Forex news for NY trading on February 27, 2020
- Major indices get hammered. All 3 major indices down -4.4% on the day
- WTI crude oil off lows but still down sharply
- ECB Lane: More widespread constitutes additional downside risks
- New York State health Department: 700 people have been asked to self isolate for 2 wks
- Guggenheim's Minerd on Bloomberg speaks bearishly about markets
- California Gov.: Monitoring 8.5K people for coronavirus
- Italian PM Conte: Must work side by side to ensure level EU/UK playing field
- US treasury sells 7 year note at a high yield of 1.247%
- Italy has 650 coronavirus cases
- Fed's Evans: Financial stability risks are moderate
- OPECs Barkindo: OPEC+ showing renewed commitment to reach an accord
- The good news is that the European stock markets are closed
- Fed's Evans: When interest rates are near zero, Fed must commit to extraordinary accommodation
- ECB Lagarde: Monitoring coronavirus very carefully
- IMF likely to downgrade global growth outlook
- Atlanta Fed GDPNow estimate for 1st quarter growth 2.7% versus 2.8% last
- US pending home sales for January +5.2% versus 3.0% estimate
- US Health Secretary Azar: Immediate coronavirus risk within US remains low
- German economy minister Altmaier: Not planning fiscal program to deal with virus
- WHO's Tedros: We are at a decisive point in coronavirus epidemic
- Initial jobless claims 219K versus 212K estimate
- US Q4 GDP (second reading) +2.1% vs +2.1% expected
- US durable goods orders for January (P) -0.2% versus -1.4% estimate
- Canada Q4 current account balance -$8.76B vs -$8.96B expected
- Coronavirus is on everyone's mind, but there is a data dump today too
- The EUR and CHF are the strongest while the CAD and GBP are the weakest
I know Forexlive is mostly focused on forex, but all eyes remain on the coronavirus news headlines and the stock markets. Needless to say, the US stock market is a driver. While the price was going up, new highs upon new highs, upon new highs, were being made. Now as the the dam has broken, the downside momentum seems to have no limits.
Today, the major indices closed just off the lowest lows of the day and down -4.42% to -4.61%. The Nasdaq led the liquidation with a decline of -4.61%, but heck, -4.42% is not far from the worst decline.
Some highlights from today's fall:
- All the major indices closing correction mode with the NASDAQ index -13% from the high, the S&P down -12.30% and the Dow down about 12.9%.
- The point declines for the Dow and S&P today were the largest on record.
- The S&P index had the worst percentage drop since 2011
- The Dow has dropped 3200 points over the last 6 days with 2 declines of over 1000 points
- The Vix or fear index is trading at the highest level since February 2018. The index moved above the 36.20 high from December 2018 when US stocks were being hammered.
I'm sure there more historical firsts, but those show the extent of the sell off.
In the US debt market, the 2 year fell by -9.3 basis points as the market continues to price in potential Fed cut. The odds for a March 18 cut increased over 60% today. The 10 year yield was down -6.5 basis points. The 2-10 year spread widened out to 20.08 basis points from 17.24 basis points yesterday.
In the gold market today, the price move sharply higher to $1660.38, but 1st as stocks rallied off lows and then as stocks unwound to the downside, the price of gold did not rebound but fell sharply. One theory might be that longs and gold were forced to liquidate to cover margin calls in other arrangements like stocks were even oil which has been getting trashed as well.
The net result is that gold is trading around $1640.23, which is down $0.60 or -0.04%. There is no flight into the safety of gold, but out of gold.
WTI crude oil futures did not escape the fears that prevail in the market. It is trading down $2.29 or -4.7% to $46.45. The low price extended to $45.88. The price of gold is trading at the lowest level since January 2019. Targets include the low from that month at $44.37. Below that, and traders will be targeting the December 2018 low $42.36.
So how did all the market fluctuations impact the forex market?
Looking at the ranking of the major currencies today, the EUR was the strongest, while the CAD and GBP was the weakest.
The EUR is likely rallying as a result of the liquidation and reversal of the flow funds into the US instruments (in particular stocks). Investors overseas from Europe have been using cheap money from Europe, to purchase US equities. Now that stocks are taken on the chin, investors (who may also been overleveraged), are selling stocks and repatriating funds back to Europe. That is one explanation at least.
The CAD weakness can be blamed on the sharp fall in crude oil.
The USD was also weaker today with gains only against the CAD and GBP.
