USDJPY, H1
The Dollar has come back under pressure versus its major counterparts as the 10-year Treasury yield dropped sharply back under 1.0%. The US currency posted a five-month low against the Yen and tracking back to recent trend lows versus the Euro, though fared better against the dollar bloc and developing-world currencies. Positioning in the Fed funds market fully factored in a follow-up Fed 25 bp easing at the approaching March-18th FOMC meeting, and a 71% chance for another outsized 50 bp move. The narrow trade-weighted USDIndex (DXY) fell over 30 pips in making a 97.02 low. The index looks set for a re-visit of the two-month low at 96.98 seen in the immediate wake of the Fed’s move on Monday. EURUSD rose back above 1.1150, though has remained below Monday’s two-month peak at 1.1213. USDJPY dove to five-month lows under 107.00, posting a low so far of 106.79.
Risk aversion once again took a grip, with stocks turning sharply lower in Europe after what had been a positive session in Asia, and USA500 futures racking up a 2% loss today so far. Gold too is joining the party and again testing the key $1650 level. All this comes with the UK’s chief medial officer saying that UK has gone from trying to contain the COVID-19 virus to trying to delay the spread of it. Switzerland also reported its first death from the virus, while Japan suspended visas for visitors from China and South Korea. The Air Transport Authority also revised its estimate of the cost to global airlines in terms of lost revenue this year, to $113 bln, over three times the amount it estimated just two weeks ago. That comes amid news that UK airline Flybe has collapsed. These developments come after California declared a state of emergency. The spectre of further economic-disrupting measures to combat the virus has returned investors to a state of risk aversion.
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Stuart Cowell
Head Market Analyst
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