Risk sentiment suffers further as Coronavirus kicks on
Thursday 12 March 2020
It's not looking good out there with Coronavirus having a greater impact every day and now officially declared a pandemic. Trump has banned flights from most of Europe into the US but not from the UK even though it has growing problems of its own and likely to step up measures into the delay phase which involves more of a general shut-down. As importantly in Trump's speech was a comment that the European ban also applied to cargo and goods. Cue massive falls in equities and oil which his later denial did little to assauge.
Worrying times indeed and markets are duly taking a beating as the situation sadly escalates. Equity markets and oil in meltdown again with FX pairs taking a further flight into safe haven territory. Eyes also focussed on the ECB today with a combination of fiscal and monetary measures expected to be announced at 12.45 GMT with the press conference at 13.30 GMT.
GBPUSD has retreated as I expected and warned both here and on Twitter. The BOE rate cut and Budget measures will do little to stimulate any growth in the present circumstances (merely an exercise in damage limitation) and the pair has dulY fallen to 1.2765 after failing at 1.2980. GBPJPY and GBPCHF supply helping to push it down along with another surge higher in EURGBP despite the ECB announcing their own measures today but with them having little wriggle room on interest rates. EURGBP has rallied to post 0.8837 (GBPEUR down to 1.1315).Markets definitely casting an eye on today's ECB announcement but seem to be ,rightly imho, coming to the conclusion that on mon pol at least they have little room to move. GBPJPY has plummeted further to 132.12 . I warned yesterday that BOE and UK Budget action are not the only games in town for this pair and market risk remains fragile and so it has panned out.
I stay poised to sell GBP rallies.I don't see fiscal or monetary policy measures being able to dig the Service-led UK economy out of this latest hole as I warned yesterday.
USDJPY duly failed above 105.00 and has been down to 103.08 before rallying. BOJ limited as to whhat they can do and unlikely to intervene above 100.00 but we must never say never.EURJPY has fallen to 116.52 as core pairs both fall on the soggy risk and ECB uncertainties.EURUSD has fallen to 1.1237 on the ECB speculation/soggy risk with EURCHF also breaking down to 1.0545. ECB in focus and I will try and send some further thoughts ahead of the announcement but I do think Euro weakness will be limited overall in the aftermath.USDCHF has been down to 0.9320 as EURCHF retreats but losses tempered by EURUSD also falling and pushing USDCHF up off its lows with the SNB ever poised but sellers also still poised.
AUDUSD has now posted fresh lows of 0.6415 and remains on the back foot with AUDJPY selling helping to drive it lower. USDCAD has been up above 1.3800 again as oil prices tumbled but since retreated to 1.3758.
Fickle Forex markets ever prevailing so be ready to jump on moves with your entry/exit levels and orders as always. Caution advised as ever if you're not sure.
Let's be careful out there as ever.
Interbank rates: 08.45 GMT