The USD opens the trading week a little weaker against the EUR, JPY, and GBP, but is trading within the ranges seen on Friday. The failure overnight of the Coronavirus stimulus package in Congress sent DOW Futures over 700 points lower. In trading overnight, the futures hit their limit down levels falling 5% and temporarily halting trading. The Fiscal Stimulus bill failed on Sunday as Democrats voted against it, stating the bill did not do enough to help workers and did too much to help companies. There is optimism that a consensus can be met in the next day or so. Analysts believe the stock market can recovery rather quickly if we can get the virus contained, and if businesses will have the ability to access capital, hopefully, we can create fiscal stimulus to stabilize growth. As cases rise in the US, now totaling over 30,000, with over 15,000 in New York alone, the NYSE will temporarily move to electronic trading beginning today. US equity markets had their worst decline since the financial crisis of 2008, and it looks as if things will get worse before they get better.
EUR/USD is trading in the middle of its overnight range after testing strong support levels earlier in the Asian trading session. The single currency did get a slight boost after the failed Coronavirus bill in the US Senate. Many traders consider this bounce to be temporary and an opportunity to sell EUR, as most observers expect the urgency over getting a deal done to outweigh the disagreements in Washington. Whatever the outcome, the final total for the bill will be quite large, which should benefit the USD. The virus is taking a huge toll in Europe. Italy has more than 5,000 deaths and no end seems in sight, as Prime Minister Guiseppe Conte has virtually shut down the country. In Germany, Chancellor Angela Merkel is in self-quarantine after coming in contact with a doctor that tested positive.
GBP/USD also trading mid-range at the moment but the bias still seems for a lower Sterling. After trading last week at its lowest level since 1985, the pound has made a bit of a recovery, but the move higher seemed to give traders fresh levels to sell. UK Prime Minister Boris Johnson has stated that as the virus spreads throughout the UK, he is considering additional restrictions to social movement as to this point, the population seems to be ignoring recommendations of limited social gatherings. Failure to break above technical resistance over the next few days could see a renewal in the selling of the pound. As traders continue to sell equities and buy US bonds, USD upward pressure will weigh on the GBP.
USD/JPY tested resistance levels early in Asian trading but has fallen back into the middle of the overnight trading range. As US bond yields moved lower traders are seen to be removing risk and once again heading into JPY as a safe-haven trade. According to traders, the fact that many are looking to hoard cash has given some support to USD/JPY, limiting a larger move lower. Failure of the US Senate to pass the virus bill also weighed on USD/JPY. Earlier in the Tokyo trading day, a Japanese Finance Ministry official said the government will issue up to JPY 300 billion inflation-linked bonds to improve market functioning. Japan is being pressured to cancel the summer Olympics which are due to begin in late July. A number of countries have already announced they will not be sending athletes to the competition.
USD/CAD continues to rise as oil prices fall. With oil prices reaching levels not seen since February of 2002, the loonie fell over 4% against the USD last week. The Canadian economy is set to fall into recession in March, with businesses closed, workers furloughed or let go, and social activity slowed due to health restrictions. A record of 500,000 workers applied for unemployment insurance last month. About 13% of the economy is bearing the brunt of the economic slowdown including retail, food services, entertainment, and hospitality. This added to the rescued prices in oil are weighing heavily on the CAD.
According to reports from Reuters, mainland China reported 39 new cases, down from 46 a day earlier. All the new cases involved traders arriving in China from abroad. The total number of cases in China now stands at 81,093, with the death toll rising to 3,270. While the fact that now new cases were reported at the epicenter of the viral outbreak, it is still a little early to take any positive reaction to the news.