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A Global Shutdown and Continued Spread of the Coronavirus to Overshadow any Stats

Bob Mason

Earlier in the Day:

It was a quiet start to the week on the Asian economic calendar this morning. There were no material stats to provide direction through the session, leaving the coronavirus as the main area of focus.

Updates from Europe and the U.S, in particular, were negatives for the broader market going into the week.

Containment measures were strengthened in a bid to slow down the spread. Over the weekend, the number of cases in the U.S surpassed Iran, South Korea, and France, Germany, and Spain.

At the time of writing, the total number of U.S cases stood at 32,356. Figures from Europe were more alarming, however.

Italy saw the total number of cases surge to 59,138, with the total number of deaths jumping to 5,476, which was giving a mortality rate of almost 10%.

Cases in Spain and Germany rose to 28,603 and 24,842 respectively, with cases in France increasing to 16,018.

For the markets, the major concern will be the fact that Italy has been in shutdown mode for a month and continues to see large increases in new cases. This will suggest that other EU member states and the U.S will experience a similar trend.

It certainly contributed to the shutdown of nonessentials across Europe and even major U.S economic hubs such as NY.

The Majors

At the time of writing, the Japanese Yen was up by 0.49% to ¥110.39 against the U.S Dollar. The Aussie Dollar was down by 0.59% to $0.5751, with the Kiwi Dollar down by 1.33% to $0.5624.

In the equity markets, the ASX200 was down by 5.82% in early trading, with the HK and China markets yet to open.

The Day Ahead:

For the EUR

It’s a quiet start to the week on the economic calendar. The Eurozone’s flash consumer confidence figures for March are due out late in the day.

With the EU going into shutdown mode in March and the total number of deaths in Italy surpassing China, it’s not going to be good.

Any hopes of a consumer consumption-driven economic rebound have gone as non-essential businesses close in a bid to contain the virus.

For the EUR, there may be some upside, however, as the number of cases in the U.S surpasses the likes of Spain, Germany, and France.

The reality is, however, that the Dollar will likely continue to hold onto its safe-haven status. At least for now… Things could change should Asia and Europe manage to contain the virus sooner.

At the time of writing, the EUR was up by 0.01% at $1.0689.

For the Pound

It’s a particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide the Pound with direction.

With the government enforcing greater containment measures, the Pound may find some much-needed support. While the number of cases has risen, they are still well below its neighbors. The government is optimistically expecting a short period of economic woe.

With non-essential businesses closing down to contain the virus, we would expect more fiscal measures to be rolled out. This should provide further support to the Pound in the week.

At the time of writing, the Pound was down by 0.07% to $1.1621.

Across the Pond

It’s also a quiet day ahead on the U.S economic calendar, with no material stats to provide direction.

Updates on the coronavirus and the government measures to contain the spread and support the economy will remain the key driver.

Coronavirus numbers alone from the weekend support increased demand for safe havens at the start of the week. The jump in U.S cases, however, will test the Dollar.

The markets will certainly need to get a sense of how widely the virus can spread before being able to assess the economic fallout.

For now, the market’s comfort blanket is that the U.S government and FED are willing to do anything. That is about the only good news, however, as the spread of the virus continues to gather pace. A Bipartisan vote is needed swiftly now to get funds to those that need it.

The Dollar Spot Index was down by 0.36% to 102.447 at the time of writing.

For the Loonie

It’s a relatively busy day ahead on the economic calendar, with January wholesale sales figures due out later today.

We would expect the Loonie to be more exposed to any weak numbers. The markets will likely fret if the bar is already at a low level ahead of any impact from the coronavirus…

Crude oil prices and market sentiment towards demand the economic outlook will likely remain the Loonie’s nemesis on the day.

The Loonie was down by 0.67% at C$1.4462 against the U.S Dollar, at the time of writing, with crude oil prices back on the slide in the early hours.

This article was originally posted on FX Empire

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