Currency Market Snapshot For The Week
· INR appreciated by 1.87% against the USD last week and appreciated by 1.55% against the euro.
· USD fell by 1.30% on a week on week basis and is at a level of 99.08.
· The British pound appreciated by 1.12% against the USD
· Euro appreciated by 1.46% against the USD.
Global Bond Market Snapshot For The Week
· US 10-year benchmark bond yields rose by 1 bps last week.
· German 10-year bond yields fell by 11 bps, French 10-year bond yields fell by 9 bps.
· Italy’s 10-year benchmark yield fell by 7 bps to 1.76%.
· US benchmark Junk bond yields fell by 24 bps to 8.04%
INR ended the week higher against USD on optimism over the progress in a drug trial for the treatment of COVID-19 and also over the expectation of re-opening of several economies that had come to a halt due to the coronavirus pandemic. The recent positive development has helped to revive the risk appetite of global investors driving all EM currencies higher against USD. INR appreciated by 1.80% against the USD last week and appreciated by 1.55% against the euro.
USD ended the week lower against major world currencies after the U.S. Federal Reserve left the door open to more monetary easing and dampened expectations for a quick economic recovery from the coronavirus pandemic. USD was also weighed down as signs of the pandemic are receding in other countries which reduced safe-haven demand for holding funds in USD.
Fresh trade war talks between US and China, on the back of Trump’s threat to impose new tariffs on retaliation to China exporting Covid 19, would hit the USD, given that the US is the hardest hit by the pandemic.
As per preliminary results of a trial conducted by the US government, COVID-19 patients who were administered Gilead Sciences’ antiviral medication remdesivir recovered 31% faster than those given a placebo. On Wednesday, Director of the National Institute of Allergy and Infectious Diseases and White House coronavirus task force member Dr. Anthony Fauci said the drug will become the standard of care for the disease.
Further, supportive comments by US Federal Reserve Chairman Jerome Powell that the central bank was “committed to using its full range of tools to support the US economy in this challenging time” has also bolstered global sentiment.
USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 1.30% on a week on week basis and is at a level of 99.08.
On Wednesday, U.S. Federal Reserve left the federal funds rate target range unchanged at 0.00-0.25% and said that the central bank would maintain it at the near-zero levels until the economy recovers.
US economy contracted 4.8% in Jan-Mar, the largest fall in quarterly GDP since 2008. This was the first time in six years since the US economy had contracted.
Euro traded higher against USD last week after European Central Bank kept its monetary policy stance largely unchanged on Thursday, leaving both its official interest rates and its various asset purchase schemes untouched.
It did, however, ease the conditions of its long-term refinancing operations for banks even further. Specifically, it cut the cost of its so-called TLTRO operations to 0.5% percentage point below the official refinancing rate for a 12-month period starting in June.
Weekly Global Bond Market Analysis
US 10-year benchmark bond yields remained mostly flat at 0.62% last week after recent weak economic data suggests that the U.S. economy is weakening. Initial jobless claims climbed 3.8 million in late April, pushing the total claims filed during the coronavirus crisis to about 30 million. Market participants estimate this corresponds to an unemployment rate of above 15%.
Consumer spending fell 7.5% in March, while personal incomes fell 2%. Yearly growth in PCE, the Fed’s preferred inflation gauge, fell sharply to 1.3% in March, down from 1.8% in the prior month.
Eurozone bond yields were largely down last week. German 10-year bond yields fell by 11 bps, France 10-year bond yields fell by 9 bps and is at negative 0.11%. Italy’s 10-year benchmark yields fell by 7 bps.
US benchmark Junk bond yield fell by 24 bps and is at 8.04%, Euro benchmark Junk bond yields fell by 19 bps to 5.63%.