The U.S. Dollar is getting crushed and is seeing multi-month lows against a few of its peers as the drop in U.S. Treasury bond yields is causing a dramatic sell-off in equities.
Overview
The effects of easing, cuts to the interest rates, plenty of injections into the repo market, and fear that stocks may tumble significantly may be given credit for the situation. Yields on 10-year and 30-year treasuries fell to all-time lows as a flight to safety has caused also major losses for stocks across the globe. The fear over the long-term economic effects that the shutdowns have caused are hurting any perception of stability.
Nevertheless, it must be noted that there has been good news out of China when it comes to the virus containment and recovery. The current panic is now about the preparedness of other countries to handle a pandemic that indeed can hurt the most vulnerable within their populations. Also, with a global economy that was already stagnant, it’s comprehensible how nations are only seeing the virus-scare as exacerbating the negative impact. We shall see how long the risk-off sentiment will last as we have gotten very little in terms of guidance lately and this could turn right back around at any moment.
Non-Farm Payrolls and the Employment situation overall looked very impressive for February, but neither the 273K added jobs, wages rising, nor the lower 3.5% Unemployment Rate figure could aid the greenback.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
EUR
The Euro is trading at its strongest level against the buck since the end of June, climbing rapidly based on the equity sell-off taking place worldwide. Economic data compiled for the bloc also helped in boosting the value of the shared currency, something that seemed unlikely with the fears that the virus had only worsened productivity.
Clearly, economic doom did not manifest itself in February and for now, at least for now, the Euro can stay at current levels. Volatility is high and we can see some room for hitting the brakes, but there is merit to its higher value.
MXN
The Mexican Peso fell all week long and now has weakened to its weakest level since December of 2018. With a tough border situation, with the U.S. and Central America, and with California seeing deaths from the virus, our southern neighbor looks quite vulnerable for worsening economic conditions. Oil down and Emerging Markets unstable make for a great recipe for losses. There is also the ongoing dark cloud of further interest rate cuts. It is difficult to capture a range, but Peso will likely remain weak throughout the month.
