Investors awaiting US GDP data, US CDC confirming COVID-19 victims in the USA, and profit warnings from major corporations keep risk assets under pressure.
Summary: Equities continue to decline as the coronavirus outbreak-related caution keeps risk sentiment under the wraps. As risk aversion continues to grow with each passing day, the global stock market saw a loss of nearly US$3 trillion since this Monday, while the U.S. Treasuries trading in the global market hit record lows.
Headlines from across the globe point to a fast-spreading virus outbreak in all major economies outside of China. Reports from Bank of America point to growth forecast for the global economy this year pointing to lows last seen during the 2009 financial crisis stating that it has revised 2020 forecasts from the previous estimate of 3.1% to 2.8%.
ECB member knot said that the impact of the COVID-19 outbreak on the global economy is likely to be more severe than the impact of the SARS outbreak from 20 years ago. Profit warnings from major corporates continue to hit the market as various firms are finally revising their earnings forecast to include the impact of the virus outbreak for a prolonged duration. This has caused both Asian and European markets to see major indices and key equities suffer from sharp declines today.
Precious Metals: Rare metals are trading with clear bullish bias following Reuters report, which hinted at loss of nearly $3 trillion from the global stock market on virus outbreak woes. Further, official reports of first virus victims in the U.S. with no connection to China caused U.S. Greenback to weaken, which also fuelled demand for metals as it lower USD meant cheaper exchange rate for traders who hold other major global currencies.
Crude Oil: Crude oil price continues to decline sharply and is on its 5th consecutive session of decline today with the price of futures scaling fresh lows since January 2019. Brent futures lost nearly 3% at EOD yesterday, building up on a 4% loss earlier this week. Virus outbreak across all major global economies and escalating the U.S. weekly crude oil stockpile reports add pressure on crude oil price activity.
AUD/USD: The pair which traded with clear dovish bias and closed at lowest in a decade – 0.6540 in the previous session has since managed to rebound from its sharp decline slightly and is trading with positive bias today. USD declined on reports of new COVID-19 victims in the USA, which weakened US T.Yields, providing bulls with opportunity for a short term relief rally.
On The Lookout: Traders are on the lookout for profit warnings from major corporates and virus victim count related headlines. As the count of new COVID-19 victims from across the globe outside of China continues to escalate with each passing day, risk aversion is on the rise. US CDCP confirmed the first virus victim with no ties to China, causing panic to spike as investors fear the possibility of CDCP’s communal virus outbreak warnings coming into a reality.
Microsoft and AB Inbev came out with a revised growth outlook and quarterly earnings forecast, which caused major indices in Europe to slide sharply. U.S. T. Yields are on a decline, causing an increase surrounding Fed rate cut bets.
On the release front today, the U.S. calendar sees preliminary GDP data, which is expected to see a revision for Q4 reading. Traders also await the release of Core Durable Goods Orders, Initial Jobless Claims, and pending home sales data while the Canadian calendar sees the release of Current account readings for Q4.
Trading Perspective: In the forex market, major global currencies denominated against U.S. Greenback are likely to see a boost on temporary weakness surrounding USD influenced by a decline in T.Yields. But broad-based risk aversion and cautious investor tone are likely to keep gains in check.
U.S. Futures trading in the international market declined over report from US CDCP confirming new virus victim and profit warnings from Microsoft which along with dovish cues from the international market suggests Wall Street is likely to open soft and see major indices decline further erasing gains made from recovery in the previous session.
EUR/USD: The pair is trading positive despite broad-based cautious investor tone as USD weakened on virus outbreak woes. Declining US T.Yields keep USD under pressure while fresh stimulus hopes helped EURO bulls push price back above 1.09 handle. Traders await U.S. data for short-term profit opportunities.
GBP/USD: British Pound remains under pressure against U.S. Greenback despite most major global currencies seeing relief rally today as tensions escalated following the U.K.’s threat to walk out of post-Brexit talks with E.U. within four months. But price held firm above the mid-1.28 handle on broad-based USD’s weakness. Traders now await U.S. data for short term profit opportunities.
USD/CAD: The pair is trading positive in the global market, having managed to gain hold above 1.33 handle in the previous session. But price action is trapped in a range around mid-1.33 handle as USD came under pressure over declining US T.Yields. The sharp decline in the crude oil price continues to keep Loonie under pressure allowing USD to retain most of its gain. Traders now await U.S. and Canadian data for short term profit opportunities.
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