What you need to know on Friday, May 5th:
The ECB expanded its PEPP by €600 billion and extended its stimulus scheme until June 2021 or as long as needed. Growth and inflation forecasts for this year and the next ones have been downgraded. President Lagarde said she expects the economy to bounce back in Q3. The announcement helped EUR/USD extend its gains beyond 1.1300.
The German Merkel’s coalition reached a deal on a €130 billion stimulus package, which consists of tax cuts and infrastructure spending.
The greenback remained under pressure despite the market mood turned sour. Equities closed in the red in Europe, while US indexes closed mixed around their opening levels. US employment-related data came in below expected, somehow anticipating a dismal US Nonfarm Payroll report this Friday.
GBP/USD reached fresh highs above 1.2600, despite bad news in the Brexit front. After three days of talks, both parts recognized that they remain far apart on core topics, with no agreement on their future trade relationship. German’s ambassador in Brussels, Michael Clauss, said that EU leaders would intervene in the negotiations in the autumn in an attempt to clinch a deal by mid-October.
US Treasury yields advanced, with the yield on the benchmark 10-year note hitting 0.82%, underpinning USD/JPY which settled above 109.00.
Crude oil prices posted a modest intraday advance, as investors remained cautious amid uncertainty surrounding OPEC+ agreement on additional output cuts. Gold prices recovered after Thursday’s sharp slide. Spot settled around 1,715.
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