Forex news for North American trade on February 25, 2020:
- US February consumer confidence 130.7 vs 132.1 expected
- Richmond Fed manufacturing index -2 versus +10 estimate
- US officials says it will take at least 12-18 months to develop coronavirus vaccine
- German confirms coronavirus patient who visited Milan
- Fed's Clarida: Still too soon to speculate on impact of coronavirus
- US 10-year yields fall to record low, breaking 2016 bottom
- US treasury sells $40 billion of two-year notes at 1.188% vs 1.172% WI level
- US Health and Human Services Azar: There will likely be more cases of coronavirus in US
- Coronavirus cases in Italy's Lombardy region rise to 240
- Swiss officials say infected patient came from Italy
- FHFA House price index for December 0.6% vs 0.4% estimate
- US December Case-Shiller 20-city house price index +2.85% vs +2.80% expected
- Philly Fed Feb non-manufacturing activity 36.1 vs 23.5 prior
- Kudlow: Hasn't heard any talk privately about the Fed cutting rates
Markets:
- Gold down $25 to $1633
- US 10-year yields down 4 bps to 1.33%
- WTI crude oil down $1.65 to $49.79
- S&P 500 down 98 points to 3128
- GBP leads, NZD lags
It didn't start out like a bad day. Risk trades were doing better in the early going and US stocks opened higher but a combination of new Swiss/German cases, an alarming CDC press conference, Kudlow hinting at no help from the Fed and general fears about the virus quickly took a toll that ultimately hammered stock markets.
The FX market still isn't sure how to react. The yen continued to hold a bid as USD/JPY fell below 110.00 and completely erased last week's squeeze higher. Yen crosses also fell 0.3-0.8% across the board.
The euro continues to alternately trade on domestic fundamentals and carry trade unwinds. The outbreak in Europe caused some euro-centric selling but the other line of thinking is that it's only a matter of time until it goes global so the trade is safety and all those euros that went elsewhere looking for yield are now happy to be at home on the sidelines.
Cable is another example of a market that's confused about how to react. There are speculative shorts unwinding and the UK has far more financial flexibility to respond to a pandemic so there's a case to buy the pound but it's not exactly a safe-haven.
The commodity currencies held up relatively well and that was a surprise given the drop in oil prices and base metals. It's a reflection of the very uncertain backdrop and some technical support levels nearby.
