Daily Update - 3rd March 2020
The euro rose against dollar on Monday as increased expectations that Federal Reserve will easing monetary policy in a bid to counter the negative impact from the spread of the new coronavirus weighed on dollar. The panic in global markets prompted U.S. Federal Reserve Chairman Jerome Powell to issue a statement on Friday saying the Fed would “act as appropriate” to support the economy. Sterling declined against dollar on Monday as traders took a cautious view at the start of talks between Britain and the European Union on their relationship after Brexit. The EU wants to give Britain beneficial access to its single market of 450 million people in exchange for guarantees that London would prevent dumping. But Prime Minister Boris Johnson has said Britain will not be bound by EU rules or the jurisdiction of its top court all necessary, in the EU’s view, to ensure fair competition. The dollar strengthened against the Japanese yen on Monday as hopes for a raft of global interest rate cuts to soften the economic blow of the coronavirus steadied nerves. The epidemic, which began in the Chinese province of Hubei, has killed 3,000 people worldwide as authorities race to contain infections in Japan, Iran, Italy, South Korea and the United States. Gold rose nearly 1 percent on Monday after suffering its largest daily fall in nearly seven years, as expectations grew for policy easing by the U.S. Fed and other central banks to help boost the coronavirus-hit global economy. Oil prices rose over 4% on Monday, reversing an early fall to multi-year lows as hopes of a deeper cut in output by OPEC and stimulus from central banks countered worries about damage to demand from the coronavirus outbreak. For the EUR, it’s a relatively busy day ahead on the economic calendar. Key stats include prelim Eurozone inflation figures for February and January’s unemployment rate. While the stats are of interest, sentiment towards monetary policy will continue to be the key driver. The markets are looking for a GFC style coordinated central bank response to the impact of the coronavirus on the global economy. For the Eurozone and the EUR, there was a double boost on Monday, with chatter of fiscal policy support from Germany also anticipated. This assuming, of course, that Germany delivers and Banks don’t sit it out for another month… For the Pound, it’s a relatively quiet day ahead on the economic calendar. February Construction PMI is due out this afternoon. Forecasts are Sterling negative, which could sink the Pound to sub-$1.27 levels as talks between the EU and Britain proceed. On the monetary policy front, the BoE may be off the hook this time around, which could give the Pound some much-needed near-term support. Across the Pond, it’s a quiet day ahead on the U.S economic calendar. There are no material stats due out of the U.S to provide the Greenback with direction. The lack of stats will leave sentiment towards monetary policy as the key driver on the day. The markets will be looking for an indication of when the FED will deliver. On the geopolitical front, it’s also Super Tuesday, with 34% of delegates up for grabs as the Democratic leadership race heats up. Following Biden’s South Carolina victory from the weekend and Buttigieg dropping out, there’s a lot more to play for.Yesterday’s Market
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