Financial markets went on a roller-coaster ride yesterday, fuelled by both fear and relief over the prospects for the future of Coronavirus and its impact on the globe. European markets began the day with a sharp sell-off, sparked by renewed concern that the worst of Coronavirus had not yet come.
The greenback strengthened against many of its peers but lost ground against the usual safe-havens as well as the euro. It’s clear the euro has gained a similar status as Japanese yen in the sense of being utilised as a funding currency. Investors borrow in euros due to the low-interest rate and invest the proceeds into various other currencies where larger returns are available. As a result, when people sell their investments they need to buy back the euros to pay the debt.
By lunchtime, markets had somewhat pared losses. As US stock indices opened, global markets were in the green. However, gains quickly vanished as fear took over. By the New York close, stocks had made new lows as FX markets continued to extend their daily trends.
Today’s economic calendar is a busy one. US revised 2019 Q4 GDP is set for release as well as a raft of additional US data points including – durable goods, jobless claims and pending home sales. We’ll also have several European Central Bank and Fed speakers scattered throughout the trading day.
Written by Viv Savani. 8:45am, February 27th 2020
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