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By XE Market Analysis April 9, 2020 4:23 pm
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    XE Market Analysis: Asia - Apr 09, 2020

    The Dollar fell broadly in N.Y. on Thursday, as the Fed announced new unprecedented facilities to deal with the coronavirus and the containment policies that have largely shut the economy. Under these new measures, that include programs to support state and local governments, as well as small and mid-sized companies, the Fed will provide up to $2.3 tln in additional aid. The Main Street lending program will see the Fed purchase up to $600 bln in loans. There will also be a Municipal Liquidity Facility which will provide up to $500 bln to states and municipalities by directly purchasing their debt. Jobless claims fell by an additional 6+ mln, PPI was near expectations, and Michigan sentiment dropped more than expected, though the markets continue to overlook the economic numbers, with focus remaining on the pandemic.

    [EUR, USD]
    EUR-USD headed to six-session highs of 1.0945, up from 1.0850 at the open, following more massive stimulus from the Fed. The Fed announced new unprecedented facilities to deal with the coronavirus and the containment policies that have largely shut the economy. Under these new measures, that includes programs to support state and local governments, as well as small and mid-sized companies, the Fed will provide up to $2.3 tln in additional aid. The Dollar has been hit across the board as a result, leaving this a case of USD weakness as opposed to EUR strength.

    [USD, JPY]
    USD-JPY made one-week lows of 108.20, trading briefly under its 200-day moving average at 108.34, before recovering over 108.40. The pairing fell from opening highs near 108.90, following the huge Fed stimulus package announcement, bucking usual risk-on trends of rallying. Wall Street has retreated from highs, as oil prices fall again, which will limit further USD-JPY gains into the close.

    [GBP, USD]
    Cable rallied to two-week highs of 1.2484, up from opening lows of 1.2400, following the massive Fed stimulus announcement. The coronavirus-incapacitated Boris Johnson, now out of the ICU, hasn't rattled UK markets unduly, with the Foreign Secretary Dominic Raab deputizing as prime minister, and who, while lacking Johnson's political clout, is expected to allow for leadership with the rest of the cabinet and senior advisers. Some big decisions will have to be made soon, including how and when to exit from the lock down.A phased return to work is likely once the infection rate is in clear retreat, though this would still be contingent on there being a satisfactory supply of relevant medical supplies (protective gear, respirators etc) and testing capacity, which might be one or two months away.

    [USD, CHF]
    EUR-CHF was fairly steady under 1.0600 in N.Y. on Thursday, as risk appetite returned on massive Fed stimulus, and hopeful virus signs. Safe haven demand for the CHF will likely continue on and off depending on the daily the level of concern about the global economic disruptions being caused by efforts to contain the coronavirus.

    [USD, CAD]
    USD-CAD printed two-week lows of 1.3932 in late morning trade, down from 1.4078 highs seen at the open. The Fed's massive stimulus package, which has resulted in risk-on conditions, along with oil prices remaining above recent lows, have supported the CAD on Thursday. The OPEC+ teleconference on oil production cuts have produced no hard numbers so far, and as a result, oil prices have moved lower through the session, following initial reports of an agreement between Russia and Saudi. This limited USD-CAD's downside. There was little FX impact from Canada's employment report, where job losses totaled over 1.0 mln. The virus related losses were of course, driven by virus shut downs.

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