Wednesday March 18th, 2020

The US presses for US$ 1 trillion stimulus package as global Coronavirus cases increases to +200k and US deaths cross +100. Global equity and commodity markets remain under pressure and investors flock to US$. Global central banks continue their efforts to keep money markets operational. The FED announced it was reinstating a funding facility used in the 2008 financial crisis. In perspective so far in 2020 AUD, NZD, ZAR, ILS, NOK are down +10% and Russia, Brazil +20% down vs US$. Intraday the focus remains on Coronavirus updates and related government responses.

Oil continues to weaken hitting 17 year lows as social and global travel restrictions increase significantly reducing supply demand. C$ sold off quickly as oil prices fell below $30 a barrel causing the loonie to hit a fresh 4 year low vs US$. C$ has weakened over 9% in 2020 vs US$ despite’s Canada’s stimulus response to the Coronavirus. Oil will remain the primary driver of the C$ strength over the coming months. The break of 1.4100 leaves the currency open to further weakness towards 1.4690 Jan 2016 low vs US$. Intraday Canadian CPI data will be watched closely.

Euro comes under renewed selling pressure breaching through the physiological 1.1000 level vs US$. The sharp drop in economic sentiment, Germany’s perceived slow response and the global flight to US$ have all impacted the Euro. Spain is the latest government to announce massive economic stimulus package to fight the effect of the Coronavirus. Euro could remain under pressure as national boarders continue to close and social restrictions increase. Coronavirus cases are expected to surpass 75K in Europe by the weekend, with Italy accounting for +31,500 as of today. A break of 1.0950 could see a retest of 1.0770 (Apr2017) and possibly 1.0336 (Jan2017).

The UK government announced a GBP 350 billion stimulus and is following Europes lead of implementing social & travel restrictions. UK PM’s reiteration that the UK is still planning to exit the EU as scheduled 31st Dec. The comment has caused investor concern, putting the GBP under renewed selling pressure. GBP has fallen over 8% vs the US$ in 2020 and is very close to 2019 lows of 1.1969, a break here leaves GBP open to testing post-brexit (historic lows) 1.1450.