Forex news from the European morning session - 27 February 2020
Headlines:
- BOE's Cunliffe: Monetary policy cannot do much about adverse supply shocks
- BOE's Cunliffe: We can see inflation pressures coming from UK labour market
- UK affirms that it is willing to trade on no-deal basis if talks with EU fails
- UK confirms two new coronavirus cases, total tally at 15
- South Korea reports another 171 cases of the new coronavirus today
- Spain February preliminary CPI +0.8% vs +0.8% y/y expected
- Italy coronavirus cases are inflated due to testing errors - WHO official
- China says that over 30% of SMEs have resumed normal production
- BOJ's Kataoka: Doesn't think additional easing is needed against coronavirus risks
- Australia PM Morrison: No 'broader, larger' fiscal stimulus in response to virus outbreak
Markets:
- CHF leads, GBP lags on the day
- European equities lower; E-minis down 1.2%
- US 10-year yields down 5.5 bps to 1.282%
- Gold up 0.6% to $1,650.42
- WTI down 2.7% to $47.40
- Bitcoin up 0.6% to $8,805
The market continues to be gripped by the coronavirus outbreak with a growing fear that it may become more widespread across Europe and in the US ahead of the weekend.
That has seen stocks take a tumble once again with US futures down by over 1% now and Treasury yields sinking, with 10-year yields down to record lows under 1.30%.
The tumble in yields also weighed on the dollar today, with the market now aggressively pricing in Fed rate cuts - fearing that the virus outbreak will dampen the US economy.
An April rate cut is more or less fully priced in with the next one seen in July and a third rate cut slowly being priced in for December currently.
With the market in risk-off mode, USD/JPY eased from 110.25 to 109.85-00 levels currently while the dollar fumbled against most major currencies in trading today.
EUR/USD rose from 1.0915 to 1.0960, helped by a push in EUR/GBP as well as late news that Germany may be introducing stimulus measures to counter the virus outbreak.
The aussie and kiwi are also posting decent gains amid short covering against the dollar, with the greenback now in a tricky spot amid virus concerns that are brewing in the US.
The loonie is among the weaker performers today as oil prices continue to be hammered amid fears of a major global slowdown, with USD/CAD treading around 1.3320-50 for the most part today. Oil is down by nearly 3% to just above $47 levels now.
The pound was also an interesting mover as cable held more steady around 1.2920-30 initially before falling off as the UK affirmed that it will walk away from trade talks with the EU if they can't get an agreement by June.
That saw cable fall off to 1.2860 before rebounding slightly currently near 1.2890-00.
Looking ahead, it is still all about risk and a key focus will be on the dollar as well, with the market starting to price in how a coronavirus epidemic may impact the US economy if the outbreak becomes more widespread in the US over the coming days.
