The steep sell-off in global markets yesterday continued overnight and look to carry on into today’s North American session, benefiting the greenback.
Overview
An historic collapse in the price of oil and heightened global uncertainty following reports that North Korea’s Kim Jong Un is in critical condition have added to the risk-off environment this morning.
The price of West Texas oil was not only the focus of traders yesterday, but also of social media. Memes and sarcasm about free gasoline and genuine questions about how it is possible for the price of oil to trade negative abound. May contracts expiring this week fell at blinding speed and closed with a negative price for the first time in history as traders tried to avoid taking delivery of crude in May amid worries there is no place to store it. Contracts expiring in June are down 42% today with a price near 16$ a barrel.
As expected, commodity-based currencies have taken a beating with the oil-lined currencies like the Norwegian krone and Canadian dollar taking heavy losses versus the greenback. Other commodity-backed currencies such as the Australian and New Zealand dollar are down over 1%.
What to Watch Today…
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EUR
The Euro has suffered losses as a result of the uncertainty over oil markets, the heavy toll of COVID-19 on the continent’s population, and doubts over a comprehensive recovery. Authorities announced that the Schengen travel system will likely be shut into the summer, adding to concerns over prolonged inactivity around the bloc.
Italian leaders are said to be very frustrated with the EU’s response and feel not enough has been done to ease the pressures the country is facing. As some member nations open up, the situation in Italy will need to remain a seriously concerning one with cases in Milan still a major issue.
NZD
Sterling has taken a pounding as doubts grow over the emergency measures, with companies saying they have struggled to access loans and programs to stay afloat. Additionally, recovered Prime Minister Boris Johnson spoke of thee need to not ease border measures soon and his cabinet has been on defense mode over their handling of the virus shutdown. Although things are difficult presently, negotiators for both the U.K. and EU are re-starting conversations over the Brexit split and terms of trade for the near future.
