Market Roundup
- BoJ expands asset purchase but refrains from rate cut
- NZ central bank slashes rates at emergency meeting
- China's economy skids as virus weakened factories, households
- Federal Reserve cuts rates to near zero
Economic Data Ahead
- (0500 ET/1000 GMT) Italy Consumer Price Index (YoY) (Feb)
- (0500 ET/1000 GMT) Italy Consumer Price Index (EU Norm) (MoM) (Feb)
- (0500 ET/1000 GMT) Italy Consumer Price Index (MoM) (Feb)
- (0500 ET/1000 GMT) Italy Consumer Price Index (EU Norm) (YoY) (Feb)
Key Events Ahead
- N/A German Buba Monthly Report
- N/A EU Finance Ministers Meeting
FX Beat
DXY: The dollar index declined after the Federal Reserve slashed interest rates for the second time in less than two weeks on Sunday, reducing to a target range of 0 percent to 0.25 percent. The greenback against a basket of currencies traded 0.7 percent down at 97.94, having touched a high of 98.81 on Friday, its highest since feb. 27.
EUR/USD: The euro rebounded after falling to a near 2-week low in the prior session, as European Union finance ministers plan to agree on a coordinated economic response to the coronavirus pandemic. The EU ministers will discuss by video conference how to limit the effects of the spread of the COVID-19 virus, which has already caused lockdowns in Germany, Italy, Spain, Denmark, the Czech Republic and Poland. The European currency traded 0.3 percent up at 1.1134, having touched a low of 1.1054 on Friday, its lowest since March 2. Investors’ attention will remain on a series of data from the Eurozone economies, ahead of the U.S. NY Empire State Manufacturing Index. Immediate resistance is located at 1.1223 (38.2% retracement of 1.1495 and 1.1055), a break above targets 1.1275 (50% retracement). On the downside, support is seen at 1.1037 (21-DMA), a break below could drag it below 1.1006.
USD/JPY: The dollar declined after the U.S. Federal Reserve made another surprise interest rate cut amid the economic impact of the coronavirus outbreak. The Federal Reserve cut interest rates for the second time to a target range of 0 percent to 0.25 percent and said it would expand its balance sheet by at least $700 billion in coming weeks. The Japanese yen extended gains after the Bank of Japan eased monetary policy further by ramping up purchases of exchange-traded funds and other risky assets to combat the widening economic fallout from the coronavirus epidemic. The major was trading 1.5 percent down at 106.33, having hit a high of 108.50 on Friday, its highest since March 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. NY Empire State Manufacturing Index. Immediate resistance is located at 108.20 (21-DMA), a break above targets 108.60. On the downside, support is seen at 105.01 (5-DMA), a break below could take it near at 104.50.
GBP/USD: Sterling bounced back from a 5-month low hit in the prior session as the greenback weakened after the Federal Reserve cut interest rates to near zero percent in an emergency move in a bid to ease tension in financial markets. The major traded 0.5 percent higher at 1.2336, having hit a low of 1.2261 on Friday, it’s highest since Oct. 10. Investors’ attention will remain on the geopolitical developments ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2482 (23.6% retracement of 1.3200 and 1.2261), a break above could take it near 1.2619 (38.2% retracement). On the downside, support is seen at 1.2204, a break below targets 1.2154. Against the euro, the pound was trading 0.05 percent down at 90.37 pence, having hit a low of 90.53 earlier, it’s lowest since Sep. 4.
AUD/USD: The Australian dollar plunged to a fresh 11-year low after data showed China’s factory production slumped at the sharpest pace in 30 years in the first two months of the year as the fast-spreading coronavirus and strict containment measures severely disrupted the Chinese economy. China's industrial output fell by a much larger-than-expected 13.5 percent in January-February from the same period a year earlier, its weakest reading since January 1990, while fixed-asset investment fell 24.5 percent year-on-year, against forecasts for a 2.8 percent rise and falling from the 5.4 percent growth in the prior period. The Aussie trades 0.8 percent down at 0.6134, having hit a low of 0.6094 earlier, it’s lowest since November 2008. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate resistance is located at 0.6320 (38.2% retracement of 0.6684 and 0.6094), a break above could take it near 0.6389 (38.2% retracement). On the downside, support is seen at 0.6056, a break below targets 0.6012.
NZD/USD: The New Zealand dollar slumped after New Zealand’s central bank surprised the markets by cutting interest rates by 75 basis points to a record low of 0.25 percent following an emergency meeting as it prepared for a hit to the economy from the coronavirus. The Kiwi trades 0.8 percent down at 0.6015, having touched a low of 0.5989 earlier, its lowest level since May 2009. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6164 (38.2% retracement 0.6447 and 0.5989), a break above could take it near 0.6218 (50% retracement). On the downside, support is seen at 0.5960, a break below could drag it below 0.5905.
Equities Recap
Asian shares slumped after the Fed cut rates for the second time this year to soften the economic blow from the economic shock.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 4 percent, its lowest since early 2017.
Tokyo's Nikkei declined 2.5 percent to 17,002.04 points, Australia's S&P/ASX 200 index rose 9.7 percent to 5,002.00 points and South Korea's KOSPI slumped 3.2 percent to 1,714.86 points.
Shanghai composite index eased 3.4 percent to 2,789.25 points, while CSI 300 index traded 4.3 percent down at 3,727.84 points.
Hong Kong’s Hang Seng traded 4.6 percent lower at 22,917.74 points. Taiwan shares shed 4.1 percent to 9,717.77 points.
Commodities Recap
Crude oil plunged as another emergency rate cut by the U.S. Federal Reserve failed to soothe global financial markets panicked by the rapid spread of the coronavirus. International benchmark Brent crude was trading 7.5 percent lower at $32.44 per barrel by 0555 GMT, having hit a low of $31.26 last week, its lowest since Feb. 2016. U.S. West Texas Intermediate was trading 7.1 percent down at $30.87 a barrel, after falling as low as $27.40 last week, its lowest since Feb. 2016.
Gold prices rebounded from multi-month lows following another emergency rate cut by the U.S. Federal Reserve. Spot gold was trading 0.8 percent up at $1,542.31 per ounce by 0559 GMT, having touched a low of $1504.78 on Friday, its lowest since Dec. 26. U.S. gold futures rose 1.8 percent to $1,544.20 per ounce.
Treasuries Recap
The Japanese government bond prices dropped after the Bank of Japan expanded its purchase of riskier assets. The benchmark 10-year JGB futures fell 0.40 point to 152.88. The yield on the benchmark 10-year cash JGBs rose 2 basis points to 0.010 percent, a two-month high. The 20-year JGB yield rose 0.5 basis point to 0.290 percent, while the 30-year JGB yield rose 2 basis points to 0.340 percent. The two-year JGB yield rose 1 basis point to minus 0.195 percent, while the five-year yield rose 2.5 basis points to a two-month high of minus 0.105 percent. The 40-year JGB yield rose 2 basis points to 0.330 percent. The 10-year swap rate, which usually moves in the same direction as bond yield, fell to minus 0.1125 percent. Its spread with the 10-year cash bond yield fell to minus 0.1225 percent, the lowest since 2009.
