Forex news from the European morning session - 2 March 2020
Headlines:
- US VP Pence: Expects many more cases of coronavirus
- Russia's Novak: Has not received proposal to cut output by 1 mil bpd
- How the coronavirus is impacting economic channels - OECD's take
- OECD cuts 2020 global economic forecast to 2.4% from 2.9% previously
- UK February final manufacturing PMI 51.7 vs 51.9 prelim
- SNB total sight deposits w.e. 28 February CHF 595.8 bn vs CHF 592.3 bn prior
- The BOJ bought a record amount of ETFs today
- BOE says it will take all needed steps to protect stability
- ECB's Villeroy: G7 will have a teleconference this week
- ECB's Villeroy: Our eyes are wide open about coronavirus, but we need to keep cool heads
Markets:
- EUR leads, GBP lags on the day
- European equities lower; E-minis down 0.7%
- US 10-year yields down 7.8 bps to 1.07%
- Gold up 0.7% to $1,597.50
- WTI up 1.3% to $45.36
- Bitcoin up 0.9% to $8,749
It is a new week and a new month but it is still all about the coronavirus in the market.
China PMI data over the weekend was abysmal and that set off more alarm bells in early trades but the market recovered strongly on hopes of global central bank stimulus to follow.
That saw a solid bounce in equities and risk which translated into the early stages of the European morning. Equity indices opened with solid gains in Europe with US 10-year yields even recovering from a low of 1.028% to 1.158%.
USD/JPY rebounded to a high of 108.58 with USD/CAD also threatening a move back towards 1.3300 as oil prices were up by more than 3% on the session.
But as the hours went by, the bounce started to fade and things quickly turned sour over the last two hours with US futures erasing over 1% gains earlier to fall by more than 1% as well - before recovering some ground currently.
European equities also sank into negative territory with the DAX falling by over 2% at one stage. Meanwhile, US 10-year yields also fell off back towards 1.07% now.
That saw USD/JPY erase gains to fall to 107.50 before recovering to 107.80 levels now. USD/CHF also fell below 0.9600 to 0.9564 while EUR/USD continued its solid momentum to rise above the 1.1100 handle.
The pound found little reprieve with the market now pricing in a BOE rate cut for next month after a sudden remark by the central bank vowing to "take all needed steps to protect stability". Cable fell off from just above 1.2800 to 1.2746 as a result.
One of the key questions in the market now is whether we have just witnessed a dead cat bounce or perhaps there is more in the rebound rally still to come later in the week.
Another key question is whether or not coordinated central bank stimulus can help to do anything in the long-run against the virus outbreak? My view is that it is a highly fluid situation so we will have to see how things develop across the world in the coming weeks.
For now, learn to embrace what the market is offering. Volatility is back!
