(06 MAY 2020)DAILY MARKET BRIEF 2:ECB defiance of German court decision

The EURUSD tanked to 1.0825 following the German court decision and traded in the tight range of 1.0830/1.0845. Euro bears have the green light from data to continue selling this morning; the German factory output plunged 15.6%m-o-m in March versus -10% expected by analysts and -1.4% printed a month earlier. Later today, the European services PMI are expected to reiterate the sharpest contraction in activity on record, while the retail sales are expected to have plunged by more than 10% m-o-m in March. Hence, soft European data should further boost the euro bears’ appetite, amid rising concerns about the ECB’s ability to act more to throw a floor under the tumbling economic activity.

Elsewhere, the Indian services PMI plunged to 5.4 in April, versus 40.0 expected by analysts and 49.3 printed a month earlier.

US and European equities closed Tuesday’s session on a positive note, but activity in the futures market hints at a bearish start in Europe.

Cable remains under a decent selling pressure as the possibility of a no-deal Brexit becomes clearer by the day. Ahead of us, the Bank of England (BoE) decision should see little reaction as the bank is expected to stay pat, but investors are worried to hear the confirmation that the lockdown in the UK will be extended until the first week of June and continue shattering the UK’s services-heavy economy.

Gold fluctuates around the $1700 per oz.

WTI crude recovered to $26 a barrel. Due today, the US oil inventories are expected to have increased less than 10 million barrels for the second week as a result of an apparent slowdown in production. Slower global supply and the prospects of business reopening are giving a boost to historical low oil markets, but the reality could hit back when the time will come for the physical delivery on May 18th. This is when we will see how much of the actual appetite for oil is real.

By Ipek Ozkardeskaya