The U.S. Dollar improved from yesterday’s rout, a historic day for global markets crushed by the weight of a trifecta of problems finally sinking all assets.
Overview
A stagnant economy already espoused in 2019, the virus that seems more misunderstood day after day, and a petro-war makes for a three-headed monster spreading havoc. Already many economists are ready to show models with recession in sight, but for now these are all just downward pressures and swings could occur. This morning there is already a mood for a bit of rebound that is already benefiting the greenback’s road to recovery.
We shall see if the panic is merited long-term. A price-war and promises of a flood in barrel production make Russia and Saudi Arabia the main actors that can shift this all around by sitting at the negotiating table. Data releases are mattering very little as all eyes seem to be focused only on a dim future. For now, the petro-currencies are trading around multi-month lows with Canadian Dollar the weakest since May 2017. Mexican Peso, Norwegian Krone are both near multi-year lows still. On the flip side, the safe-haven Yen is moving around its strongest levels since the end of 2016.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
EUR
The Euro fell by over half percent overnight as the buck managed to recover some ground overnight. Statistics are not playing a big role in today’s FX flows, but it should be noted that the final Q4 reading for the Euro-bloc’s Gross Domestic Product came in at the expected pace of 0.1%. The value of the currency is likely to stay in familiar ranges if indeed the oil-price conflict plays out for long and Euro is sought by investors to trade for other assets that are not USD-denominated oil positions.
Nevertheless, the economy of the continent is at risk with Italy closing down and putting the whole country on lock down. As we watch Champions League matches in empty stadiums, we will reminisce about stellar Industrial Production in January, which registered a pace of 3.7% beating the estimated 1.6% in Italy. We shall see if the European Central Bank has any plans for aid when they meet Thursday.
GBP
The Pound has also been moving all over the place, primarily recovering recently, but falling overnight as negotiations between the U.K. and EU come back to take the spotlight. Both sides released their visions and requirements for a trade relationship recently, and though skeptical, EU Chief Negotiator Michel Barnier said a deal could still be possible. However, what matters most is time and it is running out by the day. The U.K.’s treasury is expected to release plans for future investment, which could be quite expansive as promised by the Boris Johnson administration. Political pressures remain in the form of independence threats posed by governments in Scotland and Northern Ireland’s island partner.
