There was a limited reaction to Prime Minister’s Johnson announcement that lockdown measures would be eased slightly with differences between national countries causing some concern.

US jobs data was horrific but slightly better than consensus forecasts with non-farm payrolls declining 20.5 million and unemployment rising to 14.7%.

Overall risk appetite held firm as markets had priced in bad data and focussed on the potential for global economic recovery.

The dollar edged lower on a dip in defensive demand, although selling pressure was limited as talk of negative US interest rates faded slightly.

Sterling was supported by a weaker US dollar, but overall sentiment remained fragile.

Commodity currencies held firm with better than expected Canadian labour-market data providing an element of support for the Canadian currency. Scandinavian currencies made gains amid increased net confidence in the regional outlook.

Underlying Euro confidence has remained fragile amid concerns that the ECB bond-buying programme would be jeopardised by the German Constitutional Court ruling.

The US employment report recorded a decline in April non-farm payrolls of 20.5 million following a revised 870,000 March decline. Although marginally below consensus forecasts, it was still a record decline by a huge margin. Manufacturing jobs declined 1.33 million for the week while there were heavy losses of 7.65 million jobs in the leisure and hospitality sector. There were also notable losses in healthcare as non-emergency healthcare was stopped.

Unemployment increased to a record high of 14.7%, below consensus forecasts of 16.0%, but there were statistical distortions as the participation rate declined sharply and data suggested unemployment was closer to 20%. Average hourly wages registered a sharp 4.7% increase and year-on-year increase of 7.9% as lower-paid workers were more likely to be laid off.

Reaction to the data was measured with markets looking to focus on hopes for recovery rather than the actual data with huge job losses priced in. In this context, there was an overall decline in defensive dollar demand with EUR/USD settling around 1.0840 from a peak around 1.0875.

CFTC data recorded a small decline in long Euro positions to 76,000 contracts from 80,000 the previous week, but the overall positioning will still tend to be a negative Euro factor. Overall demand for the commodity currencies held firm with a dip in US dollar defensive demand and EUR/USD was held below 1.0850.

US 2-year yields declined to fresh record lows just above 0.10% on Friday while the Fed Funds rate continued to price in a Fed Funds rate slightly in negative territory next year and the lack of yield support continued to undermine overall dollar support. The Federal Reserve announced that asset purchases would decline to $35bn this week from $40bn previously. The White House stated that a further stimulus package was expected soon, although the overall impact was limited.

Overall risk appetite remained robust with US equities making further sharp gains on the day and USD/JPY consolidated around 106.65 as yen demand eased slightly.

President Trump again maintained negative rhetoric against China over the weekend. Markets, however, tended to focus on hopes for economic recovery and China’s central bank stated that it will use more powerful policies to help growth. There were also reports that the Federal Reserve would push back against speculation of negative interest rates which limited potential dollar selling.

The Bank of Japan summary of opinions indicated that policymakers must act boldly to avoid a repeat of the great depression. Overall yen demand faded to some extent as risk appetite held firm with USD/JPY advancing to the 107.00 area.

Sterling lost ground on Thursday amid underlying concerns over the outlook given the risk that the UK would under-perform relative to other major economies. There was also an important element of scepticism that the Bank of England forecast of a sharp economic rebound was realistic. Market expectations were also that there would be a further expansion of the central bank’s balance sheet at the June policy meeting. UK markets were closed on Friday with a weaker US dollar tone allowing GBP/USD to move above the 1.2400 level with a peak just above 1.2450 before a retreat.

There was further evidence of negative underlying sentiment with the latest CFTC data recording a net increase in short non-commercial positions to 4-month highs.

There was further uncertainty over trade talks with the latest round of UK-EU negotiations due to start on Monday. There is a heavy agenda for talks and the overall tone will be extremely important given that there is only one further round scheduled before the June deadline to make substantial progress and an outline deal.

There was a limited reaction to Prime Minister’s Johnson announcement that lockdown measures would be eased slightly with differences between national countries causing some concern.

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