04/ 03/ 2020

Dollar on defensive as rate cut spooks markets, yields slide

The dollar fell to a five-month low versus the yen after an emergency 50 basis point cut in interest rates by the U.S. Federal Reserve was deemed insufficient to offset downside risks posed by the global spread of the coronavirus.

The greenback traded near the lowest in almost two years against the Swiss franc as investors flocked to traditional safe havens.

The euro was one of the currencies to benefit most from the broad-based dollar weakness as traders bet the Fed will cut rates more than the European Central Bank.

Disappointment that a Group of Seven statement on Tuesday did not lay out a specific response to a global slowdown caused by the coronavirus has reinforced the view among some investors that policymakers have fallen behind the curve.

03/ 03/ 2020

Another Bounce Expected as Speculation of Central Bank Support Mounts

It was a mixed start to the week for the European majors. Going into the European open, the majors had found support following BoJ Governor Kuroda’s promise of action to deliver liquidity to the global financial markets. While the markets also priced in a FED rate cut later in the month, ECB President Lagarde had sent a different message last Friday. The other question is whether monetary policy support would offset the effects of the coronavirus on the respective economies. 

With the coronavirus continuing to spread across the region, plenty of uncertainty remains for the Eurozone’s economy and beyond. The majors are set for a sharp jump at the open, with economic data likely to take a back seat once more. It all hinges on the central banks now. This is a big week for data and today’s list is no exception. Traders can expect readings on PMI and ISM manufacturing later in the session. Also on tap, today is construction spending. Later in the week, we’ll get an important read from the Fed, the Beige Book. Along with that is the ADP, Challenger, and NFP reports on employment.

Any weak numbers would support a move by the ECB, which would be positive for the majors. With no material stats due out of the U.S later today, the majors will likely take their cues from central bank chatter and moves through the Asian session.

27/ 02/ 2020

Global Markets Continue to Slide While Coronavirus Fears Persist

Global coronavirus outbreak remain the main theme but markets are having kind of different reactions. US stocks extended this week’s steep decline overnight, down selling pressure seemed to have eased a bit. It was a mixed day for the European majors on Wednesday, with investors tiptoeing back into riskier assets. Support came in spite of the continued spread of the coronavirus, with a decision by EU member states to leave borders open delivering the support. In the currency markets, commodity currencies remain weakest without a doubt while Yen is the strongest. A point to note is that Euro seems to be gaining some upside momentum quietly even though it’s uncertainty for how long that could sustain.

It’s a relatively busy day ahead on the Eurozone economic calendar today. Economic data includes prelim February inflation figures out of Spain and finalized Eurozone consumer confidence numbers. From the U.S, durable goods orders and 2nd estimate GDP numbers for the 4th quarter also provided direction. Expect the Eurozone consumer confidence and numbers from the U.S to have the greatest influence from the calendar. It will ultimately boil down to news updates and the later coronavirus numbers.

25/ 02/ 2020

GDP Numbers and U.S Consumer Confidence Put the EUR and USD in Focus

The euro opened with a bearish gap on the first day of a new trading week in reaction to weekend reports that showed a surge in confirmed coronavirus cases globally – especially in Italy and South Korea. The global financial markets crashed on the back of a sudden rise in coronavirus cases, which fueled concerns that the outbreak will weaken the world economy. The US dollar benefitted from the global flight to safety and exerted some downward pressure through the early part of Monday's trading action.

The shared currency failed to gain any meaningful traction following the release of better-than-expected German IFO survey. The Business Climate in the Eurozone's largest economy improved a tad to 96.1 in February from the previous month's upwardly revised reading of 96.0. The greenback, however, failed to preserve its early gains and turned out to be one of the key factors that assisted the pair to gain some intraday positive traction. GBP trades above 1.29 as EU signs off on mandate for Brexit talks this seems positive for the currency against the Greenback along with further assurance from the Minister of Finance from UK on the Budget Release date.

Looking ahead, For the EUR, it’s a relatively quiet day ahead on the economic calendar. Key stats include Germany’s 2nd estimate GDP numbers for the 4th quarter. For USD, expect consumer confidence figures to be the key driver. Following some disappointing private sector PMI numbers last week, weak consumer confidence figures would be another red flag. Fears of a U.S recession had disappeared at the turn of the year. That could change should we see consumer confidence slump.