Key 10-Year Yield Tumbles, Dollar Slumps, Virus Fears Grip U.S.A.

Summary: Despite a Payrolls report that far beat expectations, US February NFP added 273,000 workers against 175,000 forecast and an Unemployment rate drop to 3.5% (3.6%), COVID-19 fears continued to grip US financial markets. The benchmark US-10-year Treasury yield, already at unprecedented lows, tumbled 14 basis points to close at 0.77% (0.91% Friday), after dropping to below 0.7% at one point. USD/DXY, or the Dollar Index, a favoured gauge of the Greenback’s value against a basket of 6 foreign currencies, slumped to February 2019 lows at 95.71, before settling to close at 96.093 in New York, down 0.75%. Best performing currency was the Swiss Franc which together with the Yen are haven favourites. Against the Swiss Franc, the Dollar plunged 0.97% to 0.9375 from 0.9490 on Friday. The USD/JPY pair dropped to an overnight and near 6-month low at 104.994 before climbing to settle at 105.37 (106.45 Friday).  The Euro rocketed to 1.13547 on further short covering before easing to finish at 1.1343 in New York.  Italy’s government announced a virtual lockdown of its Lombardy region, which included Milan and other northern provinces. The coronavirus death toll in Italy reached 223, while the number of cases approached 6,000. Sterling broke above 1.30 for the first time in nearly two weeks, climbing 0.75% to 1.3045. The Australian Dollar cemented its hold above 0.66 cents, finishing at 0.6645 against the overall weaker Greenback.
Wall Street stocks finished lower after another roller-coaster trading session. The S&P 500 tumbled as much as 4% before rallying to end 1.92% lower at 2,967 (3,015).

As Asia opens, wide gaps in FX appear in all currencies highlighting significant risk-off stance. The action is fast and furious. EUR/USD 1.1345 from NY close at 1.1290. USD/JPY plunged to 104.35 from 105.35. GBP/USD soars to 1.3077 from 1.3045 USD/CHF drops to 0.9325 (0.9375). Risk FX leader AUD/USD slips to 0.6595 from 0.6645. USD/CAD soars to 1.3585 (1.3435) on the plunge in Brent Crude Oil prices over the weekend.

Ten-Year US Treasury Yield Chart - CNBC - 09 March 2020
Ten-Year US Treasury Yield Chart – CNBC – 09 March 2020

Other data released Friday saw Canada’s economy create 30,300 jobs, beating forecasts of 11,000.
German Factory Orders rose 5.5%, much stronger than the 1.5% forecast and the previous month’s -2.1%. Australia’s Retail Sales underwhelmed, dropping to -0.3% against forecasts of 0.0%.

On the Lookout: Coronavirus headlines continue to grip markets, FX included. The number of global cases rose above the 100,000 mark to 105,000. Data compiled by the U.S. Johns Hopkins University reported 3,558 total deaths globally. In the US, total cases rose to 434 according to NBC News while deaths hit at least 19. A positive was the dramatic fall in new cases in China down to 99 (Saturday) from a daily average of around 2,000 just weeks ago.
Data today sees a plethora of Japanese data beginning with: Current Account, Bank Lending, Final GDP (Q4), Final GDP Price Index (y/y) and Economy Watchers Sentiment. European data start with Swiss Unemployment rate, German Industrial Production (February), German Trade Balance, and Eurozone Sentix Investor Confidence. Canada reports its Housing Starts and Building Permits.
The week ahead sees US CPI and PPI reports (Wednesday). The ECB holds its interest rate policy meeting on Thursday.

Trading Perspective: The Dollar’s overall downward correction looks set to continue. That said, in FX experience tells this writer that nothing goes in a straight line in the currency markets. This morning’s gaps in Asia extend the risk-off theme. Get ready for more extreme FX volatility ahead. We look at each currency in the current environment where the one certainty is volatility.
Amidst, all of this have a good week ahead. Happy trading all.


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