Rate cut related updates in focus, mixed activity, and virus outbreak concerns keep major risk assets under pressure wiping billions off the market today.
Summary: Global equities are on for the second consecutive session of dovish trading activity on virus woes. South Korea, the nation to suffer from the second-highest victim count following China, continues to suffer escalating tensions, and measures from local governments failed to support the stock market resulting in major indices in Asian markets seeing a sharp decline.
In the Middle East, both Kuwait and Iran reported increased death tolls while the virus outbreak in Europe also seems to be speeding up with Spain seeing its first case of virus victim in two major cities Madrid and Barcelona while Italy saw 19 new victims and one count increase to the death toll.
Other European nations – Croatia, Austria, and Switzerland have also reported new cases causing pandemonium in European markets. Europe saw stocks decline on multiple fronts ranging from Travel and financial services to Chemical and Technology – all key market areas which support the European economy, wiping billions off the market with each passing day. In the forex market, major global currencies continue to suffer while the US Dollar continues to rise on safe-haven demand.
Precious Metals: Precious metals continue to trade range-bound near recent highs as risk aversion escalates with each passing day. Firm USD caps gains while routine profit booking activity also acts as a major hurdle preventing the price of Gold and Silver from scaling fresh 2020 highs.
Crude Oil: Crude oil price declined for the fourth consecutive session and scaled fresh 14-month lows on pandemic fears. Escalating demand decline outlook and lack of a solid decision from OPEC to counter sharp decline have resulted in crude oil futures testing $49 handle in the international market.
AUD/USD: The pair is trading with clear dovish bias but has managed to stay steady around the mid-0.65 handle as the cautious tone in the market keeps both currencies under pressure. While AUD suffers on broad-based caution, the decline in US T.Yields keeps USD from gaining a clear upper hand.
On The Lookout: As pandemonium breaks out in the global market, bets surrounding rate cut measures from central banks to support to economic activity. Headlines hinted at the possibility of the USA coming under major virus outbreak similar to countries on the other side of the globe as WHO requested all countries to prepare for virus outbreak. US center for disease control and prevention also advised Americans to be ready for virus outbreak adding fuel to the fire.
Aside from the fear surrounding the virus outbreak, concerns of the impact of a virus outbreak on economic activity also fuel market bears keeping risk assets under pressure. On the release front, the US calendar sees EIA weekly crude oil stockpile data and new home sales data and there is also a speech from ECB President Lagarde and FOMC members Kaplan and Kashkari which are expected to provide short term profit opportunities.
Trading Perspective: US futures trading in the international market continued to waver lacking a clear directional bias as the market mood was dominated by caution surrounding virus outbreak and escalating victim count across Asian and European nations. Demand for safe-haven assets underpinned bonds but US T.Yields failed to make a recovery albeit slightly moving higher from previous session lows. All things considered, Wall Street is likely to see subdued opening posts in which range-bound activity dominated by macro data and fed speech led cues are likely to dictate intra-day directional cues.
EUR/USD: While the pair has managed to regain ground above 1.08 handle post decline to yearly lows, it fails to breach key resistance levels on virus outbreak and global growth outlook woes. While USD holds firm, weak US T.Yields keep the greenback’s momentum in check providing the pair with the strength to maintain hold around mid-1.08 handle for now. Cues from Fed speech later in the day could dictate a change in directional bias in case members give any signs on rate cut measures by the Fed.
GBP/USD: The pair declines below mid-1.29 handle as GBP failed to hold firm near previous session’s gains. Broad-based risk aversion on growth outlook and virus outbreak woes added more pressure to GBP which already suffers from no-deal Brexit concerns but lack of initiative from USD to build further downside move helped cap downside move above the 1.2910 handle for now. Cues from Fed speech later in the day could help USD gain strength in case members give any signs on rate cut measures by the Fed.
USD/CAD: The pair continues to trade range-bound with a clear lack of directional bias as neither side has the strength required to make a breakout run. WTI’s decline below $50 handle put pressure on crude oil price linked currency Loonie but lack of strength from US T.Yields to recover gains from early week capped USD’s prospect for a solid bullish price run keeping pair trapped below the 1.3300 handle. Traders now await US weekly crude oil stockpile data and Fed speech for directional cues and profit opportunities.
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