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Daily Brief

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Dow falls over 1,000 points

USD

After falling over 1,000 points yesterday, the US stock market is expected to open around 140 points higher later this morning. Yesterday’s sell-off was led by investor’s concerns that the number of cases of the Coronavirus has spread, aiding to fears of a longer than expected global economic slowdown. As US bond yields fell, the USD moved lower against EUR, GBP, and JPY. Adding to the USD pressure, US bond markets are now pricing to possible rate cuts by the US this year, with the first one coming as soon as June. According to Cleveland Fed President Mester, the situation is being monitored but there has yet to be any substantial damage to the US economy at this point. Later today, FOMC members Kaplan and Clarida will be speaking. February US Consumer Confidence will be released later this morning and the Market is expecting a 132 number after last month’s 131.6. Although US equity markets should rebound, the USD may remain pressured through the North American trading day.

EUR

EUR/USD moved higher yesterday and at this point is still holding on to overnight gains. The single currency is currently trading in the middle of its technical range and technical momentum could see the EUR test resistance levels later today. German GDP numbers were released and came out as expected at 0.0%, quarter on quarter, while yearly GDP also remained the same at 0.4%. As the Coronavirus has now hit the Eurozone’s third-largest economy, any sustained virus problem will negatively affect the EUR. Italy has canceled the Venice Carnival and fashion shows as tourists are now voicing concern over visiting Italy. The latest economic numbers from Italy showed the country technically exiting recession, but if the virus spreads the risk of falling into recession grows.

GBP

GBP/USD took advantage of the USD sell-off to close at overnight highs. EU members will be signing their mandate regarding trade talks with the UK. The UK mandate is set to be signed later this week. Both of these documents are expected to be quite diverse and this should put pressure once again on the GBP. The possibility continues that there will be no agreement between the UK and the EU- this will keep a lid on the GBP rise. 

JPY

USD/JPY moves lower as traders move away from risk as the currency pair has moved towards significant technical support levels. Traders remain concerned over the Coronavirus spread and are seen to continue to move into safe-haven assets. Technical currency charts are now making the sale of USD/JPY a better trade and with positions not yet near an oversold basis, the trend lower should remain. Any better news on the virus could see a reversal of positions, but that is not expected near term.

CAD

Falling oil prices continue to put pressure on the commodity-based currencies. While the USD was pressured against other currencies, the loonie is currently trading at overnight lows. Traders will be focused today on comments made in a speech by the Bank of Canada member Lane as well as GDP 4th quarter report due out on Friday. The number is expected to increase by 0.3%, which would be in line with the Bank of Canada projections.  

CNY

Speaking of the Coronavirus, the number of those infected has now gone above 80,000 worldwide, the majority of cases remain in China, yet with infections rising in Italy, the number of deaths is at 7, with 50,000 people now under lockdown. Researchers in the US and Japan are working to find potential remedies but there has been no breakthrough yet.

USD: Coronavirus concerns are putting pressure on the stock market.

USD: Coronavirus concerns are putting pressure on the stock market.

EUR: EUR higher overnight but concerns are rising over virus outbreak in Italy.

EUR: EUR higher overnight but concerns are rising over virus outbreak in Italy.

GBP: GBP higher but Brexit concerns temper the rise.

GBP: GBP higher but Brexit concerns temper the rise.

JPY: Safe-haven trades move USD/JPY lower.

JPY: Safe-haven trades move USD/JPY lower.

CAD: Canadian Dollar weakens as oil prices fall.

CAD: Canadian Dollar weakens as oil prices fall.

CNY: Cases of the Coronavirus now at over 80,000 worldwide.

CNY: Cases of the Coronavirus now at over 80,000 worldwide.

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