Coronavirus Headlines Continue This Week Along with Falling Global Interest Rates & Oil Price War

Xe Corporate APAC

8 mars 20203 min read

The AUDUSD opens higher at 0.6623 and the NZDUSD opens higher at 0.6333 this morning.

Coronavirus headlines will continue to be the primary focus in the financial markets this week, with falling global interest rates and the developing oil price war also attracting attention.

Italy has announced a lockdown of 16 million people around its economic engine of Milan and 14 nearby provinces in an attempt to control the spread of Covid-19. The pathogen has now spread to about 100 countries as a global pandemic is becoming increasingly likely.

China has slowed the virus infection rate by strictly enforcing lockdowns in Hubei province. However, there remains a risk of secondary infections as the Chinese government tries to kick-start their economy and their vast east-coast manufacturing heartland.

The US dollar fell across the board on Friday, pushing up the AUDUSD and NZDUSD, as a falling US government bond yields reduced the USD’s appeal. Despite slashing interest rates by 0.50% in an emergency move last week, the markets are now expecting another 0.50% by the US Fed this month. This is significantly reducing the yield advantage the US has enjoyed in recent years and hurting the USD’s relative value.

US non-farm payroll employment figures were released Friday night. They showed US employers maintained a robust pace of hiring in February, however these normally influential figures did little to support the USD as the report did not reflect the full impact of the coronavirus outbreak.

The EUR, GBP, and JPY outperformed against the USD and AUD. The GBP benefited by comments from the EU’s chief Brexit negotiator that a trade deal between UK and the EU was still possible this year.

Nothing is scheduled on the domestic data calendar today. Reserve Bank of New Zealand Governor Orr is due to speak on the use of unconventional monetary policy tools Tuesday – this is the only significant event on the NZ data calendar this week.

Global equity markets plunged yet again - Dow -1.0%, S&P 500 -1.7%, FTSE -3.6%, DAX -3.4%, CAC -4.1%, Nikkei -2.7%, Shanghai -1.2%.

Gold prices increased 0.3% to USD$1,673 an ounce. WTI Crude Oil prices suffered their biggest loss in more than 11 years, plunging 10.1% to US$41.55 per barrel after Russia balked at OPEC’s proposed steep production cuts to support prices amid virus-induced demand slump. OPEC responded by removing limits on its own production.

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