April Dollar Dominance as Markets Crumble

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April Dollar Dominance as Markets Crumble

APRIL 01, 2020

It is Wednesday, March 98th—or at least it feels that way. Most market participants and citizens of the world are happy to put March in the rear-view mirror.

Overview

Covid-19 has wreaked havoc on our day-to-day life and global markets. Most importantly, the virus has claimed many lives and we got a stark warning from the government yesterday that the death toll in the U.S. could reach 240K.

The buck has started the new quarter by gaining against most of its major counterparts. The Dollar Index (DXY) is up nearly a full percent as global risk sentiment took a negative turn overnight.  Despite historically low interest rates, a promise of unlimited fiscal stimulus and more cases of Covid-19 than any other country, the dollar remains King.

This morning’s economic data is likely to be stale.  ADP reported 27K private job losses in March, which was surprisingly low. However, February’s print was revised down.  Later this morning, US PMI and ISM Manufacturing data will cross the wire.  The prints will be taken with a grain of salt given the nature of the rapidly changing situation in the country. Boston Fed President Rosengren will hold a talk about the virus today at 2 p.m.

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What to Watch Today…

  • No major events scheduled for today

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EUR

The Euro has fallen nearly 1.0% versus the greenback overnight on the back of poor economic data.  Euro area flash PMIs were revised down to 44.5.  50 indicates the line between expansion and contraction.

Analysts were quick to point out that the underlying details of the reading were more negative than the headline itself, which helped push the common currency lower. There is room to fall, there is room to rise, however, nothing will materialize clearly for Euro appreciation until the EU gets its situation together. Better news of the health front will ease pressure on the continent down the line.

GBP

The Australian Dollar and other commodity-based currencies experienced major losses to the greenback as the second quarter starts with doubt, uncertainty, as reflected by the decline across equities globally in overnight trading sessions. Its Oceanic currency partner, NZ Dollar, shared in the misery as China’s recent PMIs have fallen under scrutiny with many investors bewildered at the quick return to expansion after a serious period of inactivity for Q1. Additionally, the lack of relief as it pertains to COVID’s threat in major nations is still a detriment to globalized supply chains that have most employers and workers at home.

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