First virus death toll in US California and corporate profit warnings weigh down risk sentiment.
Summary: Asian and European markets today saw major indices and key equities trade on polar opposites. While major Asian indices and equities traded on a positive note as market bulls still remained supported by news of major central banks working to take stimulus measures to support the economy, the European market saw major indices and key equities trade lower today.
Headlines suggested that ECB would follow the path of the US Fed and Bank of Canada and cut interest rates next week. Still, profit warnings from major European corporate and comments from BOE’s next governor Andrew Bailey stating that more clarity is needed before taking solid stimulus measures turned investor sentiment in risk-averse direction.
Precious Metals: Price of rare metals gained a boost in European market hours as safe-haven demand spiked over escalating COVID-19 victims. Further, corporate profit warnings from Europe and BOE’s designated governor Andrew Bailey’s comments on stimulus measures added momentum to rare metal demand.
Crude Oil: Crude Oil is trading range-bound around $46-$52 handle for US & Brent futures in the international market. Build-in EIA US weekly crude oil stockpile and OPEC’s decision to hold back on its biggest supply cut decision since 2008 until the move is also accepted by non-OPEC members such as Russia clouded the demand to supply ratio in the global market.
AUD/USD: The pair held steady above the 0.66 handle in Asian and early European market hours. But the price has since declined below the 0.6584 handle as market sentiment turned risk-averse over-cautious tone prevalent in European hours. For now, lingering hopes of stimulus measures to support economic activity from major global central banks keep AUD bulls underpinned, preventing further declines.
On The Lookout: As there are no signs of COVID-19 outbreak peaking in any major global economies aside from China anytime soon, all eyes are fixed on virus outbreak-related headlines and moves surrounding response measures for virus outbreak. Following US Federal Reserve earlier this week, the Canadian central bank reduced its interest rate by 50 basis points during its monthly interest rate decision meeting yesterday.
OPEC meeting today saw members agree on the biggest supply cut since 2008, having decided to cut back an additional 1.5 million BPD until the second quarter of 2020 but decided to hold back from bringing it into effect unless Russia agrees to do the same during the meeting in Vienna tomorrow. In the USA, California has declared at COVID-19 emergency while lawmakers have approved a bill worth US$ 8.3 Billion for combating virus outbreak. On release front today, the US calendar will see the release of initial jobless claims, Q4 NFP, Q4 Unit Labor Costs, and January Factory orders data while there is also a speech from BOE Carney, BOC Poloz and FED Kaplan in early North American market hours.
Trading Perspective: Given broad-based risk-averse market mood, major USD matched global currencies are likely to trade rangebound with slight bearish bias in US market hours. The increased death toll in the USA and declaration of emergency in California point to the possibility of a sharp decline in Wall Street today. The decline of US futures in the European market also hint at a subdued opening in Wall Street as the trading session opens later today.
EUR/USD: Despite the slight dip earlier in the day, the pair has managed to test and hold above 1.12 handle as EURO continues to be bid in the global market. USD remains weighed down over expectations for further rate cut from the Fed and news of the first victim for COVID-19 in California providing Euro bulls with added support for positive price action today. Traders now await US data for short term profit opportunities, but USD likely to remain weighed down regardless of data outcome as virus woes remain firm.
GBP/USD: The pair scales fresh weekly highs above 1.29 handle and is on the way to scale the 1.295 handle over broad-based USD’s weakness. But comments from Andrew Bailey the successor to Carney stating more data is needed before taking stimulus measures capped gains. Traders now await BOE Carney’s speech later in the day for more clarity on the exact stance of BOE over virus outbreak support measures, and clues from his speech will decide the directional bias of GBP.
USD/CAD: The US Greenback finally managed to breach past the 1.34 handle as Loonie weakened over the decline in crude oil price action. Crude oil price turned soft over sharp build in US weekly crude oil stockpile data and unexpected move by OPEC on supply cut decision, but USD’s gains were capped as US T.Yields are low amid expectations for another rate cut by Feds. Traders await a speech by US & Canadian central bank members for short term profit opportunities.
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