US equity markets take notice of the coronavirus as fears of global slowdown emerge
Reports that the coronavirus is spreading from China to other countries is increasing fear that the impact could lead to a recession in the US. Investors are preparing for the worst by buying up US Treasuries which caused yield on 10-years to fall as much as 11 basis points, the lowest since 2016.
February 25, 2020
EUR/USD 1.0843 GBP/USD 1.2986 USD/CAD 1.3281 AUD/USD 0.6594 USD/JPY 110.4400 USD/CNH 7.0236 USD/ILS 3.4257 USD/MXN 18.9880 USD/CHF 0.9773 USD/INR 71.8850
USDMarkets remain focused on the development of the coronavirus. The Bloomberg Dollar Index pared losses as the shift from slight risk-on moved back to risk-off.GBPSterling rebounded 0.3% as risk sentiment shifts back to markets following the coronavirus-driven sell off. EU member state ministers are due to sign-off on a negotiating mandate for UK trade talks. The tension between the two regions is already rising.EURWith the spread of the coronavirus moving to Northern Italy, it causes major concern for economic growth in the region. The impact of the virus on Italy could throw the economy into a technical recession as soon as this quarter. The currency pair remains well under the 1.09 handle.CADThe Canadian dollar held steady after hitting its lowest levels this month. The loonie benefited from risk appetite returning to markets after the coronavirus-driven fall.ASIA/PACIFICConcern over the coronavirus spreading in South Korea caused the JPY to pare losses. Markets are now pricing in a 10 basis-point cut from the BOJ in 2020 despite last week's surge in USD/JPY to highest levels in 10-months. This move shows a divergence in the currency pair and interest rate markets which historically tracked each other.