Summary: The Dollar and Wall Street stocks did a U-turn, sinking after reports that COVID-19 related deaths rose to 11 in the United States. US Treasury yields sank to record lows as haven FX and assets rose. The benchmark US-10-year yield sank to as low as 0.90% dragging the Dollar down with it. The Dollar Index (USD/DXY), a favoured gauge of the Greenback’s value against a basket of foreign currencies slumped 0.6% to 96.75, its weakest close since January 2. Against the haven sought Japanese Yen, the US Dollar plunged 1.16% to 105.965 in early Sydney trade this morning. The EUR/USD pair climbed above the 1.1200 resistance level, currently trading at 1.1228, up 0.81%. Risk FX led by the Australian Dollar dipped, the Battler settling around 0.6600 cents, down 0.44% from its highs at 0.6636. USD/CAD rose modestly to 1.3425 (1.3400) following yesterday’s Bank of Canada rate cut. Against the Swiss Franc, seen as the other haven currency, the Dollar slid 0.8% lower to 0.9488 (0.9568). Investor confidence was shaken as coronavirus cases continued to rise in the US despite efforts to contain the outbreak. The CBOE VIX Fear Index jumped to 8.2 points to 40.14 before settling at 39.62, a rise of 23.85%. Wall Street stocks tumbled as travel related shares took a beating. The DOW was 3.1% lower to 26,125 (26,745), while the S&P 500 dropped 3% to 3,018 (3,092).
Data released yesterday saw Australia’s February Trade Surplus rise to 5.21 billion, beating forecasts of AUD 4.8 billion. January’s Trade Surplus was revised up to 5.38 billion (from AUD 5.22 billion). US Factory Orders in February fell to -0.5%, missing expectations of -0.2% and January’s 1.9%. Next up: US February Payrolls.
On the Lookout: Expect more fireworks ahead with the coronavirus spread continuing to dominate all markets. Risk assets have whipsawed this week as volatility climbed. The action was, is and will continue to be fast and furious. Today’s big data event is the US Payrolls number.
Other data releases today are Australia’s February Retail Sales and Japan’s Leading Indicators.
Euro area data sees German Factory Orders and French Trade Balance. UK Halifax House Price Index for February follows. Canada’s Employment numbers are next with Employment Change, Unemployment rate and Trade Balance and IVEY PMI. US Payrolls follows with Non-Farms Employment Change, Unemployment Rate and Average Weekly Earnings. US Trade Balance round up today’s economic reports.
In the FX space, the Dollar took a beating, and with US yields currently at all time lows, expect further pressure on the Greenback, specially against haven FX leaders the Yen and Swiss Franc.
Traders will focus on US Payrolls, released later today. The US economy is expected to have generated a median 175,000 Jobs in February from January’s 225,000. The Unemployment rate is forecast to be steady at 3.6%. Wages (Average Hourly Earnings) is expected to have risen 0.3% from 0.2%. Any Payrolls number under 175,000 will see traders dump more US Dollars. Watch for revisions to previous months as well as the Wages number.
US bond yields dropped further. Other global rivals were also lower but, once again, not to the extent of the fall in US rates. This will keep the Dollar broadly capped against its Rivals, also to varying extents. Haven currencies will have the most potential for gain, while risk FX will lag.