Forex news from the European morning session - 19 March 2020
Headlines:
- India set to ban all incoming flights for a week starting from 22 March
- Germany considers authorising emergency borrowing as soon as next week - report
- China said to consider plans to cut 2020 economic growth target, ramp up spending
- German government said to plan €40 billion aid package for small businesses, self-employed
- SNB's Jordan: Cutting rates is unfavourable at present
- SNB's Jordan: Fiscal policy is central to combat the crisis
- Germany March preliminary Ifo business climate index 87.7 vs 96.1 prior
- SNB leaves policy rate unchanged at -0.75%
- Italian bonds give the ECB a vote of confidence - for now at least
- RBA's Lowe: Have not intervened in FX market, but prepared to act if needed
- Bank of Korea to buy ₩1.5 trillion of government bonds to stabilise markets
- RBA's Lowe: Nothing is off the table with policy
- RBA's Lowe: Expects cash rate to remain at current level for some years, but not forever
- New Zealand closes its borders to all non-residents
- Australia's Morrison: Government to announce economic measures in the coming days
Markets:
- USD leads, JPY lags on the day
- European equities mixed, mostly lower; E-minis down 2.5%
- US 10-year yields down 7 bps to 1.12%
- Gold down 0.8% to $1,475
- WTI up 7.8% to $21.96
- Bitcoin up 5.6% to $5,639
The session started with tepid tones in the dollar and with the aussie and kiwi bleeding by over 3% before seeing losses trimmed after RBA governor Lowe said that currency intervention is an option for the aussie if needed.
AUD/USD climbed from 0.5670 to 0.5800 before falling back again as the pair traded wildly between 0.5640 to 0.5750 during the session thereafter.
But it is once again all about the dollar as funding pressures continue to show up with the greenback rampaging against the likes of the euro and yen in particular.
EUR/USD fell to its lowest level since April 2017 in a drop from 1.0920 to 1.0750. Meanwhile, USD/JPY was underpinned at around 109.00 to start the day before pushing towards 110.00 now as we approach North American trading.
European markets gave a vote of confidence to the ECB stimulus package as the bond market surged higher - especially in Italy and Greece - and stocks also kept higher initially.
But that is fizzling out now as stocks turn red and bond yields creep higher on the session - though compared to yesterday levels, Italian and Greek yields are far lower. Again, this is a process so it may take time for markets to adjust - if they even will.
US futures rose higher alongside European stocks initially, with S&P 500 futures erasing 4% gains to turn flat before seeing losses return now to be down by 2.5%.
Treasury yields followed the action in European bonds as yields are lower across the curve, but not by much. 10-year yields are down by 7 bps to 1.12% currently.
Looking ahead, it doesn't look like there is much shelter for the market as the rush to the dollar and cash continues to play out. The key question will be whether or not central bank stimulus can contain the carnage at this point, as hopes of a reversal are fading.
To the dollar, they're all emerging market currencies now.