NZD marks fresh weekly lows as April’s upturn runs out of steam

Key Movers

The US dollar advanced against a basket of currencies through trade on Thursday with the DXY index pushing through 100.50 and marking a fresh 3 week high. Investors largely overlooked alarmingly high jobless claims pushing the worlds base currency higher on hopes of a bounce back in economic activity as parts of the country open up. Fears of a second wave of infections have capped gains but investors appear optimistic the recent slew of devastating macroeconomic indicators will improve once Americans go back to work. The yen and the Swiss franc offered little, suggesting the move wasn’t one driven by risk off moves and perhaps leaves the upturn vulnerable to a correction as investor focus inevitably turns to broader economic performance. Over 36 million Americans have filed for unemployment benefits since lockdown measures began in March as the weekly jobless claims report becomes an all-important measure of broader economic health. With sections of the economy re-opening in the weeks ahead analysts will be keenly attuned to future data points for any sign of improvement across employment numbers. There is a growing fear that temporary job losses may become permanent if the economy fails to respond quickly and markets will be looking for signals jobs are being reinstated quickly if the dollar is to maintain long run values. The Great British pound fell to 5-week lows, slipping below 1.22 after data showed the economy contracted by a record 5.8% in March. The combination of coronavirus and Brexit woes are weighing on the pound with investors reluctant to extend long term GBP positions. The UK surpassed Italy as this week with the most COVID-19 casualties in Europe and appears some way off from meaningfully reducing social distancing restrictions. With Brexit risks still looming and broader economic pain expected the GBP will struggle on moves above 1.23 through the short term.