Tuesday February 25th, 2020

Increasing global economic concerns from the Coronavirus saw US & European equities suffer their worst declines since mid-2016 on Monday. US$ gave up some ground to the major currencies as speculation grows that the US Fed could cut interest rates. A Fed cut would be preventative to curb the downside pressure on the economy caused by the virus. CNY, NZD & AUD appear to have found a base with the slowing pace of the virus in China & the prospect of a FED cut. The increasing virus cases outside of China continues to impact global markets. Total cases of coronavirus across 37 countries and territories sits at +79,500 with deaths +2,600. Coronavirus developments and a number of US data releases will dictate intraday direction.

Oil prices remain under pressure for a 3rd day with Coronavirus concerns outweighing OPEC+ supply cuts. C$ retreated back towards 2 weeks lows vs US$ under pressure from weaker oil prices and speculation of a BOC rate cut. C$ is approaching the key 1.3310 resistance level vs U$, a breach here could see a move towards 1.3430. BOC deputy governor speech today will be followed closely for Cad interest direction. Oil prices, US$ data and BOC speech will provide market direction today.

Euro holds around the 1.0850 more on US$ selling than Euro strengthening. The spread of the coronavirus to Northern Italy will increases investor concern for the EU economic outlook. Exports to China had driven the EU post-crisis growth, the longer-term impact could be significant for the Eurozone economy. If the FED cuts interest rates, expect a similar response from the ECB. Intraday US data will dictate currency direction.

GBP extends its rebound vs US$ again on US$ selling vs strong GBP sentiment. EU ministers are set to sign-off on their post-Brexit talk mandates. The EU / UK will begin formal trade negotiations next week, at that point we would expect the negative rhetoric from both sides to ease. FED speculation continues to impact all major currencies, with the potential to see GBP have room to rally towards 1.3150.