Daily Market Pulse

Daily Market Pulse

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DOW higher, USD lower

USD

The USD and the US equity markets appear to move in opposite directions as we begin trading this morning. DOW Futures are higher this morning, pointing to an opening surge of around 550 points when the markets begin trading later today. Positive news concerning the Coronavirus in Asia is aiding this move. This move follows the move on Monday when stocks rose over 1,600 points, posting their third-largest point gain ever. Positive comments from President Trump and the World Health Organization contributed to yesterday’s positive move. The USD is lower this morning against the EUR, GBP and CAD and higher against the JPY. According to the New York Fed, consumers see the chance of job loss moving higher. The average probability of losing one’s job in the next 12 months, increased 4.7 points to 18.5%, which is a new series high. US Treasury yields were higher in trading early this morning, with the 10-year note up to 0.7185% and the 30-year bond up at 1.3310%.

EUR

EUR/USD is trading higher this morning, as cases in the Coronavirus have eased around Europe and German industrial output beat expectations for February coming in at 0.3%, beating the forecasted number of -0.7%. A little good news coupled with the selling of the USD has benefitted the single currency. After bouncing off support levels early in the overnight session, the EUR is now trading at the overnight highs and looks to test technical resistance levels during trading today. While officials are saying it is too soon to determine whether virus cases are easing, investors are reacting positively to news that deaths and cases have slowed. Spain reported a fourth consecutive drop in fatalities and Italy also confirmed a substantial fall in new cases. The move higher in the EUR could be limited, however, as European officials cannot seem to agree on “coronabonds” as Germany leads the opposition. Eurogroup finance ministers meet today and will attempt to come to some agreement.

GBP

The main news coming out of Great Britain yesterday was the hospitalization of Prime Minister Boris Johnson. The PM is in critical condition and has transferred the rights to preside over administration meetings and lead the UK during the pandemic to Foreign Secretary Dominic Raab. GBP/USD has rallied overnight initially testing resistance levels in early European trading before easing back to the middle of the overnight trading range. The move in the GBP is considered to be more of a USD pullback in all currencies as opposed to anything related to the GBP. Traders will keep an eye on news coming from St. Thomas hospital where the PM is being cared for. Any unfortunate news coming from the PM’s condition will have a negative effect on GBP.

JPY

USD/JPY is trading near overnight highs this morning, as the risk-on mood continues. Adding to the weakening of the JPY was Japan’s declaration of a state of emergency to fight virus infections in the larger Japanese cities. The government also unveiled a stimulus package that is worth around JPY 108 trillion, or roughly $990 billion USD. The state of emergency will target Tokyo and six other cities, according to Reuters and will be in effect for one month. The fast spread of the virus throughout the country was stated as the reason for the state of emergency. The move higher in USD/JPY could continue if the break of resistance levels can be sustained. 

CAD

USD/CAD remained under heavy selling pressure for the second straight day as technical support levels were breached on the way lower, setting off some “stop-loss” selling orders. The USD/CAD is currently testing overnight support lows. Overall USD selling, as well as positive oil news, is benefitting the Loonie. Oil prices were higher overnight, with Brent crude up $0.93 to $33.98, while US crude rose $0.79 to $26.87 per barrel. The world oil producers including Russia and Saudi Arabia are scheduled to meet on Thursday and hopefully come to an agreement on oil output. Due to the virus, oil demand worldwide has fallen by as much as 30%, as many remain at home in self-quarantine. 

CNY

According to reports from Reuters, Mainland China reported fewer cases of the virus today (32), than yesterday (39). The report also showed no deaths reported yesterday as analysts look to see if the slowing of cases indicates a “turning of the tide” regarding the virus. The report of no new fatalities from China was the first time since January this had been reported. China’s equity markets which were closed Monday for a holiday were higher overnight, leading the other Asian markets to finish positive. As virus cases ease, risk sentiment is improving to all markets. Lockdown measures globally seem to be working.

Quick Insights

USD: USD and DOW moving in opposite directions as investors reacting positively to virus updates.

USD: USD and DOW moving in opposite directions as investors reacting positively to virus updates.

EUR: EUR higher after better than expected German economic numbers.

EUR: EUR higher after better than expected German economic numbers.

GBP: PM Johnson remains in critical condition, transferring power to Foreign Secretary Raab.

GBP: PM Johnson remains in critical condition, transferring power to Foreign Secretary Raab.

JPY: State of Emergency declared, as risk-on trades weaken the JPY.

JPY: State of Emergency declared, as risk-on trades weaken the JPY.

CAD: Better oil prices aiding the “loonie” in overnight trade.

CAD: Better oil prices aiding the “loonie” in overnight trade.

CNY: China reporting less cases of virus fatalities overnight.

CNY: China reporting less cases of virus fatalities overnight.

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