Warnings from WHO, Moody’s cripple risk appetite is leading to a further decline in global equities, macro data in focus on the last trading session of the week.
Summary: Global equities face meltdown and continue to decline on the last trading session of the week with the global stock market losing another 2 trillion USD in sell-off activity since Wednesday bringing the total decline this week to 5 trillion USD. Analysts across major banks and investment firms are tagging the meltdown as the worst weekly decline since the global financial crisis during 2008-09.
Following a steep bearish rout in Wall Street and Asian markets, European markets are also experiencing a sharp meltdown in major indices and equities. Major shares in European markets declined by over 3% today, while key indices and equities are seeing their biggest weekly decline in more than a decade as per technical data. Investors fear the further rapid spread of coronavirus across major global economies, continuing to quite some time in the near future, leaving a visible impact on the global economic growth outlook.
Precious Metals: Rare metals have been on consolidative mode since profit booking activity earlier this week post yellow metal’s rise to seven-year highs. Firm USD and strong supply found around key resistance levels keep the price of gold and silver capped for scaling new highs in the immediate future.
Crude Oil: Crude oil price continues to see a steady decline in the international market with futures experiencing the biggest fall in four years, having lost nearly 12% just this week alone. Virus fears influenced caution and decline in global growth outlook have created a glut scenario much earlier than expected, adding pressure to crude oil bulls.
AUD/USD: The pair continues to hold steady on its week-long decline and scaled fresh 11-year lows today as broad-based caution led sell-off intensified on last trading session of the week and price falling below the 0.65 handle. While AUD remains under pressure, the decline’s momentum is lower compared to earlier this week as USD remains under pressure owing to a decline in US T.Yields, which weakened the greenback.
On The Lookout: The main focus remains on virus outbreak-related proceedings for now despite various local and international events providing local markets with short term profit opportunities and directional cues. As each day passes, the new COVID-19 victim count continues to escalate across Europe, and US markets also seem susceptible to communal breakout leading to fear index in major markets scaling fresh multi-year highs.
Disruption to various events aside from international travel such as retail activity, closure of educational institutions, and cancellation of major annual events across the globe have resulted in economic activity turning into a wreck across the globe.
Warning from WHO that Covid-19 has pandemic potential and comments from Moody’s rating agency stating that further outbreak of virus could trigger a global recession in the first half of 2020 have wreaked havoc in global market today as traders struggle to get a clear picture on how far the impact on global economy would be and what the worst-case scenario is.
On the release front, US calendar sees release off Core PCE Price Index, Goods Trade Balance, Personal Income and Spending data while Canadian calendar sees the release of Q4 GDP data.
Trading Perspective: Forex market is likely to see major global currencies matched against USD trade within familiar levels despite overwhelming bearish bias and cautious tone as USD lacks the strength to build a rally over a sharp decline in US T.Yields. The CBOE volatility index also referred to as fear index jumped to 39 – the highest level in two years which along with a decline in US Futures in the international market in Asian and European market hours suggests Wall Street will see a further decline in all its major indices and key equities during the trading session today.
EUR/USD: The pair managed to breach past 1.10 handle and tested mid-1.10 handle in early hours owing to USD’s weakness. But the cautious tone in global market and USD’s strength from its status as a safe-haven currency and risk currency sell-off put pressure on EURO bulls bringing the price back to the 1.099 handle for now. Traders now await US data for short term profit opportunities.
GBP/USD: The pair is mostly trading flat in the global market as neither currency has the strength to build even a short term rally in its favor. GBP is weighed down by fears of no-deal Brexit woes as the UK holds firm on its threat to walk away from further talks while USD is weighed down by a sharp decline in US T.Yields. The pair is trading above mid-1.28 handle currently while traders await US data for directional cues, but pair is unlikely to close above 1.29 handle today.
USD/CAD: The pair has entered into consolidation around mid-1.34 handle as USD remains firm on broad-based risk currency sell-off and demand for safe-haven assets, but it failed to establish rally owing to pressure from declining US T.Yields. Sharp fall in crude oil price across the week keeps Loonie weighed down. Traders now await Canadian GDP and US data for short term profit opportunities.
Please feel free to share your thoughts with us in the comments below.
