US Dollar Soars, Wall Street Confirms Bear Market, Gold Prices Drop. What Now?
Last week was filled with mixed market emotion. On the one hand, Wall Street experienced its worst day since 1987 as equities entered a bear market. On the other hand, the S&P 500 and Dow Jones surged over 9% on Friday as President Donald Trump declared a national emergency on the coronavirus outbreak. That has opened the door to much needed federal aid.
What is clear is that the US Dollar took its role as the world’s reserve currency, rising the most on average over 5 days since 2008. The premium for liquidity combined with rates plunging across major central banks did not bode well for anti-fiat gold prices. XAU/USD had its worst week since 2011. A price war triggered by Saudi Arabia plunged oil prices in their largest drop since 1991.
The risk of volatility remains high with all eyes on stimulus measures from governments and central banks. With the U.S. Senate open during its recess, expect policymakers to push forward a relief bill. This is as futures markets almost expect 100-bp worth of easing from the Federal Reserve on Wednesday. Some easing is also anticipated from the Bank of Japan a day later.
Timing and expediency are arguably of the essence to prevent the coronavirus from both spreading and taking a large enough toll on economic growth. If done right, there could be scope for calm which risks pressuring the anti-risk Japanese Yen. China will release industrial production and retail sales during a month when gauges of business activity dropped off a cliff. What else is next?
Last week’s failure by the ECB to cut Eurozone interest rates as most traders and analysts had expected has led to a steep drop in EUR/USD and turned the outlook from positive to negative.
Speculation for lower US interest rates may curb the recent pullback in the price of gold as the Federal Reserve is widely expected to deliver another rate cut in March.
The ‘V-shaped’ recovery in the US dollar continues despite the Fed announcing a massive USD1.5 trillion liquidity pump on Thursday to arrest a further breakdown in the financial system. Next week, the latest FOMC decision.
History-making volatility across global stock markets. Eyes turn to Fed decision, while German ZEW to confirm recession.
Mexican Peso marked the fourth weekly decline vs the Dollar with price settling well off fresh record highs. Here are the levels that matter on the USD/MXN weekly chart.
Crude oil prices will have to a digest a plethora of volatility-inducing catalysts in the week ahead including the FOMC rate decision, covid-19 pandemic and an ongoing OPEC-Russia price war.
USD/CAD erupted last week on the massive shock in oil; the breakaway gap looks to be legit, and on that a bid is anticipated to maintain.
A volatile week saw USD/JPY plunge more than 2.8% before reversing sharply higher- is a low in place? Here are the levels that matter on the Japanese Yen weekly chart.
Gold has had a rough stretch recently and is hitting support with a vengeance; the question is whether it will hold or break on through for further losses.
Christine Lagarde is in the spotlight as Europe is the new epicenter for the coronavirus. Will a 2008-like slowdown follow?
The US Dollar roared higher last week, posting its best performance since October 2008 at the heart of the global financial crisis. Will it find fuel to continue building higher?
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