Investors continue to ignore the positive data coming out of Europe and the US, which point to the emerging bottom after a strong decline in economic activity against the backdrop of a coronavirus pandemic that forced previously economically developed countries to quarantine. The reason for this is an increase in the number of COVID-19 infections in America and the news that New York, as well as several other cities and states, have imposed restrictions on visitors coming from other states in an attempt to limit the spread of the pandemic.
These data are really interesting, indicating, on the whole, the strengthening of the recovery process in the US, Europe and Asia, primarily China. According to the data, core orders for durable goods rose significantly above the forecast in May, reaching 4.0% against April's decline to -8.2% and expectations for growth of 2.5%. The volume of orders for durable goods also increased significantly, jumping by 15.8% against April's decline by 18.1% and the forecast growth of 10.9%. We were pleased with the number of orders for means of production, excluding military and aviation products. The index rose last month by 2.3% against a 6.5% fall in April and expectations of a 1.0% increase.
In addition to these extremely positive data, the values of applications for unemployment benefits last week in the amount of 1,480,000 were presented, which, although they did not reach the forecast of 1,300,000, were slightly better than the previous value of 1,540,000, revised downward. We believe that in this situation the most important is the fact of their decline, which, when the economic activity in the country normalizes, will fall to normal values.
But the markets are still so scared that they do not pay attention to this, preferring to focus on coronavirus topics, which is the root cause of high volatility and the long period of consolidation of the US dollar in the currency market. We believe that such dynamics will continue at least until the beginning of July, until the situation with the COVID-19 pandemic in the United States becomes clear. If they do manage to stop this problem, investors will quickly switch from the coronavirus topic to the fact that the US economy is recovering, which may cause an increase in demand for risky assets, especially company shares, with a noticeable weakening of the dollar.
Today, we should pay attention to the speech of the ECB President C. Lagarde and the publication of important inflation indicators from America - the base price index of personal consumption expenditures, incomes and expenses of Americans, as well as the value of the consumer expectations index and their sentiments from the University of Michigan. Positive values of the indicators will support the demand for shares of American companies and put local pressure on the dollar.
Forecast of the day:
The USD/CAD pair also remains in the range of 1.3500-1.3665. Recovery in oil prices and some improvement in demand for risky assets will help the pair decline to the level of 1.3500.
The NZD/USD pair is also in the range of 0.6395-0.6530. The improving mood of investors in the market, as well as some recovery in demand for commodity assets may support the pair's growth to 0.6530.
