Friday March 27th, 2020

A volatile week for the US$ which is on track for its biggest weekly fall in a decade. The combination of FED’s QE measures, the leap in US virus cases and the highest weekly surge in US Unemployment claims on record added pressure to US$. The US House of Representatives votes on the US$2-trillion coronavirus bill today, once passed the bill is expected to be signed by the US President. Safe-haven US$ buying is returning as equity markets see fresh selling, halting the 3-day rally. MXN remains under pressure after the S&P cut its credit rating yesterday, in anticipation of the coronavirus’s economic impact on the country. Other currencies are consolidating as investors take stock of the volatile week. US Data releases and US coronavirus bill will provide intraday direction.

Oil prices continue to weaken and is on track for its 5th consecutive weekly fall as virus related lockdowns reduces demand global oil demand. The head of the international energy agency said demand my drop by 20% as 3 billion people remain in lockdown. C$ boosted by a weaker US$, rallied to a 9-day high of 1.3985 yesterday. We open at 1.4060 a break above 1.4080 could see further C$ weakness towards 1.4250 level as oil prices remain weak.

Euro retreated from its weekly highs as the “US Stimulus” related rally starts to run out of steam and US$ buying resumes. EU leaders are still not in agreement on a unified economic response, with Germany opposing issuing “Corona-bonds”. The lack of combined response may weigh negatively on the Euro. Italy, Spain, Germany and France account 40% of the global virus cases, overwhelming medical services. We expect Euro could retreat back towards 1.0890 level vs US$. Intraday will focus on US data releases and the stimulus vote for direction.

GBP after rallying over 800bps vs a weak US$ is looking like it is running out of steam and consolidating around the 1.2250 level. Investor confidence in the UK is returning after the governments stimulus efforts have been seen as positive. Coronavirus projects for the UK highlighted that the transmissibility is faster than expected. Any GBP weakness intraday should find initial support around the 1.2100 level vs US$.