US payrolls eyed as global virus cases top 1 million
The euro slipped by around one percent against a broadly stronger US dollar on Thursday amid a surge higher in oil prices and investors once again seeking the safety of the low-risk currencies.
The COVID-19 virus continues to spread at an alarming rate, with global cases surpassing 1 million yesterday, around double the number recorded last week. A total of 245,000 or so cases have now been reported in the US alone. There is now a general feeling that the economic recovery from the virus will take longer than initially anticipated, particularly given the exponential growth in cases in the key economic areas around the world in the past two weeks, namely the US and Europe.
Macroeconomic data that we have had so far has made for very grim reading. As we mentioned in yesterday’s afternoon note, Thursday’s US initial jobless claims data suggested that the country’s labour market was already being signiﬁcantly impacted by the virus. Claims surged to 6.6 million in the week to 27th March, well above the 3.5 million consensus and around tenfold the previous peaks recorded in the early-1980s and the 08/09 ﬁnancial crisis. This is the equivalent of around 6% of the entire US labour force losing their employment in a fortnight.
We will not, however, see that reﬂected in full in this afternoon’s labour report, which only covers the period up to 12th March, i.e. before the strict containment measures were put in place across much of the US. Both the nonfarm payrolls ﬁgure and the unemployment rate will underestimate the virus’ true impact thus far and will therefore be largely dated and mostly irrelevant. The market is bracing for a -100k decline in net jobs lost and a modest 0.3 percentage point uptick in the jobless rate. This afternoon’s March PMI data from ISM will also be eagerly anticipated, with a sharp decline into contractionary territory assured.
Already record low Euro Area PMIs revised lower
Data out of Europe this morning also made for ugly reading, with the monthly Euro Area PMIs revised lower from the already rock-bottom initial estimates. The key services index was revised to 26.4 for March, down on the initial 28.4 reading, a fresh record low. This dragged the composite index below the level of 30 to 29.7. It is clear that the bloc’s economy is heading for a sharp recession in the coming months, with the key question not whether this will happen, but how deep the contraction will be.
Sterling also fell foul of the broad rally in the dollar this morning, although its sell-off was limited to around half a percent. So far the spread of the virus has not been as aggressive in the UK as some of its major peers in Europe, although it merely seems a matter of time before it catches up. Britain appears on a similar trajectory to Italy, just on around a 15-day or so lag. Should we see another sharp acceleration in UK cases in the coming few days, then the pound could be in for a rough few days when trading opens for the week on Monday.