Tuesday March 31st, 2020

Chinese manufacturing and service PMI data released today both beat expectations signaling signs of recovery. Equity markets have started the day in positive territory but are set to post their worst quarter since 2002. US$ index continues to strengthen vs a basket of major currencies. Asian currencies have been supported by the Chinese data remain stable, whereas AUD & NZD fell 1% vs US$. Coronavirus dominates the markets focus as the lockdown extends to +3bln people globally and virus infections surpasses 800k. Several key US data releases will provide initial direction, with expectations US$ may continue to extend its current rally.

Oil prices bounced off 18-year lows after US President and Russian President agreed to talks aimed at stabilizing the energy markets. The talks could be a significant first step in brokering an agreement between OPEC/Russia to reduce supply. C$ weakness continued towards the mid 1.42’s on weak oil prices and a strengthening US$. Expect range bound 1.4150/1.4250, a break of 1.4250 could see a retest of 1.4400. Intraday focus will be on Canadian GDP, US Data and developments in US/Russia energy discussions. 

Euro has continued to weaken against the US$, breaching the key support of 1.0980 this morning. Europe’s fight against the coronavirus is seeing the number of patients at intensive care units stabilize in Spain and new infections in Italy are falling. Worse than expected EU CPI data and a strengthening US$ could see further Euro weakness towards 1.0800 vs US$. US data releases and coronavirus updates will continue to dominate intraday direction.

GBP remains under pressure as investors favor buying US$. Disappointing UK GDP data and falling confidence among British companies adding to GBP weakness. Investor concern is growing over UK debt related to the coronavirus stimulus, which saw Fitch cut Britain’s sovereign debt rating last week. GBP continues to look vulnerable to further volatility and weakness, a break of 1.2300 could see 1.2150 next.