Multiple trends sway FX markets as global reaction to coronavirus plays out

The dollar is stronger vs. most emerging market currencies and weaker against the euro and pound. Financial markets are bracing for another day of high volatility as interest rates globally continue to sink. Safe-haven currencies are stronger but so are currencies benefiting from carry trade unwinds. Central bank action is imminent after the US and Canada cut rates by 50bps. 

“Anyone can hold the helm when the sea is calm”
Publilius Syrus
  • FX Rates
    March 5, 2020

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    The dollar is stronger vs. commodity currencies and emerging market currencies but weaker vs. the pound and euro. The dollar will benefit from any flight to safety, but with the central banks of euroland and the UK meeting later this month the FX markets are speculating on future announcements.

    US initial and continuing jobless claims were steady but most all economic data is being dismissed as outdated as it doesn't reflect the impact of the coronavirus.

    GBP

    The pound is stronger vs. the US dollar for the third day in a row after touching the lows of October this past Monday. FX traders are speculating around a Bank of England rate cut at the March 26 meeting (or before) and whether it will be 50 or 25bps.

    EUR

    The euro is flat against the dollar after testing the 1.12 level. The euro has been strong during most of the coronavirus related market turbulence but has yet to break out of the longer term downward trend which began in mid-2018. The ECB meets March 12 and will likely announce additional monetary easing. Possible tactics include: cutting the already negative overnight rate, increasing quantitative easing and supporting banks via reduced reserves. 

    CAD

    The Canadian dollar is weaker despite oil prices being stronger. The Bank of Canada cut interest rates 50bps at a regularly scheduled meeting yesterday sending the loonie lower. OPEC has proposed a production cut of 1.5 million barrels per day to curb oversupply after the coronavirus sapped demand for oil due to huge cut backs in transportation. Currently, the proposed reduction cuts include participation from Russia who has yet to agree.

    ASIA/PACIFIC

    The Chinese renminbi is trading around 6.94 which is roughly where it was just before the government shut down Wuhan on January 23. The rebound in the yuan comes from speculation the coronavirus spread has slowed in China and the country begins to look toward an economic recovery.

Contact Us

For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory

Subscribe to receive the Daily FX Update in your inbox.

By providing your email address and clicking on the Subscribe button below, you consent to receive emails from Silicon Valley Bank for your chosen categories. You also consent to the terms of our Privacy Notice. If you have privacy questions, you may contact us at privacy@svb.com. You can withdraw your consent at any time.

Peter Compton
WRITTEN BY
Peter Compton

Insights from SVB Industry Experts

 
SVB experts provide our customers with industry insights, proprietary research and insightful content. Check out these related articles that may be of interest to you.
Dollar gains on profit-taking of risk assets
 
China rally fuels global risk-on sentiment, dollar lower
 
Dollar ends week on back foot
 
Dollar slides as jobs report surprises
 
Dollar higher on haven status
 
Dollar higher to end quarter