Greenback Slows Down, Risk-appetite Attempts Return
MARCH 20, 2020
The U.S. Dollar is trading in weaker ranges across the board as overnight trading sessions saw some revival for equity markets as well as currencies.
The fears of a deep recession with serious joblessness as the globe tries to fight the COVID-19 virus spread by asking people to exercise social distancing, if not shelter in place. A week that has witnessed panic and a jump to expansive stimulus will be remembered in the history books and hopefully marks turning point in what has been a dramatically intense year. Volatility remains high, but now that the magnitude of the problem seems to be more understood, we shall see how the implementation of aid and easing uplifts sentiment as well as restarts growth.
Pandemic fears unlike anything we have experienced before have shifted a very active global economy into one hitting the brakes. Central banks from Bank of England to Norway have slashed interest rates to historic lows in order alleviate concerns that businesses may not be able to remain functional nor survive an indefinite hiatus. The next quarter is expected to be a test of patience as we figure out a solution to the health issues at hand and look for a way to reassure safety, a sense of normalcy. Expect swings, we certainly think there’s room for buck losses. In uncertain times, dollar gains, but it may have already reached a peak.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
The Euro fell 3.3% this week and looks to rebound after a strong commitment by member nations to fiscally aid their domestic economies while the European Central Bank reassured banks it would provide liquidity as well as further QE. Italy is paying a huge toll as it has registered more losses of life over the coronavirus than China at this point. We shall see how this weekend pans out as news reports have also focused on the recent arrival of help from Chinese doctors and specialist to help in the fight. A vaccine is said to be in the works and any further developments that point us towards progress will be a welcome sign for all.
Pound joined a chorus of major currencies trying to reverse losses after a week of sinking to multi-year lows. The Bank of England decided to follow the Fed and cut interest rates to 0.1% and the government launched its biggest spending since World War II.
While Brexit has faded somewhat in importance in the face of a much bigger global problem, some are suggesting this may bode well for the Prime Minister’s plans to reach as Australia-style free trade arrangement. It would be more preferential than going to a World trade Organization set of terms, but it would certainly signify less equivalence and regulatory obligations. At this point it is very difficult to know, maybe they could even just amend things and work on something else entirely.