Forex news from the European morning session - 3 March 2020
Headlines:
- France's Le Maire: G7, Eurogroup will have strong, coordinated response
- Iran confirms 835 new coronavirus cases, brings total tally to 2,336 cases
- ECB's Holzmann: Monetary policy actions are secondary to fiscal support
- BOE's Carney: Should expect a response that has a mix of fiscal and central bank elements
- Eurozone February preliminary CPI +1.2% vs +1.2% y/y expected
- BOE's Carney: If UK economic recovery is not sustained, BOE may need to act
- BOE's Carney: We will take all necessary steps to support the UK economy
- UK February construction PMI 52.6 vs 49.0 expected
- ECB reportedly working on possible long-term loan scheme for SMEs hit by virus impact
- South Korea confirms another 374 new coronavirus cases, total tally at 5,186 cases
- China: US actions against Chinese media has caused serious negative impact on bilateral relations
- Switzerland Q4 GDP +0.3% vs +0.2% q/q expected
- Japanese investors not impressed by BOJ's efforts to ensure market stability today
Markets:
- AUD leads, CAD lags on the day
- European equities higher; E-minis up 0.4%
- US 10-year yields down 1.8 bps to 1.145%
- Gold up 0.9% to $1,603.00
- WTI up 3.2% to $48.25
- Bitcoin down 0.4% to $8,907
The session started off with a bit of caution as a Reuters report highlighted a possible lack of fiscal and monetary commitments on the G7 draft communique. Asian equities pared gains into the closing stages with US futures also slipping into negative territory.
USD/JPY eased lower to 107.70 with US 10-year yields slipping towards 1.11% ahead of European trading. But that all quickly changed when the cash equity market opened.
European stocks began with decent gains before a quick surge with gains between 2% to 3% with US futures also rising above 1% at one stage during the morning.
That helped to push yields slightly higher towards 1.17% before the enthusiasm eased a little as we look towards North American trading currently.
The currencies space was less enthused though, with USD/JPY still sticking near 108.00 and USD/CHF also holding lower around 0.9580 at the moment.
The pound performed decently in spite of BOE governor Mark Carney dropping hints about a possible rate cut down the road. The push lower in EUR/GBP away from its 200-day moving average is helping to keep sterling bid with cable flirting with the 1.2800 handle.
Meanwhile, the aussie is keeping its post-RBA gains around 0.6550-65 against the dollar but is generally little changed on the session.
Looking ahead, the market seems to be holding out some hope that global central bank stimulus and fiscal action is going to come in and save the day still. That is keeping risk assets slightly more underpinned as we approach the session ahead.
However, I reckon investors may be setting themselves up for disappointment if they are hoping to get clues about that from the G7 communique.
That said, rate cuts are going to come anyway but how effetive they will be in appeasing the market will depend on fiscal help and ongoing coronavirus developments.
