The equity roller coaster continues today as the Dow is currently set to open 500 points lower this morning after yesterday’s positive closing of over 1170 points. Yesterday’s Dow correction took the stock market out of correction territory, which means the market is now down less than 10% from the 52-week highs. US Treasury yields have been above and below the 1% level on the 10-year note in the last few days and at the moment the 10-year note is trading at .9939%, while the 30-year bond is trading at 1.6396%. Yesterday the US ISM number came in at 57.3, much stronger than the expected 54.9, and the employment index moved higher to 55.6, the highest that number has been since July 2019. After rallying a bit yesterday, the USD is once again under pressure against the major currencies. This seesaw move in the USD is expected to continue the rest of the week. Traders will be looking at tomorrow’s release of Non-Farm Payroll number for February which is expected at 175,000 jobs created after January’s 225,000 number.
After falling during yesterday’s equity market surge, the EUR/USD is once again higher testing its overnight highs this morning. Coronavirus is spreading through Europe, and Italy has closed its schools as cases of the virus rose above 3,000. France, Germany, and Spain all have reported cases now above the 200 level. With the US equity markets set to open lower, the EUR should head higher and could test technical resistance levels later this morning. Without any major EU or US economic releases today, equity markets will be the main driver concerning the single currency.
GBP/USD is higher this morning as the incoming Bank of England Governor, Andrew Bailey, spoke about future monetary stimulus based on the Coronavirus outbreak. He made it clear that it's unlikely the BOE will follow the Fed and lower rates any time soon. Currently trading at overnight highs, any sustained USD weakness during today’s trading could see GBP test resistance levels. Brexit negotiations continue but seem to be on the back-burner at the present time.
USD/JPY is much lower this morning as traders fear over the Coronavirus have traders seeking safe-haven cover. The currency pair has fallen to five-month lows and technicals point to the USD/JPY moving even lower. Despite over-sold conditions, traders continue to buy JPY. At the moment USD/JPY is testing strong support levels and it seems only logical those levels will be tested later today.
The Bank of Canada lowered rates yesterday by 50 bps, bringing the rate to 1.25%. This was in response to the global health crisis as well as weaker than expected economic releases, highlighted by a fall in retail sales. BOC Governor Stephen Poloz will give a speech later today. The USD/CAD came of initial highs after the announcement but the loonie remains pressured as oil prices once again are lower as OPEC and non-OPEC members can’t seem to agree on production cuts.
The IMF announced a $50B aid package for low-income and emerging market countries to help them fight the impact of the Coronavirus. Cases in China and South Korea are said to be topping out, but the global outbreak continues as more countries report cases and fatalities. China’s finance ministers announced a $16 billion allocation to help virus prevention as the amount of global cases has now risen above 95,200- with more than 3,200 deaths. Major industries are seeing the impact as The International Air Transport Association (IATA) announced that the financial impact of the virus could reach $113 billion. China expects its first-quarter data to be affected by the Coronavirus, as Li Chenggang, a director at the Ministry of Commerce said: “it will be difficult for imports and exports to avoid volatility”.