Morning Commentary: All for One, One for All

Foreign Exchange - Morning Commentary
All for One, One for All
Share this story:
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
US initial jobless claims doubled to a record high of 6.65 million.  Additionally, last week’s number was also revised up slightly.  For context, initial jobless claims have been running in the low 200k through all of 2019.  Today’s massive number continues a trend of economic data points illustrating the economic costs of the COVID-19 crisis.  

Through all of this, the US’s policy response has been an evolving one due to misconceptions around the virus.  Some of the key misconceptions include 1) only hotspots in the country need to do social distancing and 2) closing international borders will keep the virus from spreading in the US.

The issue is that data clearly shows that closing international borders has not stopped the virus from going global.  Given this, closing internal borders is likely to be even less effective.  As such, walling off hotspots like New York will not be a successful strategy.  

Italy and China have found success by implementing aggressive social distancing measures across the entire country.  In contrast, the US has been running a piecemeal approach with social distancing measures implemented after the virus has established itself in the community.  Clearly, this has not been working as new hot spots are developing around the country.  

All of this reinforces the notion that aggressive social distancing is the best way to minimize the spread of the virus and minimize the long term economic impact.  Even after states bring the virus under control, they will still need to maintain strict distancing rules as the virus doesn’t move on a one-way street.  Case in point, a county in China has been put back under lockdown after a flare up in cases. 

As such, expect the US economy to successively weaken through the next couple of months as stricter distancing measures are rolled out. 
  • While today’s initial jobless claims number doubled last week’s record, many Americans are struggling to file claims due to jammed phone lines and overwhelmed websites, implying that the true number is even larger than reported.  The next key data release will be tomorrow’s non-farm payroll report that is expected to show the first monthly decline since 2010.  
  • The Federal Reserve Board has temporarily excluded Treasuries and deposits from its leverage ratio rules to ease strains in the Treasury markets and increase banks’ abilities to provide credit to businesses and consumers.  This move builds on other “whatever it takes” measures from the central bank.  
  • The number of confirmed cases worldwide is expected to top 1 million this week although a lack of testing kits likely means the number of cases is actually much higher.  On a country level, the death and new cases curve continues to flatten in Italy and Spain.  Domestically, the US has roughly double the number of confirmed cases as any other country and projections show another 2 weeks before the US reaches an apex.   
  • Oil price are on the rise this morning.  Some of the key drivers include conciliatory comments from Putin that could bring Russia back to the negotiating table and reports that China will be making purchases to refill its reserves.  
  • The EU has broken into two camps on how to respond to the virus.  It is this failure to find consensus on a strong fiscal response that puts the EZ economy at risk relative to other areas that have taken decisive actions.  
  • Canada’s Finance Minister unveiled details to the country’s wage subsidy plan.  Including this plan, the total cost for all direct support to businesses and individuals will total ~C$170 billion or ~4.6% of GDP.   
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2020 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?