real GDP is seen crashing 12.6 percent in 2020 and, by the end of the projection horizon, stands around 91/2 percent below its level in the March 2020 staff projections, with the inflation rate at only 0.9 percent in 2022.


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U.S. Labor Productivity Decreases Much Less Than Initially Estimated In Q1

Trading 04 juin 2020 Commentaire »

Revised data released by the Labor Department on Thursday showed U.S. labor productivity declined by much less than initially estimated in the first quarter.

The Labor Department said labor productivity fell by 0.9 percent in the first quarter compared to the previously reported 2.5 percent nosedive.

The revision to a much smaller decrease came as a surprise to economists, who had expected the slump in labor productivity to be revised to 2.7 percent.

The unexpected upward revision to productivity, a measure of output per hour, came as the plunge in hours worked was revised to 5.6 percent from 3.8 percent.

The report still showed a steep drop in output, which was revised to 6.5 percent from the previously reported 6.2 percent.

Meanwhile, the report showed the jump in unit labor costs in the first quarter was upwardly revised to 5.1 percent from 4.8 percent. The spike in unit labor costs was expected to be upwardly revised to 5.0 percent.

Hourly compensation soared by 4.2 percent compared to the previously reported 2.2 percent surge, but the upward revision was largely offset by the much smaller than previously reported drop in productivity.

Real hourly compensation, which takes into account changes in consumer prices, jumped by 2.9 percent compared to the previously reported 0.9 percent increase.

In the fourth quarter of 2019, labor productivity increased by 1.2 percent, while unit labor costs surged up by 2.2 percent.


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Euro Appreciates As ECB Boosts Emergency Bond Buying Scheme

Trading 04 juin 2020 Commentaire »

The euro spiked against its major trading partners in the European session on Thursday, after the European Central Bank kept its key interest rates unchanged and expanded the pandemic emergency purchase programme to support the economy from the impact of Covid-19.

The ECB increased the size of its emergency asset purchase programme, or PEPP, by EUR 600 billion to a total EUR 1,350 billion.

This expansion will further ease the general monetary policy stance and support funding conditions in the real economy, especially for businesses and households, the ECB said.

The Governing Council left the main refi rate at a record low of zero percent and the deposit rate at -0.50 percent. The marginal lending facility rate is at 0.25 percent. The decision was in line with expectations.

Data from Eurostat showed that Eurozone retail sales declined sharply for the second straight month in April as coronavirus containment measures weighed on consumer spending.

Retail sales decreased 11.7 percent month-on-month, following an 11.1 percent drop in March. Economists had forecast a monthly decrease of 15 percent. This was the second consecutive fall in sales volume.

The euro dropped against its most major counterparts in the Asian session on hopes that European Central Bank will increase the size of its 750 billion euro pandemic emergency purchase programme to support the coronavirus-stricken economy.

The euro appreciated to 1.1272 against the dollar, its highest level since March 12, and recorded a 0.7 percent rise from a low of 1.1195 set at 4:15 am ET. The pair had closed Wednesday's deals at 1.1233. The euro is seen finding resistance around the 1.14 mark.

The euro gained 0.4 percent against the yen, approaching a 4-1/2-month of 122.78. The pair was worth 122.33 when it ended deals on Wednesday. Next key resistance for the euro is likely seen around the 125.00 level.

The euro bounced off to 1.0803 against the franc, up 0.5 percent from a low of 1.0744 seen at 5:30 am ET. At Wednesday's close, the pair was valued at 1.0798. The euro is likely to face resistance around the 1.10 region, if it gains again.

Continuing its early rally, the euro jumped 0.4 percent to a 3-day high of 0.8969 against the pound. The euro-pound pair had finished yesterday's trading session at 0.8933. Should the euro strengthens further, it is likely to test resistance around the 0.91 region.

Survey data from IHS Markit showed that the UK construction sector downturn eased in May reflecting a gradual reopening of construction sites as lockdown measures introduced to curb the spread of coronavirus were eased in England.

The IHS Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose to 28.9 in May from 8.2 in April.

Having declined to 1.5113 at 4:30 am ET, the euro turned higher against the loonie, rising to a 3-day high of 1.5201. The euro was trading at 1.5160 per loonie at yesterday's close. Further uptrend may take the euro to a resistance around the 1.54 area.

The euro was up 0.5 percent at 1.6281 against the aussie, after falling to 1.6206 at 7:30 pm ET. The euro-aussie pair was worth 1.6231 at Wednesday's close. The euro may challenge resistance around the 1.65 mark.

Following a fall to 1.7424 at 7:15 am ET, the euro recovered against the kiwi, with the pair trading at 1.7502. At yesterday's trading close, the pair was quoted at 1.7491. Extension of the euro's uptrend may lead it to a resistance around the 1.78 region.


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U.S. Trade Deficit Widens More Than Expected To $49.4 Billion In April

Trading 04 juin 2020 Commentaire »

A report released by the Commerce Department on Thursday showed the U.S. trade deficit widened by slightly more than anticipated in the month of April.

The Commerce Department said the trade deficit widened to $49.4 billion in April from a revised $42.3 billion in March.

Economists had expected the trade deficit to widen to $49.0 billion from the $44.4 billion originally reported for the previous month.

The wider than expected trade deficit came as a nosedive in the value of exports outpaced a slump in the value of imports.

The value of exports plunged by 20.5 percent to $151.3 billion, reflecting substantial decreases in exports of capital goods, industrial supplies and materials and automotive vehicles, parts and engines.

Meanwhile, the report said the value of imports tumbled by 13.7 percent to $200.7 billion amid steep drops in imports automotive vehicles, parts and engines, capital goods and consumer goods.

"The closure of motor vehicle production plants throughout North America played the biggest role in the slump in trade," said Paul Ashworth, Chief U.S. Economist at Capital Economics. "Services trade was hit by further declines in travel and transport."

"Services trade isn't going to rebound any time soon with the borders partly closed, but the reopening of motor vehicle production plants in mid-May means we should see a rebound over the coming months," he added.

The Commerce Department noted the goods deficit widened to $71.8 billion in April from $66.0 billion in March, while the services surplus fell to $22.4 billion from $23.7 billion.


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U.S. Weekly Jobless Claims Drop Less Than Expected To 1.877 Million

Trading 04 juin 2020 Commentaire »

First-time claims for U.S. unemployment benefits pulled back further off their recent record high in the week ended May 30th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims tumbled to 1.877 million, a decrease of 249,000 from the previous week's revised level of 2.126 million.

However, economists had expected jobless claims to slump to 1.800 million from the 2.123 million originally reported for the previous week.

Jobless claims pulled back further off the record high of 6.867 million set in the week ended March 28th, although the number of new claims since the coronavirus lockdowns now exceeds 42.6 million.

While claims declined for the ninth straight week, Paul Ashworth, Chief U.S. Economist at Capital Economics, noted, "The pace of decline has begun to stall a little, with claims still at an otherwise unprecedented level."

The Labor Department also said the less volatile four-week moving average sank to 2,284,000, a decrease of 324,750 from the previous week's revised average of 2,608,750.

Meanwhile, the report said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, jumped by 649,000 to 21.487 million in the week ended May 23rd.

Despite the weekly increase, economists at Oxford Economics noted continuing claims remain below their peak, suggesting "a small amount of rehiring may be starting to take place."

The four-week moving average of continuing claims slid to 22,446,250, a decrease of 222,500 from the previous week's revised average of 22,668,750.

On Friday, the Labor Department is scheduled to release its more closely watched employment report for the month of May.

Employment is expected to tumble by about 8.0 million jobs in May after plunging by 20.5 million jobs in April. The unemployment rate is expected to jump to 19.7 percent from 14.7 percent.


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*Lagarde: ECB Has Not Just PEPP, But A Whole Package Of Tools

Trading 04 juin 2020 Commentaire »

Lagarde: ECB Has Not Just PEPP, But A Whole Package Of Tools


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*ECB Slashes 2022 EZ Inflation Forecast To 1.3% From 1.6%

Trading 04 juin 2020 Commentaire »

ECB Slashes 2022 EZ Inflation Forecast To 1.3% From 1.6%


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*ECB Lowers 2021 EZ Inflation Outlook To 0.8% From 1.4%

Trading 04 juin 2020 Commentaire »

ECB Lowers 2021 EZ Inflation Outlook To 0.8% From 1.4%


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Short-term analysis of Gold

Trading 04 juin 2020 Commentaire »

Gold price is bouncing strongly once again towards $1,720. Price has held for another week the $1,700 level unless bears take the upper hand tomorrow. Bulls are trying to recapture the tenkan-sen and kijun-sen pivot point intersection.

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Inability to close above the $1,716 intersection could lead to another pull back towards $1,675 and the cloud support. Gold bulls are now showing signs of strength as they reclaim $1,715-20. However the most important obstacle bulls need to overcome is the blue rectangle resistance recent high at $1.745.

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Blue rectangle - resistance

Gold price is approaching the 61.8% Fibonacci retracement of the recent decline. The 61.8% Fibonacci level is at $1,722. As one can clearly see the area of $1,700-$1,725 is a very important area for Gold. Price has been mostly moving around it since early April. Focusing on the bigger picture, the levels to watch are 1.785-90 (need to break $1,745 for this target to be achieved) and $1,670-40 (need $1,700 to break on a weekly basis).

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