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CRUDE OIL AND GOLD TALKING POINTS:
Crude oil prices were back close to where they began Thursday’s Asia Pacific session as it began to wind down. Early gains were pared into the afternoon’s proceedings as investors nervously awaited key US labour market data.
In US hours markets will learn how many Americans signed on for unemployment benefits for the first time in the week to March 21, with millions of new claimants now expected to be added to the roster thanks to the coronavirus’ economic ravages.
This prospect has loomed over the passage of a $2 trillion stimulus and assistance bill through the US Senate, powering it towards a vote in the House or Representatives on Friday. Energy marked participants will be particularly aware that such government action huge as it may be can only help once recovery starts. It can’t of itself bring about the crucial lowering of infection rates.
The price war between major exporters Saudi Arabia and Russia threatens crude oil markets with a massive supply glut at a time when demand is collapsing. Sure enough US crude inventories rose by 1.6 million barrels last week, a ninth consecutive week of gains.
Gold prices fell back, reportedly as investors again rushed into cash to cover losses incurred elsewhere. This pattern has been much seen in the precious metal market this year, with prices falling despite the clear economic uncertainty against which the likes of gold and silver supposedly hedge.
This market can still expect plenty of support should those US labor market numbers come in anything like as weakly as investors now fear.
That price clash may be one fundamental reason why US crude oil prices have made so little headway even as the hope or reality of various large stimulus programs worldwide has lifted other markets. For now prices remain very close to the seventeen-year lows plumbed earlier this month, with the bulls unable to gird themselves for a serious attempt at even near-term resistance in the $27.22/barrel area.
Multi-million claimant rises in the US labor data could well make another test of those lows unstoppable. A moribund jobs market will clearly destroy near-term energy demand as supply is about to ramp up.
Gold prices have similarly faltered ahead of key resistance, in this case the psychological $1650 level. It must be likely that another upside test will come shortly, but for the moment downside focus is on a broad band of support between the lows of early March and those of February.
In the current environment slips back toward this level may well represent little more than a better opportunity to go long, but those who do so will need to be aware that this market will remain vulnerable to slippage whenever investors need cash to cover losses elsewhere.
Crude oil prices were back close to where they began Thursday’s Asia Pacific session as it began to wind down. Early gains were pared into the afternoon’s proceedings as investors nervously awaited key US labour market data...READ MORE
Here is what you need to know on Thursday, March 26:
The US Senate finally passed the $2 trillion stimulus bill to mitigate the impact of coronavirus, and the House will soon take it. However, the market's enthusiasm has faded away. The move is partly a "buy the rumor, sell the fact" reaction but also the details of the package, which include a significant chunk of loans rather than grants.
The euro and yen are – whose economies have current account surpluses – are gaining ground against the greenback while the dollar is beating the pound and commodity currencies. The present action in money is a break from the "dollar vs. everything" trade that has been seen earlier as there seems to be no distress.
Coronavirus has taken the lives of over 21,000 and has infected around 470,000. Spain suffered its grimmest day with 738 deaths, while the signs of "flattening the curve" are seen in Italy, where the number of new infections has stabilized. US cases near 70,000, yet New York City is somewhat optimistic. The Japanese government is considering adding restrictions amid an increase in cases.
The focus today is US weekly Unemployment Claims, which may soar to 1.5 million and perhaps higher. Lockdowns have triggered massive layoffs. Some estimate the figure could be north of three million.
The US also releases final Gross Domestic Product figures for the fourth quarter of 2019 – pre-crisis levels. Economists foresee a deep recession due to Covid-19. Jerome Powell, Chairman of the Federal Reserve, is scheduled to give an interview ahead of the data. The Fed stunned markets on Monday by announcing an open-ended Quantitative Easing (QE) program.
GBP/USD trading has been extremely volatile, and the Bank of England's third rate decision in as many weeks may trigger additional ups and downs. The BOE may introduce more QE or loans but is unlikely to cut its rates.
The European Central Bank is considering dusting off its old Outright Monetary Transactions (OMT) program that allows it to buy unlimited government bonds from specific countries, providing another boost to their economies.
On the other hand, Germany and the Netherlands are reportedly opposed to issuing common European bonds, dubbed "corona-bonds." EU leaders will hold a videoconference later in the day. The news follows a letter by nine countries, including France, Italy, and Spain, demanding to share the debt burden.
Gold is consolidating around $1,600, looking for a new direction. Oil is on the back foot, with WTI hovering around $24.
Cryptocurrencies have been edging lower, with Bitcoin trading around $6,600.
Here is what you need to know on Thursday, March 26:The US Senate finally passed the $2 trillion stimulus bill to mitigate...READ MORE
EUR/USD Wednesday's four-hour chart is painting a positive development. Yohay Elam, an analyst at FXStreet, takes a look at the EUR/USD pair technical picture.
“Momentum on the four-hour chart has turned to the upside, a positive development, yet EUR/USD still trades below the 50, 100, and 200 Simple Moving Averages. The picture is improving.”
“Resistance awaits at the daily high of 1.0840, the daily high, followed by 1.0880, Tuesday's peak, which also converges with the 50 SMA.”
“Support awaits at 1.0750, Tuesday's low, and then by the 2020 trough of 1.0640.”
EUR/USD Wednesday's four-hour chart is painting a positive development. Yohay Elam, an analyst at FXStreet, takes a look at the EUR/USD pair technical picture...READ MORE
Traders scaled back their open interest positions by around 12.7K contracts on Tuesday, according to preliminary data from CME Group. Volume, instead, rose for the second session in a row, this time by nearly 150K contracts.
Gold looks capped around $1,650/oz
Prices of the ounce troy of the precious metal appears to have met strong resistance in the $1,650 area. Declining open interest in gold coupled with positive price action hints at the likeliness that further gains look limited around the $1,650 per ounce for the time being, opening the door at the same time for a potential consolidation or correction lower.
Traders scaled back their open interest positions by around 12.7K contracts on Tuesday, according to preliminary data from CME Group. Volume, instead, rose for the second session in a row, this time by nearly 150K contracts...READ MORE
Here is what you need to know on Wednesday, March 25:
The market mood remains upbeat as the US Senate reached a deal on a $2 trillion stimulus package after around-the-clock talks. Stocks remain bid after staging the strongest rally since 1933 on Tuesday. American politicians are getting their act together as the number of domestic cases topped 55,000 and the World Health Organization said the world's largest economy is set to be the next epicenter of the disease.
The agreement includes cheques to most Americans, aid to small businesses, unemployment insurance, tax deference, and more. The bill is set to turn into law by the end of the week. Some of the funding comes from the Federal Reserve's unlimited Quantitative Easing program announced on Monday.
While Asian stocks are on the rise, S&P futures are on the back foot, potentially pointing to a "sell-the-fact" reaction to the stimulus deal.
President Donald Trump said he wants to see the lockdowns removed by Easter, in around three weeks' time, while state and local officials are adding restrictions to curb the spread of Covid-19.
Preliminary Purchasing Managers' Indexes from the US, the UK, and the eurozone plunged in services sector activity while manufacturing is holding up due to quirk in the calculation, counting delays as a positive factor.
Commodity currencies are the most significant beneficiaries on Wednesday, with AUD/USD recapturing 0.60 and NZD/USD also advancing despite a nationwide lockdown. USD/CAD has dropped below 1.44 as WTI Crude Oil closes on $25. Crude oil inventories are eyed.
Another winner is GBP/USD which is trading well over 1.18, which is extending its recovery as Brits get used to their lockdown. UK inflation figures for February will likely be ignored by markets as it predates the crisis.
EUR/USD is hovering around 1.08, relatively stable after Italy reported a rise in the number of deaths and Spain's number of mortalities continues rising quickly. Epidemiologists want to see the curve flattening. The final German IFO Business Climate for March is set to confirm a sharp drop in confidence.
India has joined the long list of countries imposing lockdowns, ordering around 1.3 billion people to stay at home.
Gold is battling $1,600 after breaking above the round number on Tuesday. The precious metal is benefiting from the Fed's figures.
US Durable Goods Orders for February are forecast to show falls, but the pre-crisis figures will likely be overlooked in favor of updated coronavirus figures from all over the world. Over 400,000 people have been infected and nearly 19,000 have died all over the world.
Cryptocurrencies have been consolidating their gains, trading above $6,500.
Here is what you need to know on Wednesday, March 25:The market mood remains upbeat as the US Senate reached a deal on a...READ MORE
Despite the slump in the UK and Euro area services sector activity as well as the contraction in the factories, which points towards a recession, the risk-on trading action in the European trading remains unperturbed.
Markets continue to cheer the stimulus measures deployed by the German government and the US Federal Reserve (Fed) to tackle the economic fallout from the coronavirus pandemic. Further, the prospects of the US Congress reaching the economic package deal against the virus spread also added to the renewed optimism across the global markets.
The market mood received a further boost amid signs of a likely slowdown in the virus spread in Italy, the new epicenter of the outbreak. Italy’s new coronavirus cases fall for a second day to near 700, slightly less than the previous day.
Consequently, S&P 500 futures extend the rally by 5% and hit the limit-up band of 2,333.50. Among the European indices, the pan European benchmark, EuroStoxx 50 is up 5.80%, Germany’s DAX jumps 6.50% while the UK’s FTSE 100 jumps 4+% and French CAC 40 gains nearly 4% so far this session.
Despite the slump in the UK and Euro area services sector activity as well as the contraction in the factories, which points towards a recession, the risk-on trading action in the European trading remains unperturbed.READ MORE
The GBP/USD pair climbed to fresh session tops, with bulls now looking to build on the momentum beyond the 1.1700 mark despite mixed UK PMI prints.
The sterling regained some positive traction on Tuesday and was being supported by the UK Prime Minister Boris Johnson's stricter lockdown measures to combat the COVID-19 pandemic.
The bid tone surrounding the British pound remained unabated following the disappointing release of the UK Services PMI, which was largely negated by slightly better Manufacturing PMI print.
The flash version of the UK Services PMI dropped to 35.7 in March, showing a sharp contraction in the business activity, while the UK Manufacturing PMI edged lower to 48 vs. 45 expected.
Meanwhile, some notable US dollar weakness, amid easing concerns over tightening liquidity, remained supportive of the pair's bid tone through the early European session on Tuesday.
It is worth recalling that the Fed on Monday announced to buy unlimited amounts of Treasury bonds and mortgage-backed securities to support the economy struggling from the coronavirus pandemic.
It will now be interesting to see if the pair is able to capitalize on the momentum or once again meets with some fresh supply at higher levels as the focus now shifts to the release of the US PMI prints.
The GBP/USD pair climbed to fresh session tops, with bulls now looking to build on the momentum beyond the 1.1700 mark despite mixed UK PMI prints...READ MORE
The single currency is prolonging the upbeat mood on Tuesday and is helping EUR/USD to break above the key 1.0800 barrier to print fresh 3-day highs near 1.0870.
EUR/USD gains ground on USD-weakness
EUR/USD is advancing for the third consecutive session on Tuesday, extending the optimism seen at the beginning of the week and managing well to surpass and keep business above the key barrier at 1.0800 the figure.
The pair is deriving support pari passu with the corrective downside in the greenback, all after the Federal Reserve announced an open-ended programme of purchases of Treasuries and MBS on Monday, adding to the other stimulus measures released in previous days.
In addition, better-than-expected preliminary manufacturing PMIs in Germany and the broader Euroland for the current month have been also lending legs to the ongoing recovery in the shared currency.
Later in the day and across the pond, February’s New Home Sales are due seconded by the Richmond Fed manufacturing gauge and the advanced Markit’s Manufacturing/Services PMIs for the current month.
What to look for around EUR
EUR/USD remains in recovery-mode at the beginning of the week, always following USD-dynamics, developments from the coronavirus and the response from central banks. On the latter, the recently announced extra measures from the Fed has been collaborating further with the rebound in the pair from recent YTD lows. On the macro view, better-than-forecasted PMIs in both Germany and the broader Euroland opened the door to some respite in the prevailing downtrend of fundamentals in the region, although the underlying stance still remains well on the negative side.
EUR/USD levels to watch
At the moment, the pair is gaining 0.98% at 1.0832 and a breakout of 1.0866 (weekly high Mar.24) would target 1.0992 (monthly low Jan.29) en route to 1.1015 (55-day SMA). On the other hand, immediate contention emerges at 1.0635 (2020 low Mar.23) seconded by 1.0569 (monthly low Apr.10 2017) and finally 1.0494 (monthly low Mar.2 2017).
The single currency is prolonging the upbeat mood on Tuesday and is helping EUR/USD to break above the key 1.0800 barrier to print fresh 3-day highs near 1.0870....READ MORE
EUR/USD has eroded the 35 year uptrend at 1.0782/74 on a weekly basis. Karen Jones from Commerzbank analyzes the EUR/USD pair technically.
“1.0782/74 was major support and it has been broken. Failure here is considered to be a major breakdown and targets 1.0352, the 2016 low, on the way to 1.0000.”
“Rallies should find initial resistance at 1.0926/41, the September and October lows.”
EUR/USD has eroded the 35 year uptrend at 1.0782/74 on a weekly basis. Karen Jones from Commerzbank analyzes the EUR/USD pair technically...READ MORE
Here is what you need to know on Monday, March 23:
The constant increase in coronavirus cases and deaths, alongside the failure of US politicians to strike a deal on fiscal stimulus is weighing heavily on markets. US stock futures hit limit down alongside Asian stocks, and bonds are in demand. The drop in US yields is weighing on the dollar vs. majors, with EUR/USD recovering above 1.07 and USD/JPY dropped under 110. The greenback is gaining ground against commodity currencies, oil is falling, and gold remains pressured under $1,500.
Coronavirus has taken the lives of over 14,000 people and infected more than 330,000. The death tolls in Italy is especially devasting, nearing 6,000. The eurozone's third-largest economy announced tighter restrictions, closing non-essential factories. Spain's death toll also extends its rapid increase, with the government announcing that the state of emergency will last through at least April 11.
German Chancellor Angela Merkel is in self-isolation after a doctor she was in contact with tested positive for Covid-19. She announced more rigid limits on movement. Eurozone Consumer Confidence is set to show a significant drop later in the day. Members of the European Central Bank say more can be done after last week's €750 billion in new bond-buying.
In the UK, Prime Minister Boris Johnson hinted of tougher measures to enforce social distancing after the public seemed to flout the guidance over a sunny weekend. London announced vast support to employees losing their jobs.
US coronavirus cases reached 35,000, the third-highest in the world as testing has been ramped up. James Bullard, PResident of the Saint Louis branch of the Federal Reserve, said the unemployment rate could hit 30% and Gross Domestic Product could fall by 50% in this planned shutdown. Bullard said everything is on the table while Neel Kashkari, his colleague from Minnesota, said that the Fed has more tools.
Senate Democrats voted against a fiscal stimulus bill brought forward by Republicans as it consisted of too few strains attached. Democrats are opposed to unlimited bailouts. Reports suggest the size could exceed $2 trillion dollars and would include 50-year bonds funded by the central bank. Frantic negotiations continue in Washington.
Finance ministers and central bankers of the G-20 will hold a video conference later on but are unlikely to issue a statement.
The Bank of Japan stepped into markets by offering ¥800 billion of repo operations. Tokyo is under growing pressure to cancel the Olympics due in late July.
NZD/USD: The Reserve Bank of New Zealand announced a Quantitative Easing program while the government places the country on lockdown. NZD/USD has been one of the biggest losers, falling around 1%. The Reserve Bank of Australia kicked off QE last week. In the eurozone and in Britain, printing new money seemed to help the currencies.
Cryptocurrencies are edging higher after ticking down over the weekend. Bitcoin is trading just under $6,000.
The constant increase in coronavirus cases and deaths, alongside the failure of US politicians to strike a deal on fiscal stimulus is weighing heavily on markets. US stock futures hit limit down alongside Asian stocks, and ...READ MORE
The UK is not taking the coronavirus lightly, despite initial criticism against the government to the contrary. The number of cases now stands at 3,983 with 177 deaths, a significant acceleration on a day earlier. Much darker days lie ahead but both the government and Bank of England have announced huge fiscal and monetary easing packages and made clear that they will continue to add to them as the situation develops.
The pound sold off heavily this week, despite these efforts, including an incredibly volatile day on Friday in which the currency gave up most of its earlier gains. It’s not likely to get easier for the country or anything associated with it. The BoE meets next week but the way they’re easing at unscheduled meetings, I’m not sure that’s even particularly important any more.
The ECB disappointed the markets by not cutting interest rates at the meeting last week but responded with a massive surprise QE program on Wednesday that made up for it. The temporary bond purchases, until the end of the year, named Pandemic Emergency Purchase Program, took pressure off the rising yields across Europe. Central banks aren’t taking this lightly so we can probably expect more unscheduled announcements for weeks to come.
The data is about to get ugly for the US economy. It is a worrying time for many Americans and the next jobless claims release will be the opening act to a string of terrible economic data releases. Filings for unemployment benefits are going to skyrocket well above their record high that occurred during Hurricane Sandy in 2012. With half of US workers receiving hourly pay, filings for restaurant, retail, hotel, and travel businesses could see well over a million claims filed for the week ending March 21st. Expectations are all over the place with one analyst eyeing 3-million jobless claims.
The Fed has been very active in delivering stimulus and so has the government. Washington has already passed two phases of virus relief with the big $1.3 trillion economic stimulus potentially set to get voted on early in the week.
The lockdown efforts will likely intensify in the US and all eyes will be on how quickly healthcare capacity is reached. Any slowing in the spread of the coronavirus could prove to be supportive for risk appetite, but all early signs suggest that will probably not be the case.
The Democrats have quickly settled on former-VP Joe Biden as the nominee, technically not official, but pretty much guaranteed. Biden will lose a lot of momentum as social distancing will prevent him from holding rallies. US politics should take a backseat for a couple months until Washington is able to do everything they can for providing support to those impacted by the coronavirus.
Industrial Profits due next Friday. Investors pricing a recovery China for now as new coronavirus cases are plummeting to zero. Faces an external demand shock from coronavirus.
A resurgence of coronavirus sees double dip. Authorities tightly managing stock market and currency volatility. Stocks could suddenly collapse if authorities step aside.
Economy mired in a deep recession due to coronavirus slowdown. On the plus side, protests have subsided to almost nil. No significant data or events next week. Cathay Pacific slashes capacity by 96%.
Covid-19 could weigh on the economy leaving national champions like Cathay Pacific bleeding. Sentiment on equity market very fragile.
A huge winner from oil price collapse will help the RBI stagflation fight. No data of significance. Credit markets under strain post the RBI takeover of Yes Bank
A sudden spurt of coronavirus cases could overwhelm health system. INR and Nifty as risk of declines as investors flee. Credit markets could become very tight as Yes Bank failure delivers another blow to the banking system. Cap for Yes Bank withdrawals ends next week. A bank run has the potential for domino in the financial sector.
Panic buying of consumer staples as coronavirus cases increase. The slowdown in the domestic economy as borders are shut. RBA cut rates and announced a massive QE programme. Will do what it takes. AUD crushed, hitting multi-decade lows. Massive stock market volatility. Members told to decrease the number of trades by 25%.
There is a real risk of heavy intervention by the RBA. The stock market may introduce trading curbs and/or shorten trading hours.
No significant data. Containment measures appear to be working well with low number of cases. Like AUD, NZD has been heavily sold, hits GFC low. Remains vulnerable to further resource price drops. RBNZ cut rates to 0.25% and preparing other measures if needed. No sign of housing market stress or job losses.
Spike in coronavirus cases will put pressure on NZ stocks. More likely is a massive short squeeze as NZD is hugely oversold.
Doubts persist over true numbers of coronavirus cases. BoJ no cut but increased QE. Fiscal stimulus package from the finance ministry is still imminent. No data of note. High risk of Olympics cancellation, blow to the economy. Nikkei refusing to rally when rest of Asia and the US do is a bad sign.
Doubts persist over Japans true coronavirus numbers. Risk of Olympic cancellation. Delayed response from the government on the fiscal front. Any of these factors can send Japan equities much lower, quickly.
The dollar has come back into favour and rapidly, despite a slew of measures from the Federal Reserve to support the economy and ensure the plumbing of the financial markets continues to function. The dollar has been soaring to trade at its highest level since the start of 2017. Expect to see a lot more focus on emerging markets as a result, particularly those with large dollar-denominated debt and current account deficits.
It’s been a wild ride for oil and today was no different. Early gains were short-lived and heavy losses followed once again. It’s the perfect storm for oil which is facing a global recession and an oil price war. The latter can be avoided but no side is showing any indication that it’s going to blink first.
Gold prices appear to be stabilizing but its role in the markets right now is anyone’s guess. Today’s it’s rebounded alongside the improvement in risk appetite, while falling for much of the week as central banks around the world threw the kitchen sink at the coronavirus. Their efforts are not in vain but we’re not seeing the surge in demand for gold that we’ve seen in the past when the market is flooded with liquidity. I feel there may be a lag effect, with investors still liquidating gold positions to fill holes elsewhere but only time will tell.
No one will be more relieved than crypto fans about the rebound over the last 48 hours. After falling 63% from mid-February to mid-March, it’s now rallied more than 70% in less than a week to trade close to $7,000. It will be difficult to maintain these gains though as I don’t think the worst in the markets is behind us and cryptos have clearly been among the victims. Worse days may still lie ahead.
The ECB disappointed the markets by not cutting interest rates at the meeting last week but responded with a massive surprise QE program on Wednesday that made up for it. The temporary bond purchases...READ MORE
Gold continued gaining some positive traction through the early European session and shot to fresh daily tops, around the $1514-15 region in the last hour.
The precious metal once again managed to attract some buying ahead of the $1450 strong horizontal support – or YTD lows set at the beginning of this week – and snapped two consecutive days of losing streak. The early Asian session downtick remained limited amid mounting fears over the economic crisis from the coronavirus pandemic.
This coupled with some aggressive US dollar long-unwinding trade provided a goodish lift to the dollar-denominated commodity. A coordinated effort by central banks across the world helped ease market concerns about tightening liquidity conditions and prompted some USD profit-taking, all against the backdrop of the recent strong bullish run.
Gold continued gaining some positive traction through the early European session and shot to fresh daily tops, around the $1514-15 region in the last hour...READ MORE
Economist at UOB Group Lee Sue Ann assessed the recent announcements by the ECB.
“In an unexpected move, unveiled late on Wednesday (18 March), the European Central Bank (ECB) announced a new EUR750bn bond-buying programme, called the Pandemic Emergency Purchase Programme (PEPP).”
“In a nutshell, this programme will last until the end of 2020, and will target both publicand private-sector assets.”
“In the press release, the Governing Council of the ECB stated that it was committed to playing its role in supporting all citizens of the euro area through this extremely challenging time and would ensure that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb this shock.”
“Just slightly less than a week ago on 12 March, the ECB had disappointed markets by keeping its three key interest rates unchanged; but pledged instead to re-open its dormant quantitative easing (QE) programme to support the economy as it grapples with the COVID-19 pandemic.”
“In all, we think the ECB has made a fairly aggressive move here… Whilst we think that these monetary policy measures will be better complemented with even more fiscal measures; this is, for now, definitely Lagarde’s “whatever it takes” moment.”
“In an unexpected move, unveiled late on Wednesday (18 March), the European Central Bank (ECB) announced a new EUR750bn bond-buying programme, called the Pandemic Emergency Purchase Programme...READ MORE
Here is what you need to know on Friday, March 20:
The US dollar takes a breather and is retreating after raging across the board throughout the week, as stocks find some calm after a wild week amid the coronavirus crisis. The respiratory disease has already taken the lives of over 10,000 people worldwide, with over 244,000 infected.
The Federal Reserve expanded its dollar swap program to additional central banks on Thursday after the initial move on Sunday to ease the pressure on the greenback. In the US, California issued a state-wide order to stay at home and New York mayor Bill de Blasio warned the city could run out of medical supplies. Lawmakers in Washington continue working on a relief bill aimed to be concluded by Monday. Other states may follow California.
EUR/USD is trading at the 1.07 handle after hitting 1.0652 on Thursday, the lowest since 2017. The European Central Bank introduced a new Quantitative Easing worth €750 billion to support vast government spending in Europe as several countries are under lockdown.
Italy has surpassed China in the number of deaths from coronavirus and is considering extending and deepening its restrictions. The disease continues spreading in Germany, France, and Spain with the latter seeing hospitals filling up.
GBP/USD is trading at the 1.16 handle after ranging over 300 pips on Thursday. The Bank of England surprised with the second rate cut in a week and also enlarged its QE program by £200 billion, an increase of around 45%. The move came as the new governor Andrew Bailey and his colleagues feared disorderly market action as Brits braced for a lockdown.
Prime Minister Boris Johnson said Britain could turn the tide within 12 weeks after closing schools and taking other measures. Chancellor of the Exchequer Rishi Sunak is set to introduce new measures to support the economy later in the day. Brexit talks in doubt: David Frost, Chief UK Brexit negotiator is in self-isolation after showing symptoms of Covid-19 and as his European counterpart said he tested positive.
Oil prices have been surging into Friday, with WTI already some 30% off the lows of nearly $20 on Wednesday. The Canadian dollar has recovered, with USD/CAD trading at the 1.43 handle after topping 1.46 earlier this week. Canadian retail sales figures for January, before the crisis, are on the agenda today.
AUD/USD is also bouncing from the 17-year lows and is around at the 0.58 handle as the Reserve Bank of Australia began implementing its QE program. NZD/USD is also some 100 pips higher on the day, at the 0.57 handle.
USD/JPY is battling 110 after surpassing the round number on Thursday. The currency pair is moving with the dollar with the yen losing its safe-haven status.
US weekly jobless claims leaped to 281,000 from 211,000 in the first sign that the crisis is set to trigger unemployment. President Donald Trump has reportedly asked states not to publish employment figures while Goldman Sachs sees unemployment hitting 2.25 million. US Existing Home Sales for February are due out today
On Wall Street, a considerable amount of options expire on Wall Street, in what is called "quadruple witching" – that usually causes high volatility. With markets already wild, it could add fuel to the fire.
Cryptocurrencies are on the rise with Bitcoin topping $6,000 and other digital assets following suit.
The US dollar takes a breather and is retreating after raging across the board throughout the week, as stocks find some calm after a wild week amid the coronavirus crisis. The respiratory disease has already taken the lives of over 10,000 people worldwide, with over 244,000 infected...READ MORE
Bank of Canada (BoC) commits to do what is necessary to keep system running, Dawn Desjardins, a VP & Deputy Chief Economist at the Royal Bank of Canada reports.
“The BoC Governor did not make any new policy announcements today but ran through the long list of policies put in place to support the financial system and ensure that credit is available to households and businesses.”
“The bank has been clear that there are more policy levers that could be pulled in the toolkit. These include lowering the overnight rate to the lower bound of 0.25% and employing additional non-traditional measures.”
“The Governor said that what is important is that the programs can be scaled up or down as needed.”
“The private sector is also working to help Canadian households with Canada’s banks allowing customers to defer mortgage payments for up to six months if faced with disruptions associated with the crisis.”
Bank of Canada (BoC) commits to do what is necessary to keep system running, Dawn Desjardins, a VP & Deputy Chief Economist at the Royal Bank of Canada reports...READ MORE
WTI plunged again as Saudi Arabia instructed Aramco to keep production at 12.3m barrels per day. News for the sector continued to deteriorate, economists at ANZ Research inform.
“The market took little comfort central bank policy measures to lessen the economic impact. However, it was ongoing supply-side concerns that really pushed crude prices lower.”
“The Saudi Ministry of Energy directed state-producer Saudi Aramco to continue to supply crude oil at levels of 12.3mb/d over the coming months. Russia, a key member of that agreement also appears to be battening down the hatches.”
“The collapse in Brent crude below USD25/bbl has resulted in several OPEC members calling for new action. Iraq urged the group to hold fresh talks to address the crisis. For the moment, key members Saudi Arabia and Russia have rejected those calls.”
WTI plunged again as Saudi Arabia instructed Aramco to keep production at 12.3m barrels per day. News for the sector continued to deteriorate, economists at ANZ Research inform...READ MORE
EURO, EUR/USD TECHNICAL ANALYSIS, GERMAN IFO DATA – TALKING POINTS
Early into Asia’s Thursday trading session, ECB President Christine Lagarde announced a 750b Euro coronavirus stimulus package and reasserted the central bank’s commitment to the Euro. For seasoned traders, this kind of rhetoric echoed a similar message her predecessor Mario Draghi expressed when he said monetary authorities will do “whatever it takes” to save the Euro from the regional debt crisis in 2012.
The cycle-sensitive Australian and New Zealand Dollars fell while the Euro ticked higher following Ms. Lagarde’s comments. Jobs data from Australia crossed the wires but failed to elicit a notable market reaction as traders anxiously waited for the RBA rate decision. AUD fell after the central bank cut interest rates to another record-low at 0.25 percent and will target “yields on three-year government bonds of around 0.25%”.
EURO AT RISK OF AGGRESSIVE LIQUIDATION AHEAD OF GERMAN IFO DATA
Preliminary German IFO data for March in the upcoming European session may amplify EUR/USD losses after ZEW data earlier this week sent the Euro tumbling below key support. While markets are rarely paying attention to economic indicators now amid blaring headlines from the coronavirus, German data – at least, for Europe – still has the capacity to move markets.
As the “steam engine of Europe”, the growth outlook for Germany has the potential to send a continental chilling effect if the region’s economic hub begins to sputter. IFO business climate, current assessment, and expectations components will be closely watched by traders, particularly the latter due to its forward-looking nature.
New coronavirus infections are now occurring mostly outside of mainland China with Europe become the new epicenter of the pandemic according to the World Health Organization (WHO). The European Central Bank Governing Council will be holding an emergency call on a response to the virus following France’ Finance Minister Bruno Le Maire saying monetary authorities should intervene quickly and “massively”.
Despite the coronavirus aid package, it is unclear how effective it will be in stimulating growth with rates in negative territory and member states being fiscally restricted by regional budgetary rules. Germany’s Chancellor Angela Merkel said the government will do everything required to help distressed companies as CDS spreads on ensuring sub-investment grade European corporate debt hover at Eurozone debt crisis-level highs.
SWISS NATIONAL BANK RATE DECISION, OUTOOK
The Swiss National Bank is expected to hold interest rates at -0.75 percent following the release of their annual report which will likely carry gloomy undertones as part of the pessimistic zeitgeist permeating market mood. Consequently, this may pressure the EUR/CHF exchange rate which is already trading at a five-year low and less than four percent away from the plunge it experienced in January 2015.
EUR/USD TECHNICAL ANALYSIS
EUR/USD has shattered below the 1.0981-1.0989 support range – dating back to the last two months of 2019 – and is now retesting the prior descending resistance channel (labelled as “Downtrend Beta”). The upcoming data may catalyze another aggressive selloff in EUR/USD and push the pair below the multi-year swing low at 1.0789 and lead to a resumption of the prior steep downtrend.
Preliminary German IFO data for March in the upcoming European session may amplify EUR/USD losses after ZEW data earlier this week sent the Euro tumbling below key support. While markets are rarely paying attention to...READ MORE
Traders trimmed their open interest positions once again on Tuesday, this time by around 10.3K contracts, in light of advanced figures from CME Group. In the same direction, volume went down by around 152.6K contracts.
WTI now targets $25.00/bbl
Prices of the barrel of WTI remain well entrenched into the negative territory and are now challenging the $26.00 mark. However, decreasing open interest and volume should allow for some rebound in the near-term, helped by the ongoing extreme oversold condition of the commodity.
Traders trimmed their open interest positions once again on Tuesday, this time by around 10.3K contracts, in light of advanced figures from CME Group. In the same direction, volume went down by around 152.6K contracts...READ MORE
Gold extended its sharp intraday slide and weakened farther below the key $1500 psychological mark through the early European session.
The precious metal failed to capitalize on the overnight goodish intraday bounce and an early uptick to the $1546 region. Traders seemed rather unimpressed by a fresh leg down in the global equity markets, which tends to undermine the commodity's perceived safe-haven status.
A strong follow-through rally in the US Treasury bond yields turned out to be one of the key factors that exerted some fresh downward pressure on the non-yielding yellow metal. In fact, the yield on the benchmark 10-year US government bond jumped back to 1.2% on Wednesday.
This coupled with a sudden pickup in the US dollar demand added to the intraday selling bias surrounding the dollar-denominated commodity. The greenback benefitted from its status as the global reserve currency and a rush to hoard cash to ride through the coronavirus crisis.
However, growing concerns over the economic fallout from the coronavirus pandemic – despite the recent efforts from major central banks and various government measures to offset recession fears – might lend some support to the commodity.
Hence, it will be prudent to wait for some strong follow-through selling, possibly below the recent swing lows to over one-month lows, around the $1450 region, before positioning for any further near-term depreciating move for the metal.
Gold extended its sharp intraday slide and weakened farther below the key $1500 psychological mark through the early European session...READ MORE
Heavy selling hit the base metals, with copper posting its biggest two day loss since 2015, strategists at ANZ Research apprise.
“Signs of weakening demand are emerging by the day. Inventories on the LME jumped 22% yesterday, pushing the year to date gain to over 50%.”
“Sentiment was also impacted by the weak economic data out of China. Industrial production in Jan-Feb fell 13.5%, while retails sales were down 20.5% for the same period.”
“The fall in prices in getting a response from the supply side, with several top producers announcing cutbacks to output.”
Heavy selling hit the base metals, with copper posting its biggest two day loss since 2015, strategists at ANZ Research apprise...READ MORE
EUR/USD is holding onto its range in a typical "dead cat bounce" move but that may change. Tuesday's four-hour chart is pointing to the downside, as FXStreet’s analyst notes.
“EUR/USD is trading around the 100 Simple Moving Average on the four-hour chart, above the 200 SMA and below the 50 SMA. Momentum is to the downside while the Relative Strength Index is balanced.”
“Support awaits at 1.11, which provided support in early March. It is followed by 1.1050, a stubborn support line from last week.”
“Resistance is at 1.1240, a swing high on Monday which is backed up by the 200 SMA. It is followed by 1.1320 and 1.1360, both stepping tones on the way down.”
EUR/USD is holding onto its range in a typical "dead cat bounce" move but that may change. Tuesday's four-hour chart is pointing to the downside, as FXStreet’s analyst notes...READ MORE
GOLD AND CRUDE OIL TALKING POINTS:
Gold prices were lower again on Wednesday even as the coronavirus’ spread continued to dominate the news cycle. Investors reportedly sold gold holdings to cover cash losses incurred elsewhere, especially in the equity market rout of the past month, as they’ve been seen doing before.
Stock prices rose in parts of the Asia Pacific region, notably in Japan and Australia, as investors hoped for a continuing fiscal response from the world’s governments even as monetary policy looks stretched thanks to years of low intertest rates in many jurisdictions. New Zealand’s government added to these hopes on Tuesday with the announcement of a large package of measures to try and ameliorate some of the virus’ effects.
Still, global equity markets remain close to multi-year lows in most developed economies, adding credence to investors’ broad need for cash which some are clearly satisfying in the gold market.
The coming global session will bring news of US retail sales’ performance and UK employment levels but, as the numbers cover only January and February, they’re likely to have been rendered more historic than usual for the markets by the disease’s subsequent ravages.
Crude oil prices were higher on Tuesday, riding modestly improved risk appetite higher, and perhaps aided a little by last week’s US decision to add considerably to its strategic reserve.
However, the market still appears oversupplied and dominated by the price war between major producers Russia and Saudi Arabia which followed on from their inability to reach agreement on production cuts at this month’s meeting of the Organization of Petroleum Exporting Countries and others.
The coronavirus has clearly put the brakes on all aspects of the global economy which will in turn inevitably mean lower energy demand.
Prices have collapsed this month and have now fallen below their previous trading band, which formed support on the way up to this month’s peaks. Tuesday’s retreat has taken them below $1509.68 which is the final, 78.6% retracement of the rise from November’s lows to this year’s peaks. Monday’s intraday action saw complete retracement with its trial of $1449.16, a level which now forms near-term support.
US crude oil prices have been sliding all year but have spent the past week or so in a broad range between $30 and $35 per barrel. However, the market seems to be headed lower within this band, with a trial of its lower range likely this week.
Gold prices were lower again on Wednesday even as the coronavirus’ spread continued to dominate the news cycle. Investors reportedly sold gold holdings to cover cash losses incurred elsewhere, especially in the equity market rout of the past month, as they’ve been seen doing before...READ MORE
Here is what you need to know on Tuesday, March 17:
Stocks are in the green early on Saint Patrick's Day, after yet another massive sell-off on Monday. Concerns about the impact of coronavirus weighed heavily on the markets, triggering double-digit falls on Wall Street in the worst fall since 1987. The Federal Reserve's massive accommodation – slashing rates to zero, launching $700 billion of QE, and other measures – failed to cheers investors. Airlines are lining up for bailouts as countries are closing borders and forcing isolation, industrial companies are shutting down plants, while other firms say they cannot provide outlooks.
On Tuesday, S&P futures are up, and the dollar is in demand across the board, advancing against all currencies, including the yen. Gold is also suffering from the general sell-off, trading below $1,500.
President Donald Trump changed his tone, sounding somber, not ruling out a recession, and saying the disease could peak only in the summer. The administration recommended refraining from gatherings of over ten people. Democrats have proposed a $750 billion stimulus bill, similar in scale to the then-President Barrak Obama's package following the financial crisis.
In Europe, France and Germany have imposed severe restrictions, with French President Emmanuel Macron said "we are at war" and also pledged €300 billion to support companies in distress, as well as waiving utility bills. Other countries may follow. The Euro 2020 football tournament may be canceled.
The German ZEW Economic Sentiment for March may shed light on business confidence after the intensification of the crisis, and it is forecast to crash as EUR/USD trades below 1.12.
In the UK, the government seemingly made a U-turn on its strategy to let the virus spread among the strong – causing "herd-immunity" – and recommended refraining from large gatherings as the government mulls a financial package. Prime Minister Boris Johnson said it is critical to act at the right moment. Britain's job report is set to provided insights on how the economy performed before the crisis.
Later in the day, US Retail Sales figures for February are projected to edge higher. The data – normally a top-mover – will likely be shrugged off as old news. The Empire State Manufacturing Index for March plunged in the report on Monday.
Oil is edging higher with WTI nearing $30 after Monday's crude crash. The US is filling up strategic reserves while the Suadi-Russian price war is weighing on price values.
New Zealand introduced a stimulus plan worth 4% of Gross Domestic Product, larger than the one in the 2008 crisis.
Cryptocurrencies are attempting a recovery after another downfall, with Bitcoin trading above $5,000 and Ripple battling $0.15.
Centrist Joe Biden and left-leaning Bernie Sanders compete in another set of primaries for the chance to challenge President Donald Trump in November's Presidential elections. Biden is in the lead, in a contest now overshadowed by Covid-19.
Stocks are in the green early on Saint Patrick's Day, after yet another massive sell-off on Monday. Concerns about the impact of coronavirus weighed heavily on the markets, triggering double-digit falls on Wall Street in the worst fall since 1987...READ MORE
The Bank of Japan (BoJ) Governor Haruhiko Kuroda, in the post-policy meeting press conference, was noted saying that today's move was made out of coordination among other countries' central banks as uncertainty remains high.
The Bank of Japan (BoJ) Governor Haruhiko Kuroda, in the post-policy meeting press conference, was noted saying that today's move was made out of coordination among other countries' central banks as uncertainty remains high...READ MORE
EUR/USD remained depressed on Friday and retested weekly lows, near the 1.1055 area. Haresh Menghani, an analyst at FXStreet, takes a look at the pair from a technical perspective.
“EUR/USD has been finding decent support near confluence support comprising of 100-day SMA and 61.8% Fibonacci level of the 1.0778-1.1335 recent upsurge, which should now act as a key pivotal point for short-term traders.”
“A convincing break below will negate prospects for any further positive move and turn the pair vulnerable to accelerate the slide towards challenging the key 1.10 psychological mark.”
“On the flip side, the 1.1200 round-figure mark now seems to have emerged as an immediate strong resistance, which is closely followed by resistance near the 1.1235 region.”
EUR/USD remained depressed on Friday and retested weekly lows, near the 1.1055 area. Haresh Menghani, an analyst at FXStreet, takes a look at the pair from a technical perspective.READ MORE
A fourth week of heightened volatility will see financial markets continue to focus on the coronavirus spread across Europe and the US. The economic impact of the virus is deepening, and expectations are high for the week ahead to see another wave of massive monetary easing and for governments to inch closer to a fiscal response. The base-case is starting to price in a recession for the US and the length of it will likely determine how long we will see risk aversion remain in place.
A lot of attention will fall on the Fed’s rate decision as economists have a wide range of rate cut forecasts that range between a 25-basis point cut to a full percentage point. The downside scenario on the economy appears likely and the Fed will not want to waste ammunition. The Fed will likely lean towards a more aggressive cut and signal its latest QE program will take the balance sheet well beyond the $5 trillion mark this year. Risky assets will eventually benefit from all this global stimulus, but until a better understanding is reached on the how long this virus will impact everyday life, travel and trade, risk aversion could remain the dominant trend.
In addition to the Fed and BOJ, rate decisions will be had in Switzerland, Norway, Indonesia, Philippines, Taiwan, Turkey and Saudi Arabia. Globally central banks seem united in cutting rates further and delivering additional stimulus. The punchbowl will be overflowing with stimulus and for the risk rally to occur it will need to be accompanied with weakening in the spread of the coronavirus for risk appetite to fully return.
The race to zero could come true at the upcoming Fed policy meeting. Following the February 3rd intra-meeting rate cut, the Fed is about to quickly show how quickly concerned they are with the stresses in funding markets. The Fed will probably be convinced the US will enter a recession and the severe tightening of financial conditions will force them to remain on the offensive with their bond buying efforts. The balance sheet will go grow tremendously and when the markets are beyond the virus, risky assets will be well supported.
Mexico’s economic continues to crumble as coronavirus global pandemic continues to intensify. The Mexican central bank is expected to cut rates however the government may have little room to deliver fiscal support. Mexico’s peso will try to rebound following one of the worst week’s since Trump won the presidency.
Coordinated easing from the Bank of England and the government this week as policy makers began their defense of the economy as the coronavirus properly announces its arrival on UK shores. The measures were substantial but only in line with the minimum being demanded by the markets, as seen by the rather timid response. More measures from both will likely be warranted in the coming months, with the BoE potentially doing so as early as the next meeting in a couple of weeks.
The SNB have rumoured to have been active in currency markets recently as they attempt to ease the pressure on the franc, which has become a favourite again in this risk averse environment. The central bank may be tempted to cut even deeper into negative territory to -1% next week but markets aren’t currently pricing a move in. Instead they may adopt more unconventional measures to support the economy through these tough times for the global economy, as we’ve seen from others, while continuing to manage the currency in a way all too familiar to them.
The ECB disappointed traders this week by focusing on measures designed to ease the strain on small and medium sized businesses, rather than feed the markets another meaningless 10 basis point rate cut. The central banks toolkit is looking very depleted but more will likely be expected of it. Given the trend for emergency rate cuts, we may get further measures from the central bank in the coming weeks, possibly even that rate cut if traders don’t back down. Given the state of the eurozone economy even prior to the Coronavirus outbreak, it is arguably the most in need of support, especially Italy which has among the least fiscal headspace. Policy makers will have to be more proactive in the coming weeks or the recession there could be brutal.
The CBRT is expected to remain in easing mode, with markets pricing in a 50 basis point cut, in line with many other central banks in recent weeks. The central bank is contending with a weakening currency though so may be forced to play it carefully or risk triggering another spike in inflation. They’ve got away with it until now but these markets are less forgiving.
The South African central bank is poised to follow the rest of the world and deliver rate cuts at the March 19th meeting. The rand has pummeled along with all the emerging market currencies. The outlook for the South African economy is rather bleak. The economy is in a technical recession and unemployment is at the global financial crisis high. South Africa has high inflation but the SARB can afford to cut rates again from the relatively high 6.25% interest rate.
Economy mired in a deep recession due to coronavirus slowdown. On the plus side, protests have subsided to almost nil. No significant data or events next week.
External. Covid-19 weighs on the economy and national champions like Cathay Pacific are bleeding. Sentiment on equity market very fragile.
Feb Retail Sales are due Monday. Loan prime Rate Friday. Expect a rate cut. Investors pricing a recovery China for now as new coronavirus cases are plummeting to zero. Faces an external demand shock from coronavirus. The winner from oil price collapse.
A resurgence of coronavirus sees double dip. Lots of good news priced in. Authorities tightly managing stock market and currency volatility. Stocks could suddenly collapse if authorities step aside.
A huge winner from oil price collapse will help the RBI stagflation fight. No data of significance. Credit markets under strain post the RBI takeover of Yes Bank
A sudden spurt of coronavirus cases overwhelms health system. Fall in INR and Nifty as investors flee. Credit markets very tight as Yes Bank failure delivers another blow to banking system. Potential for domino in the financial sector.
Panic buying of consumer staples as coronavirus cases increase. The slowdown in the domestic economy as schools are shut and large gatherings banned. Positive is a huge fiscal stimulus and an RBA rate cut.
A jump in risk aversion sentiment (probably due to coronavirus) could see AUD sell-off resume with force and also hit the stock market. The oil price collapse has flowed to the resource sector, pummelling stocks and the AUD. Increase in virus concerns will weigh disproportionately on Australia.
Very quiet on the data front next week, with high beta to China the main risk. Containment measures appear to be working well with low number of cases. Like AUD, NZD has been heavily sold and remains vulnerable to further resource price drops. No sign of housing market stress or job losses.
Doubts persist over true numbers of coronavirus cases. BoJ interest rate decision Thursday. Expect no cut but increased QE. Fiscal stimulus package from finance ministry imminent. No data of note.
Stock markets have been among the worst-performing in Asia. Extremely sensitive to increased coronavirus risk internationally. Possible postponement of cancellation of Olympics deals another huge blow to the economy.
Oil price volatility is not going anywhere anytime soon. Oil prices resumed their bearish trend after President Trump reminded markets that travel bans are likely to deliver further demand destruction for crude. Crude prices will be subject to wild swings on any surprise disruption in the Middle East or if OPEC + somehow decides to put an emergency meeting on the calendar. The President will try save the shale industry and will provide some support. His first step was to announce the purchase of large quantities of oil for their strategic reserves. He will likely offer more support in the coming weeks.
Gold investors are wondering when will the scramble for cash end. The patience of many gold bulls has been lost and prices could soon see a very quick snapback once a wrath central bank rate decision signal a lower interest rate environment is here to stay. Gold’s safe haven status was dealt a blow over the last week.
Bitcoin is having a terrible month that is seeing many investors panic and get out of the crypto space. Bitcoin could remain under pressure until we see markets have an appetite for risky assets. Bitcoin volatility should remain high and could see wide trading target the $3,500 to $6,300 range over the next few weeks.
A fourth week of heightened volatility will see financial markets continue to focus on the coronavirus spread across Europe and the US. The economic impact of the virus is deepening, and expectations are high for the week ahead to see another wave of massive monetary...READ MORE
Economists at Deutsche Bank have changed their forecast and are now expecting more rate cuts from the Fed at its next meeting. Meanwhile, the US dollar is showing off its safe-haven status.
“Our Fed call has changed and we now expect 100bps of cuts at the next meeting, bringing the fed funds rate directly to the zero bound.”
“They also don’t rule out an early emergency cut given the volatility. It wouldn't surprise any of us if this happens at any moment.”
“If the Fed cuts rates to zero by this meeting as they expect, Chair Powell’s press conference should focus on the next policy steps should the outlook deteriorate further.”
Economists at Deutsche Bank have changed their forecast and are now expecting more rate cuts from the Fed at its next meeting. Meanwhile, the US dollar is showing off its safe-haven status...READ MORE
The ECB has decided to announce a multifaceted package focusing on liquidity, a temporary increase in the QE envelope of a total EUR120bn to be implemented by year-end and leaving policy rates unchanged, analysts at Danske Bank brief.
“The package underwhelmed the market, which saw in particular risk-off, with spread widening between peripheral and core bonds.”
“We believe the ECB is done with policy stimulus, unless things turn markedly worse.”
“We believe EUR/USD is likely to turn its attention to potential fiscal measures being taken in the US and Europe, although little has happened as of yet.”
“EUR/USD is evolving on a day-to-day basis but we believe it is likely EUR/USD is heading lower.”
The ECB has decided to announce a multifaceted package focusing on liquidity, a temporary increase in the QE envelope of a total EUR120bn to be implemented by year-end and leaving policy rates unchanged, analysts at Danske Bank brief...READ MORE
Even the safe-haven status of gold couldn’t protect the yellow metal from the wave of selling, as strategists at ANZ Research notes. XAU/USD is recovering yesterday losses, currently trading at 1591.50.
“Investors were forced to sell to meet liquidity needs as equity markets collapsed.”
“Considering gold is one of the few metals to have performed well this year, investors didn’t hesitate in booking profits.”
“This saw gold futures down nearly 4% late in the session.”
Even the safe-haven status of gold couldn’t protect the yellow metal from the wave of selling, as strategists at ANZ Research notes. XAU/USD is recovering yesterday losses, currently trading at 1591.50...READ MORE
Gold failed to capitalize on the early uptick and witnessed a modest intraday pullback, albeit has managed to hold above one-week lows set early this Thursday
Another brutal selloff across the global equity markets – amid growing fears over the coronavirus outbreak – provided some early boost to the precious metal's perceived safe-haven status.
The market rout followed a move by the World Health Organization to declare COVID-19 a pandemic and the US President Donald Trump's announcement to suspend all travel from Europe for 30 days.
The early uptick, however, lacked any strong bullish conviction and quickly ran out of the steam near the $1650 region amid renewed optimism over a fiscal stimulus package by Trump administration.
It is worth reporting that Democrats in the US House of Representatives on Wednesday unveiled a broad package of proposals to help Americans affected by the coronavirus outbreak.
Meanwhile, the anti-risk flows led to a fresh leg down in the US Treasury bond yields, which kept the US dollar bulls on the defensive and extended some support to the non-yielding yellow metal.
Market participants now look forward to the ECB monetary policy decision, which might influence the USD and produce some trading opportunities around the dollar-denominated commodity.
Gold failed to capitalize on the early uptick and witnessed a modest intraday pullback, albeit has managed to hold above one-week lows set early this Thursday. Another brutal selloff across the...READ MORE
Here is what you need to know on Thursday, March 12:
President Donald Trump addressed the nation amid the growing coronavirus crisis and failed to provide a coherent message. He announced the banning of flights to and from Europe, excluding the UK, from Friday. Measures to provide relief for businesses were limited. Markets were disappointed by the lack of significant fiscal stimulus in the president's Oval Office address.
At the same time, basketball matches at the NBA were canceled after a played contracted the virus and actor Tom Hanks said he and his wife were confirmed positive, bringing the virus to the mainstream of American life.
Stock markets in Asia and S&P futures are significantly lower. American stock indexes entered a bear market on Wednesday. alongside oil prices, which have resumed their falls amid the price war.
The safe-haven Japanese yen is jumping while the greenback edging lower against the euro and the pound together as US yields are declining again. Gold prices are attempting a recovery.
The European Central Bank is set to announce its rate decision today with few tools in its shed, as the deposit rate is already at -0.50% and the Quantitative Easing program already stands at €20 billion per month. Christine Lagarde, the ECB's President, told EU leaders that unless they act, the continent may suffer a 2008-style crisis.
Coronavirus updates: The World Health Organization finally labeled Covid-19 as a pandemic. Italy slapped additional nationwide restrictions closing restaurants, bars, and shops apart from necessities as the number of cases topped 12,000. Spain confirmed over 2,000 cases and various countries are banning gathering and canceling sports events.
GBP/USD has stabilized above 1.28 after a roller coaster Wednesday when the Bank of England slashed interest rates by 50 basis point to 0.25% and the government introduced massive fiscal stimulus in a coordinated move.
The Australian dollar is on the back foot below 0.65 despite the government's announcement of a stimulus package.
US data: US jobless claims and producer prices are published today after consumer prices came out marginally above expectations for February in a publication on Wednesday. The focus remains on coronavirus headlines.
Middle East: Two American soldiers and one Brit were killed in an attack in Iraq.
Cryptocurrencies have resumed their slide, with Bitcoin trading around $7,600. Digital assets, which were in demand around the Iran crisis, fail to attract safe-haven flows amid this health crisis.
Here is what you need to know on Thursday, March 12:READ MORE
EURO, EUR/USD PRICE CHART, ECB RATE DECISION, CHRISTINE LAGARDE – TALKING POINTS
ASIA-PACIFIC RECAP: CORONAVIRUS SPREADS, EQUITIES PAY THE PRICE
The Japanese Yen surged against its G10 counterparts but with particular vigor against the petroleum-linked Norwegian Krone after the dark session in Wall Street infected Asian stock markets. The selloff deepened after US President gave announced measures to counter the effect of the coronavirus. However, subsequent price action suggests markets did not find his words to be a source of reassurance – but rather one of panic.
ECB RATE DECISION, LAGARDE OUTLOOK: WHAT TO EXPECT
Overnight index swaps show markets are fully baking in a 10-basis point rate cut from the ECB after the Fed and Bank of England both unexpectedly slashed borrowing costs by 50 bps over the past two weeks. Analysts are also expecting for the European Central Bank to introduce other targeted measures in addition to traditional easing measures.
On Wednesday, central bank president Christine Lagarde warned that Europe is at risk of a 2008-style crisis as the spread on credit default swaps for ensuring corporate debt widen to their highest points since the Eurozone crisis. In the spirit of Mario Draghi, German Chancellor Angela Merkel also said Germany will do “whatever is necessary” to counter the economic impact of the coronavirus.
However, it appears the Chancellor’s reassurance failed to quell market anxiety. Considering the circumstances Europe finds itself in now and the available set of tools at its disposal relative to before, officials have limited room to implement effective countervailing measures. With rates already in negative territory and a growing balance sheet, investors are questioning how effective additional rate cuts can be.
On the fiscal side, policymakers will have to reconcile the circumstantial urgency to introduce stimulatory measures with compliance to strict budgetary guidelines outlined the Growth and Stability Pact. Reformed after the sovereign debt crisis, the rules of the framework aim to preserve financial stability and to prevent member states from spending beyond their means and putting the state’s ability to repay its debt in question.
EUR/USD PRICE CHART
EUR/USD’s impressive rally from the multi-year low may be coming to an end after it failed to clear 12-month resistance at 1.1448. The pair may now test oscillating support/resistance – labelled as “Uptrend Alpha” along its descent which may be accelerated by the ECB rate decision. The next major floor to monitor will be support at 1.1091 which may act as the last stronghold before EUR/USD’s downtrend resumes.
Overnight index swaps show markets are fully baking in a 10-basis point rate cut from the ECB after the Fed and Bank of England both unexpectedly slashed borrowing costs by 50 bps over the past two weeks. Analysts are also expecting ...READ MORE
GOLD PRICE TALKING POINTS
The price of gold pulls back from a fresh yearly high ($1704) as global equity indices stage a rebound, but the ongoing threat posed by COVID-19 may keep the precious metal afloat as the outbreak continues to drag on the global supply chain.
GOLD PRICE PULLBACK FIZZLES AMID BETS FOR MORE FED RATE CUTS
The recent pullback in the price of gold my prove to be short lived as the coronavirus shows no signs of slowing down, and the weakening outlook for global growth may continue to heighten the appeal of bullion as market participants look for an alternative to fiat currencies.
The emergency rate cut by the Federal Reserve suggests the global community of central banks will respond to the outbreak by implementing lower interest rates, and Chairman Jerome Powell and Co. may show a major shift in the forward guidance for monetary policy as the “Committee judged that the risks to the U.S. outlook have changed materially.”
As a result, the Summary of Economic Projections (SEP) are likely to reflect a lower trajectory for the benchmark interest rate as the Federal Open Market Committee (FOMC) pledges to “act as appropriate to support the economy,” and the central bank may ultimately implement a zero interest rate policy (ZIRP) in 2020 as President Donald Trump tweets that Chairman Powell and Co. “should get our Fed Rate down to the levels of our competitor nations.”
In turn, Fed Fund futures show 100% probability for another Fed rate cut on March 18, with market participants pricing a greater than 60% chance for a 75bp rate cut as the central bank alters the course for monetary policy.
With that said, the price of gold may continue to benefit from the low interest environment as market participants look for an alternative to fiat-currencies, and the broader outlook for bullion remains constructive as the reaction to the former-resistance zone around $1447 (38.2% expansion) to $1457 (100% expansion) helped to rule out the threat of a Head-and-Shoulders formation.
The price of gold pulls back from a fresh yearly high ($1704) as global equity indices stage a rebound, but the ongoing threat posed by COVID-19 may keep the precious metal afloat as the outbreak continues to drag on the global supply chain...READ MORE
The Bank of England has announced a surprise 50 basis point rate cut from 0.75% to 0.25%.
Both outgoing Governor Mark Carney and his successor Andrew Bailey had previously said that they are ready to act in face of the coronavirus crisis. While the move is not a total surprise, but the timing – outside a scheduled meeting – is responsible for the sharp move in sterling. Moreover, the BOE's new rate of 0.25% puts its at the post-Brexit low, exhausting the "Old Lady's" firepower.
The BOE also announces a new SME worth £100 billion – a lending scheme to businesses. The Monetary Policy Committee has left the bond-buying scheme unchanged at £435 billion.
GBP/USD has dropped from around 1.2935 to a low of 1.2830 before bouncing but remains depressed. Support awaits at 1.2775 and 1.2720. The resistance is at 1.29 and 1.2950.
The government is set to unveil its new budget later today and the move may be coordinated.
The Bank of England has announced a surprise 50 basis point rate cut from 0.75% to 0.25%...READ MORE
The risk sentiment was battered once again in Asia, as investors fretted over the rise in the number of new coronavirus cases across the globe, especially in the US, Italy and Japan. More so, doubts over the effectiveness of the proposed US economic stimulus-response to tackle the virus outbreak killed the appetite for the risk/ higher-yielding assets, as a flight to safety emerged as the dominant theme.
The US Treasuries, therefore, witnessed heavy risk-off flows, which knocked-off the returns on them, in turn, crushing the US dollar against its main competitors. Markets ignored the news that US President Trump won the Michigan Republican primary.
The Asian equities turned into a sea of red, led by sell-off in the Australian stocks, despite the Australian health package announced. Wall Street futures also followed suit, with S&P 500 futures down almost 3%, at the press time. Gold prices, on the other hand, recovered above $1660 levels.
Across the fx board, the yen outperformed, having rallied nearly 1.50% vs. the greenback, with USD/JPY dumped to near 104.00. The shared currency benefited the most from the broad dollar slump, as EUR/USD bounced back to 1.1350. The rest of the major also recovered ground, although the Canadian dollar trimmed the recovery gains in tandem with oil prices. Meanwhile, AUD/USD stood better bid above the 0.6500 level.
We have a busy European calendar today, mainly dominated by the releases from the UK, including the monthly Gross Domestic Product (GDP), Industrial and Manufacturing Production, among other minority reports. The UK data dump will drop in at 0930 GMT. The focus also remains on the first post-Brexit UK Budget Report that will be presented by Finance Minister Sunak.
Investors then look forwards to the US Consumer Price Index (CPI) data due at 1230 GMT for fresh dollar trades while oil traders will closely watch out for the Energy Information Administration (EIA) Crude Oil Stocks Change data lined up for release at 1430 GMT. Later in the American afternoon, the US Monthly Budget Statement will be published, as all eyes remain on the details of the economic stimulus package to battle the virus outbreak in the US.
In the lead up to the macro news, the sentiment across the financial markets will remain driven by the risk trends and coronavirus updates.
EUR/USD rebounds towards 1.1350 as US dollar wilts with Treasury yields
EUR/USD jumps back on the bids and looks to retest the 1.1350 level amid unabated broad-based US dollar selling, as we progress towards the European opening bells, having stalled its corrective slide at 1.1275.
GBP/USD: All eyes on UK’s first post-Brexit budget, monthly data dump
GBP/USD bounces back above 1.2900 ahead of the key UK macro catalysts. Chancellor Sunak is expected to try various means to please Brexiteers amid coronavirus fears. The EU-UK jitters continue to play out.
UK Budget Preview: Showing the way with fiscal stimulus? GBP/USD has room to rally
UK Chancellor of the Exchequer Rishi Sunak is set to present a budget including stimulus. Additional spending in face of the coronavirus crisis is eyed. GBP/USD has room to rise if the government provides an open-ended expenditure commitment
We have a busy European calendar today, mainly dominated by the releases from the UK, including the monthly Gross Domestic Product (GDP), Industrial and Manufacturing Production, among other minority reports...READ MORE
EUR/USD has resumed its rise after CNBC reported that White House plans for economic response to coronavirus are not there yet. Bond yields and stocks are reversing gains.
It's Donald's Draghi moment – If President Trump announces broad stimulus measures to counter the coronavirus carnage, markets could rally and EUR/USD has room to fall to 1.13. If his message falls flat, equities could plummet and the consequent rush into bonds would push yields and the dollar lower.
Why is Trump's fiscal support so important?
Ahead of this severe health crisis, central banks' ability to act had been limited. The Federal Reserve's interest rate stood at 1.75% before its emergency cut – well below pre-2008 levels and below the post-crisis high of 2.50%. Other policymakers have limited scope to act.
That leaves governments with the power to act in several ways. Officials have the power to impose lockdowns, helping contain the disease but with a severe impact on the economy. They also have the ability to provide fiscal stimulus, via tax relief plans, infrastructure spending, and more.
Policymakers' strongest tool is to create confidence. Back in 2012 at the peak of the European debt crisis, Mario Draghi managed to turn around the fate of the common currency. He said that the European Central Bank will "do whatever it takes" – and that was enough. The euro jumped and the ECB later introduced a program that it never needed to use – as private investors already began back into European debt.
Can Trump lead by pledging action now and vowing to do whatever is necessary? So far, the president dismissed the disease as a hoax, compared it to the flu, and blamed the Fed among others.
However, with stock markets hardly recovering from Monday's bloodbath – which includes the halting of trade for the first since 2008 – he may change tack.
The White House's press conference is scheduled for 21:30 GMT, but Trump may speak earlier or conversely provide the press with details of the plan.
The next move depends on the president, not on additional virus headlines such as the number of infections, deaths, or other developments in Europe.
EUR/USD has resumed its rise after CNBC reported that White House plans for economic response to coronavirus are not there yet. Bond yields and stocks are reversing gains.READ MORE
Here is what you need to know on Tuesday, March 10:
After Monday's coronavirus-correlated bloodbath in markets, Asian stocks and S&P futures are up, yields are on the rise, and the dollar bounced from its lows. USD/JPY tops 104 in a 2% leap, while EUR/USD is below 1.14, and GBP/USD under 1.31. Gold is pressured at around $1,660 after temporarily topping $1,700 early on Monday.
Oil prices, which have plummeted also due to Saudi Arabia's decision to start a price war, is even jumping with WTI at around $33. The collapse of the OPEC+ pact with Russia triggered the Saudi move.
The bounce is a mix of correction and optimism about China. President Xi Jinping visited Wuhan, the epicenter of the disease. Moreover, the wold's second-largest economy will issue "green cards" for those free of the illness.
In the US, President Donald Trump is considering a payroll tax cut and other relief measures in response to the crisis. More details are due later on Tuesday. The news also helps sentiment.
Mark Meadows, his Chief of Staff, is in self-isolation after coming in contact with a person carrying the virus, but the president has not been tested. Many fear that the slow pace of testing in the world's largest economy implies many more cases will show up later on.
On Monday, trading was halted on Wall Street for the first time since the financial crisis in a massive sell-off.
The situation in the old continent remains dire. After another jump of around 2,000 infections and 100 deaths, Italian PM Giussepe Conte announced that all of Italy is now under the most severe restrictions. Over the weekend, travel limit and event bans were limited to only a quarter of the population. Germany, France, and Spain have confirmed over 1,000 cases each. School has been called off in the Madrid region, and France forbids events of over 1,000 people.
Japanese PM Shinzo Abe is pushing through a law that would allow emergency powers and also working on stimulus measures. Worldwide, the number of infections tops 114,000, over 64,000 recovered, and 4,000 have died.
In US politics, centrist Joe Biden aims to extend his lead over left-leaning Bernie Sanders in another round of voting in the Democratic Party's primaries. Biden's decisive victory in "Super Tuesday" was cheered by markets.
Here is what you need to know on Tuesday, March 10:After Monday's coronavirus-correlated bloodbath in markets, Asian stocks and S&P futures are up...READ MORE
Shares around the world had their worst day since the financial crisis with the dramatic falls leading to the day being dubbed "Black Monday".
The main financial indexes in the US closed down by more than 7%, while London's index of top shares ended the day nearly 8% lower.
Similar drops took place across Europe and Asia as a row between Russia and Saudi Arabia saw oil prices plunge.
Shares were already reeling from fears of the impact of coronavirus.
Analysts described the market reaction as "utter carnage".
In the US, the major stock indexes fell so sharply at the start of trading, that the buying and selling of shares was halted for 15 minutes, as a so-called "circuit breaker" aimed at curbing panicky selling came into effect.
The Dow Jones Industrial Average sank by 7.8% or more than 2,000 points - the biggest points-drop in history and the largest decline in percentage terms since the financial crisis. The S&P 500 fell 7.6%, while the Nasdaq dropped about 7.3%.
The declines in London wiped some £125bn off the value of major UK firms.
The UK and US falls were mirrored by similar declines in Europe, with the main stock market indexes in France, Germany and Spain all closing over 7% lower.
"There is panic setting into the market right now," said Andrew Lo, professor of finance at MIT's Sloan School of Management. "Things are going to get worse before they get better."
Oil output disputes
The dramatic drops were triggered by a row between Saudi Arabia and Russia over oil output.
Saudi Arabia said it would slash prices and pump more oil, sparking fears of a price war. This came after Russia rejected a proposal by oil exporters to cut supply to cope with lower demand due to the coronavirus outbreak.
Analysts said Saudi Arabia was "flexing its muscles" to protect its position in the oil market.
On Monday, the price of international oil benchmark Brent fell almost a third in its biggest drop since the Gulf War in 1991 before recovering slightly to trade 20% lower.
The price of oil had already fallen sharply this year as the coronavirus began to spread internationally, with demand for fuel expected to decline.
Those conditions make Saudi Arabia's decision to increase output "extremely surprising", said Stewart Glickman, an energy equity analyst at CFRA Research.
"This is not the first time that we've had a shock to the oil market, but it is the first time that I can recall that you've had a supply shock and a demand shock at the same time," he said.
"The craziness that you're seeing in the oil prices today, and companies related to oil and gas, is a reflection of this being pretty unprecedented."
In the US and UK, oil firms led the market declines, with shares in Shell, BP and Chevron down about 15% or more. Premier Oil saw its shares more than halve in value.
In Frankfurt and Paris, banks were hit hardest, while the Russian rouble tumbled about 8% to its weakest level since 2016.
In Brazil, steep falls in morning trade also triggered a temporary pause with shares ending the day down 12%.
Earlier, Asian markets had also fallen sharply, with Japan's Nikkei 225 index down 5% while Australia's ASX 200 slumped 7.3% - its biggest daily drop since 2008.
In China, the benchmark Shanghai Composite fell 3%, while in Hong Kong, the Hang Seng index sank 4.2%.
hares around the world had their worst day since the financial crisis with the dramatic falls leading to the day being dubbed "Black Monday".The main financial indexes in the US closed down by more than 7%, while London's index of top shares ended the day nearly 8% lower...READ MORE
Here is what you need to know on Monday, March 9:
Markets are panicking with wild moves across the board, including flash crashes. Investors are increasingly worried about the spread of coronavirus and its impact on the global economy.
Coronavirus greatest worries: Over the weekend, Italy announced that it is locking down most of its north, an area including 16 million people – a quarter of the population – and most of its industry. The death toll jumped from 233 to 366 on Sunday, and the number of infections topped 7,000. Markets are also worried about the spread in the US – the world's largest economy – where testing for the respiratory disease has been slow. America's mortalities are only at 21, but some fear a leap. In total, over 110,000 cases are confirmed, and the death toll is around 3,800.
Mammoth bond moves: Investors are flocking into the safety of US bonds and reflecting an outright US recession. The benchmark US 10-year Treasury yield is dropping below 0.50%. PIMCO says an outright downturn is on the cards.
The US dollar is on the back foot against majors with USD/JPY falling below 102 at one point, the lowest since 2016, EUR/USD nearing 1.15, the highest since December 2018, and GBP/USD swinging above 1.31 at one point. The most extreme moves were reversed, but the USD/JPY remains below 103.
The greenback beat commodity currencies with AUD/USD flash-crashing below 0.64, NZD/USD to near 0.60. USD/CAD jumped above 1.37 and is holding onto gains above 1.36, amid the fall in prices.
Gold jumped to a new seven-year high at $1,703.19 before turning down and trading below $1,670.
Crude crashing: Saudi Arabia decided to kick off a price war, offering discounts to customers and ramping up production. The decision has come after talks between OPEC and non-OPEC countries – led by Russia – collapsed on Friday. WTI is trading below $30, down some 30% after falling on Friday. The Saudis originally wanted to prolong and deepen oil production cuts in the wake of the coronavirus crisis.
Stock markets in Asia are plunging with Japan's Topix entering a bear market – 20% down from the peak – and US eMini S&P futures pointing to a 5% plummet.
In economic data, Japan's final Gross Domestic Product saw a downgrade to -1.8% for the fourth quarter, worse than initially reported. The eurozone Sentix Investor Confidence is set to turn negative in March. Friday's US Non-Farm Payrolls figures for February – that beat expectations with 273,000 – have faded into the background.
Cryptocurrencies lost ground over the weekend, with Bitcoin falling below $8,000.
Here is what you need to know on Monday, March 9:Markets are panicking with wild moves across the board, including flash crashes. Investors are increasingly worried about the spread of coronavirus and its impact on the global economy...READ MORE
Russia has just sparked what may end up being among the ugliest oil price wars in recent history. And Saudi Arabia is firing back. As the two oil superpowers face-off, American oil companies may end up as the biggest victims.
Russian President Vladimir Putin announced on Sunday that present oil prices were sustainable for the Russian economy. Adding that Russia had the tools to react to any adverse results of the spread of the coronavirus on the global financial climate.
"I want to stress that for the Russian budget, for our economy, the current oil prices level is acceptable," Putin explained in a meeting with Russian energy officials.
Now some oil analysts are anticipating barrel prices as low as $20 within the year. Some experts have suggested that Russia's move is intended to counter U.S. shale producers and hit back against the U.S. for targeting the Nord Stream 2 gas pipeline connecting Russia and Germany.
Saudi Arabia blasted back, in kind. Sunday morning, Saudi Arabia dropped its own oil weapon. Its latest plans will not only reduce its unrefined price to Chinese consumers by as much as $6 or $7 per barrel, but it is also reportedly looking to increase its daily unrefined output by as much of as 2 million barrels per day into an increasingly oversupplied international market.
The shocking move by the Saudis is both a market share grab as well as a loud signal to Moscow that it is finished playing games.
Within seconds of the market opening on Sunday night, oil prices plummeted as much as 30 percent, driving crude to its lowest level in four years. The Brent crude benchmark fell from $45 a barrel to $36.44 at the time of writing, while WTI plummeted from $40.45 to $32.97, in one of the single worst drops in recent history.
Russia has just sparked what may end up being among the ugliest oil price wars in recent history. And Saudi Arabia is firing back. As the two oil superpowers face-off, American oil companies may end up as the biggest victims...READ MORE
Starting from market open on Monday (March 09, 2020) the GMT offset on our trading servers will be adjusted to GMT +3.
This change should not impact open trades in any way or hinder the process of opening new trades or closing and or modifying existing trades. In any case we strongly recommend that you check the time settings on your custom Indicators and EA’s to be sure they continue operating correctly.
Happy trading, and, as always, stay safe!
Starting from market open on Monday (March 09, 2020) the GMT offset on our trading servers will be adjusted to GMT +3.READ MORE
Coronavirus fears continue to drive investors
It’s been a truly chaotic couple of weeks in financial markets, with the number coronavirus cases and fatalities accelerating outside of China, prompting authorities around the world to up their game.
This week, it was the Fed that set the tempo, cutting interest rates by 0.5% outside of a scheduled meeting. The move got people’s attention but did little to quench the thirst of investors who demanded more. Several other rate cuts around the world combined with pledges from the IMF and World Bank was just enough to prevent a full blown meltdown but it’s only half time.
Authorities will have to do much more in the coming weeks. Already, another 0.5% rate cut is priced in from the Fed and much more is expected from governments around the world.
UK trade talks with the EU are going exactly as you would expect in these early stages. There’s huge gaps between what both sides would like the future relationship to look like and frictions are growing by the day. It’s all-too familiar by now though and, understandably, hasn’t really been making the headlines it may otherwise have.
Next week we’ll get the budget from the new Chancellor, Rishi Sunak, which comes at a time when many are pondering the prospects of a coronavirus-driven recession for the UK. These budgets have become quite dull affairs in recent years but this one may be a little different for numerous reasons. The Bank of England has also been very quiet as other central banks have eased monetary policy to support the economy. Policy makers may just be waiting for the next meeting although maximum impact could arguably come alongside an expansionary budget.
We are under two weeks from the next FOMC meeting and that along with coronavirus incremental updates will remain the key focal point for many traders. All of Wall Street is trying to price in what will the Fed do on March 18th. Money markets are pricing in another 50-basis point cut and if that expectations remains in place, the freefall with Treasury yields could continue. The virus fallout trade has provided some eye-dropping moves and that volatility could persist. The overall risk aversion theme could remain in place until we start to see Treasury yields stabilize.
The bond market has delivered some historic moves and the Fed could very well see their debt join the negative yielding club. While it still seems unlikely the 10-year yield will fall to negative territory, the majority of the curve could in fact trade negative.
Investors could remain fixated with the bond and volatility trade until financial markets have a firm grasp of the economic impact of the coronavirus outbreak rippling across the world. The dollar could remain in the house of pain as the high carry trade has been wiped away with sudden shift with rate expectations. The dollar is slowly becoming a funding currency and could remain vulnerable until the Fed signals they are done cutting.
On March 10th, the next major wave of Democratic primaries is up for grabs. Former-VP Joe Biden looks to keep the momentum going with strong wins in Michigan and Missouri. Bernie Sanders needs a strong outing following his Super Tuesday setback. Wall Street would prefer to see Biden win the Democratic nomination and if he wins most of Tuesday’s 352 delegates, insiders will say he has it in the bag.
Feb Balance of Trade released over the weekend. Expected to collapse from $47.0 bio to $$13.0 bio, but most of the bad news seems priced into China for now. New coronavirus cases are plummeting.
Better than expected BoT could cause an upward surprise. A resurgence of coronavirus cases, especially outside of Hubei, could cause a sudden currency and stock sell-off.
Economy mired in a deep recession due to coronavirus slowdown. On the plus side, protests have subsided to almost nil. No significant data or events next week.
Negative headlines from China and/or the US will impact the stock market negatively. India Yes Bank, the 5th largest private bank in India was taken over by the government today. Depositors limited to INR 50,000 withdrawals. ($700). Been on the cards for a while but will negatively impact stocks in India and may see credit markets freezing there.
Ongoing protests over citizenship laws weigh on investor sentiment. Remarkably low incidence of coronavirus cases so far. No data of significance. Risk A sudden spurt of coronavirus cases overwhelms health system. Fall in INR and Nifty as investors flee.
Consumer confidence released Tues and Wed, but bad news priced in. High beta to China and with 30% of its exports, acutely exposed to serious slowdown there. Currency under sustained pressure after RBA cut this week. Rally in stockmarkets has halted the slide for now. Signs of panic buying of consumer staples. Risk A jump in risk aversion sentiment (probably due to coronavirus) could see AUD sell-off resume with force and also hit the stock market.
Very quiet on the data front next week, with high beta to China the main risk.
GDP released Monday, expected to collapse to -1.6-%. Grappling alongside South Korea with some of the highest numbers of coronavirus infections. Schools closed, Olympics could be postponed. A new stimulus package may be announced next week. Risk Worse than expected GDP fall from coronavirus slowdown sees Nikkei fall aggressively. Yen strongly appreciated over the last week on repatriation/haven flows. That could accelerate if the virus situation does not improve domestically, or most importantly, it accelerates internationally.
The dollar has been smashed over the last couple of weeks as the coronavirus spread dramatically increased the probability of rate cuts and the central bank obliged earlier this week with an emergency 50 basis points outside of the normal meeting. A similar cut is now likely in a couple of weeks and quantitative easing is likely to be back on the table.
Oil has been slammed again at the end of an already dreadful week after OPEC and its allies failed to come to an agreement on both an extension and an increase. The current cuts expire at the end of March, after which there will be no more restrictions. I doubt this is the end of the discussion, with Saudi Arabia in particular keen to prevent prices falling too far.
Gold was just starting to act rationally again, rallying as risk aversion grew and global central banks pumped stimulus into the system. The dollar dropping to a 12-month low also aided the effort. And then Friday afternoon arrived and gold started falling again even as the other conditions showed no improved.
It was suggested that last week’s dislocation in gold may have come as a result of loss covering or margin calls. Whatever the reason, the dislocation is clearly not a thing of the past in these volatile markets and we can probably expect more of this kind of behaviour.
Bitcoin has been fairly stable by its standards at a time when the rest of the market is losing its head. It’s traded between $8,000 and $9,000 for more than a week and while it’s trading at the top end of this range now, the lower may not be out of the woods just yet. It’s certainly represents the greater risk after the market appeared to top of in the near term just above $10,000. As ever though, this is a highly unpredictable market.
Coronavirus fears continue to drive investors. It’s been a truly chaotic couple of weeks in financial markets, with the number coronavirus cases and fatalities accelerating outside of China, prompting authorities around the world to up their game.READ MORE
According to UOB Group’s Senior Economist Alvin Liew and Rates Strategist Victor Yong, the Federal Reserve could reduce further its FFTR at the next meeting on March 17-18.
“Post-G7 finance ministers & central bankers’ tele-conference on Tuesday (3 Mar), the US Federal Reserve Chair Jerome Powell “walked the talk” of using all appropriate policy tools and announced a 50bps emergency Fed rate cut to bring the Fed Funds Target rate (FFTR) range to 1.00-1.25%.”
“The surprise and unanimous Fed decision was meant to address the uncertainty surrounding the coronavirus outbreak (COVID-19) and the Fed judged the outbreak will weigh on the economy for some time but the economic impact remains uncertain. It is also unclear how long the outbreak will last, even though Powell still expects US to return to solid growth.”
“Following the surprise move, we now expect the Fed to implement another 50bps rate cut in the March FOMC, to bring the FFTR range down to 0.50-0.75% for the remainder of 2020, as another insurance cut in view of the rising risks to the US outlook from the COVID-19 outbreak. Note that there is a non-negligible risk that the Fed could slash by an even bigger 75bps. While we have not priced in further rate cuts beyond 1Q, the Fed still has room for at least one or two more 25 rate cuts if the risk factors escalate and more accommodation is needed to safe-guard the economy. That said, we do not think the Fed will want to push rates beyond zero, into negative territory.”
“With the change in our Fed funds forecasts, by end 2020, our forecasts for 3M US Libors are revised lower to 0.85%, while the projected 10Y UST yield is lowered to 1.60%.”
According to UOB Group’s Senior Economist Alvin Liew and Rates Strategist Victor Yong, the Federal Reserve could reduce further its FFTR at the next meeting on March 17-18....READ MORE
Gold extended its consolidative price action through the early European session on Thursday and remained confined in a range around the $1640 region.
A combination of diverging forces failed to provide any meaningful impetus or assist the commodity to build on this week's positive move, sponsored by the Fed's surprise move on Tuesday to cut interest rates by 50 bps.
Investors await a fresh catalyst
A coordinated effort by major central banks helped ease concerns over the negative impact of the coronavirus outbreak on the global economy and continued boosting investors' appetite for perceived riskier currencies.
The risk-on mood was reinforced by a pickup in the US Treasury bond yields, which allowed the US dollar to preserve the overnight recovery gains and kept a lid on any upside for the dollar-denominated commodity.
Despite the above-mentioned factors, a sharp fall in the US equity indices futures extended some support to the precious metal's safe-haven status and helped limit deeper losses, at least for the time being.
Hence, it will be prudent to wait for a sustained break through a two-day-old trading range before positioning for any firm intraday direction amid absent relevant market-moving economic releases on Thursday.
Gold extended its consolidative price action through the early European session on Thursday and remained confined in a range around the $1640 region...READ MORE
The buying interest appears to have returned to the single currency in the second half of the week, with EUR/USD trading close to the area of 1.1140, or daily peaks.
EUR/USD focused on data, coronavirus
EUR/USD is alternating gains with losses in the 1.1140 zone following the opening bell in Euroland on Thursday, all against the backdrop of a generalized consolidative mood in the global markets.
Indeed, market participants as well as volatility appear to be taking a breather in the second half of the week following recent volatile sessions, particularly in response to the unexpected 50 bps rate cut by the Federal Reserve on Tuesday.
In the meantime, and with coronavirus fears still unabated, investors continue to look to the G7 central banks in order to gauge the probability of further easing measures (mainly via interest rate cuts) aimed to tackle the impact of the coronavirus outbreak on the economy.
Absent data releases or events in the euro docket, the focus of attention will shift to the US data space, where Factory Orders and the weekly report on the US labour market are due along with Unit Labor Costs and Non-farm Productivity.
What to look for around EUR
EUR/USD came under pressure following weekly/monthly tops beyond the 1.1200 mark. In the meantime, the ECB remains vigilant and ready to act in case the outlook deteriorates further in response to the coronavirus and particularly after the Fed cut rates on Tuesday. On another front, the ECB is expected to finish its “strategic review” (announced at its January meeting) by year-end, leaving speculations of any change in the monetary policy before that time pretty flat. Further out, recent better-than-expected results in both Germany and the broader Euroland appear to have re-ignited some optimism among investors regarding the possibility of some recovery in the region and the currency. This view is also supported by rumours of fiscal stimulus in Germany.
EUR/USD levels to watch
At the moment, the pair is gaining 0.04% at 1.1138 and a breakdown of 1.1097 (200-day SMA) would target 1.1037 (55-day SM) en route to 1.0992 (monthly low Jan.29). On the flip side, the next hurdle lines up at 1.1213 (weekly/monthly high Mar.3) seconded by 1.1239 (monthly high Dec.31 2019) and then 1.1249 (monthly high Aug.6 2019).
The buying interest appears to have returned to the single currency in the second half of the week, with EUR/USD trading close to the area of 1.1140, or daily peaks...READ MORE
EUR/USD RALLY MAY PAUSE NEAR-TERM, BUT HAS BIG POTENTIAL
The Euro has been surging lately on the back of a big uptick in FX volatility due to the coronavirus. Finally, we are seeing some major momentum out of the single-currency, which is an encouraging sign going forward for trading. The low last month came at a trend-line dating all the way back to 2000, and with a monthly reversal candle posted the rejection at support suggests a broader up-move is underway.
EUR/USD is still confined in a channel that is a part of the trend beginning in early 2018, but with the Euro screaming back higher, risk is heightened that the trend will continue to be thoroughly challenged and may lead to a much larger squeeze ahead.
With price around the top of the channel and 200-day there is risk of a minor pullback or pause. A cross above the top trend-line of the channel and, for confirmation, a breakout above the December 31 high at 11239 is seen as causing the market to reposition for higher prices.
Looking to a target, there is the 2008 trend-line (which put in the 2018 top), crossing down around 11700. While this is a good bit higher and will take some time to reach, short-term traders can still use the generally bullish backdrop to support near-term set-ups (i.e. constructive pullbacks/consolidation patterns). In the event this turns out to have been a short-lived squeeze higher and price never hurdles the aforementioned line/level, then we will have to reassess and go from there.
The Euro has been surging lately on the back of a big uptick in FX volatility due to the coronavirus. Finally, we are seeing some major momentum out of the single-currency, which is an encouraging sign going forward for trading...READ MORE
US President Donald Trump noted that the Reserve Bank of Australia lowered its policy rate to 0.5% to battle the economic slowdown amid the coronavirus outbreak and called upon the Federal Reserve to make a big interest rate cut.
"Our Federal Reserve has us paying higher rates than many others when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage," Trump tweeted out. "We must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one."
The USD's reaction to Trump's comments was relatively muted. As of writing, the US Dollar Index was up 0.08% on a daily basis at 97.60.
US President Donald Trump noted that the Reserve Bank of Australia lowered its policy rate to 0.5% to battle the economic slowdown amid the coronavirus outbreak and called upon the Federal Reserve to make a big interest rate cut...READ MORE
"We have a very tight labour market but this is not the only factor for inflation," Bank of England (BoE) policymaker Silvana Tenreyro explained on Tuesday. "There is strong competition in the retail sector and declining business markups are weighing on inflation."
Regarding the policy outlook, Tenreyro said that it's important to highlight that the BoE is not in a rush to raise interest rates, per Reuters.
The GBP/USD pair continues to pull away from the daily high that it set at 1.2815 earlier in the session. As of writing, the pair was up 0.25% on the day at 1.2782.
"We have a very tight labour market but this is not the only factor for inflation," Bank of England (BoE) policymaker Silvana Tenreyro explained on Tuesday. "There is strong competition in the retail sector and declining business markups are weighing on inflation...READ MORE
Public Health England has recently announced that they have a confirmed case of coronavirus infection in south London after a member of staff at Wimbledon College became infected in Italy, as reported by Sky News.
Meanwhile, Iranian Deputy Health Minister Alireza Raisi said that the total number of infection in Iran rose to 1,501 as of Monday morning with 66 fatalities.
Markets have turned risk-averse, once again, after starting the week on a positive note. At the moment, the 10-year US Treasury bond yield is down nearly 7% on a daily basis.
Public Health England has recently announced that they have a confirmed case of coronavirus infection in south London after a member of staff at Wimbledon College became infected in Italy, as reported by Sky News...READ MORE
Volatility has picked up around EUR/JPY on Monday, always looking to developments from the Chinese coronavirus for near-term direction.
The daily price action saw a test of the boundaries of the 120.30 region, where sits the 200-day SMA, and the proximity of 118.50, area close to the 2020 lows recorded on Friday.
While the cross keeps waiting for a stronger catalyst for price direction, further consolidation should not be ruled out, likely between 121.50 and 118.50.
Volatility has picked up around EUR/JPY on Monday, always looking to developments from the Chinese coronavirus for near-term direction...READ MORE