Markets Try Staying Afloat, Buck Still Losing
MARCH 25, 2020
The U.S. Dollar saw ongoing losses overnight as Asian markets grabbed on to some of the momentum brought from the best daily recovery in the history of U.S. stocks.
A sense of resolve gripped markets as traders and investors counted on optimism behind a major stimulus package from the U.S. government that could be matched with the Fed’s addition of measures and even new lending programs direct to businesses. Uncertainty remains however because the medical issue at hand is still not cured as COVID-19 keeps creating havoc in the global healthcare community.
What markets want is a guaranteed cushion for what they perceive could be a prolonged period of forced hibernation for many who can work from home or stuck temporarily unemployed. Inactivity and the perceived threat that it poses long-term will keep markets guessing if an equity rally can be sustained and the buck’s value truly knocked down. However, it has taken a slight hit these last two days as the Bloomberg Dollar Spot Index sits 0.7% lower.
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The Euro experienced little movement and was unbothered by the Purchasing Managers Index data from yesterday suggesting a lack of investment by companies that was worse than expected. News of an ambitious aid package from the German government are helping in keeping Euro somewhat stable after days of dramatic swings. Spain and Italy are hurting as they are experiencing a heavy death toll from the virus.
Nevertheless, some news reports out of Italy point at the infection curve flattening somewhat especially as things in Milan have improved. Slowly, but surely, we hope all normalizes, but an inactive continent is dealing with a medical crisis similar to the pressures brought by World War II. The continent is in in lockdown entirely, with the U.K. the latest in joining in the policy.
Sterling has been digging itself out of the deepest decline since 1985 as the country mandated a lockdown to contain spread, announced a major spending package, and ignored the negativity in data. As expected, PMI figures were awful, with a March PMI Composite reading of 37.1, a major drop from February’s 53.0 expansion reading.
The monthly fall is three times worse than the previous record, thus indicating the country is indeed moving gearing into recession mode. With most of the world closed down, we shall monitor the effects of social distancing in the next few weeks and see if there is a decrease in infection and deaths that can signify a safe return to economic activity.