Tuesday March 24th, 2020

Yesterday, in a coordinated effort to stabilize financial markets the US Fed announced unlimited Q.Easing and Germany announced Euro 750bln stimulus package. Markets are initially responding positively with European equities stronger and oil up 4% in early trading. The US$ index fell 1% boosting weaker currencies such as MXN, ZAR, & NOK which have rebounded between 2%-5%. European PMI data fell significantly highlighting the economic impact from the Coronavirus. US PMI and New Home sales data releases this morning and will provide intraday direction to the markets. The US Coronavirus Bill continues to be negotiated, expectations are between $1 – 2.5 trillion in fiscal stimulus.

Oil prices bounced off $25 a barrel after the US Fed rolled out several stimulus programs. Oil prices have halved in 2020, and could remain under pressure with Saudi Arabia planning to boost exports. C$ rebounded on stronger oil prices, settling into a 1.4150-1.4650 wider range. With provinces announces non-essential business shut-downs, its difficult to see a scenario where C$ doesn’t weaken further vs US$.

Euro rallied almost 2% vs US$, focusing on the latest stimulus measures and shrugging the weak eurozone PMI data. A positive sign on the Coronavirus as Italy announced fewer Coronavirus-related deaths for a 2nd day in a row. Germany’s stimulus measures, Europes largest stimulus package helped boost confidence in Euro. As European restrictions are being extended, expect current Euro strength to be limited. Bias to sell Euro on any rallies as we expect the US$ to retain its current safe-haven status.

UK PM ordered its citizens to stay at home instigating restrictions without precedent in peacetime, in order to curb to the spread of the Coronavirus. GBP rallied towards 1.18 on the back of weaker US$, but similar to Euro its difficult to see GBP extending its current rally. UK PMI felt its lowest level on record, the composition figure also fell below the levels seen in the financial crisis.