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Currency Market Analysis

Feb 24, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar gained a fresh head of steam Monday after concerns over the coronavirus took a sharp turn for the worse over the weekend. Currencies from Europe fell with the euro slipping toward three-year lows. Global stocks plunged and oil shed more than 4%, sending Canada’s dollar to two-week lows. The kiwi and Aussie dollars sank to four-month and 11-year lows respectively. Emerging markets were dumped for the safer greenback. Markets are in freefall following a weekend explosion in the number of coronavirus infections outside of Asia. The deadly virus is on the rise in places like Italy, the euro zone’s third biggest economy, and Iran which is heightening fears of a global slowdown. The dollar continues to benefit from coronavirus concerns on the notion that America’s economy is best placed to weather the uncertainty.


The Aussie dollar tumbled to 11-year lows as coronavirus concerns reached a fever pitch and added to the risk of a local rate in the months ahead. Australian lending rates are already at record low levels below 1%. Down 6% this year, the Aussie is among the worst performing currencies on the view that China’s health and economic woes threaten to darken Australia’s outlook that’s been pressured by recent bushfires.


The euro slipped anew as its rally last week to one-week peaks was undercut by an escalation in concerns about the coronavirus. Dollar-based assets are in vogue on the view that America’s economy is less vulnerable than Europe to the viral outbreak. The euro has kept its chin above April 2017 lows after numbers from Germany on Friday and Monday topped expectations and tempered concerns about recession in the bloc’s biggest economy.


Sterling fell toward three-month lows as plunging global markets whet appetite for the safer greenback. The pound underperformed last week as concerns about the state of trade talks between the UK and EU overshadowed signs of Britain’s economy bouncing back after flatlining during the fourth quarter. A dearth of domestic event risks this week could see sterling take its cues from global developments and risk sentiment.


Canada’s dollar sank to two-week lows as global markets plunged and oil shed 4%, sinking to $51. A sharp jump in the number of coronavirus cases outside of Asia is roiling markets and sparking a flight to safety in the greenback. With global markets in a swoon, it overshadowed good news on the Canadian economy as wholesale trade, which speaks to the health of the services sector, bounced back with a solid 0.9% increase in December which nearly erased a 1.1% decline in November.

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