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.
March 5, 2020
EUR/USD 1.1186 GBP/USD 1.2914 USD/CAD 1.3420 AUD/USD 0.6590 USD/JPY 106.8500 USD/CNH 6.9396 USD/ILS 3.4722 USD/MXN 19.7435 USD/CHF 0.9514 USD/INR 73.3175
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US initial and continuing jobless claims were steady but most all economic data is being dismissed as outdated as it doesn't reflect the impact of the coronavirus.GBP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.