US President Donald Trump in his yesterday's speech failed to calm investors and convince them that the situation is under control. In addition, the CDC (Center for Disease Control and Prevention) reported that the first patient in the USA appeared who did not have a proper travel history or had no contact with another patient with a disease caused by the virus.
This is the first case of a coronavirus in the US of unknown origin, which seemed to affect the stocks, bond or US dollar. Huge demand for US debt has dramatically reduced bond yields, which has resulted in 10-year and 30-year interest rates falling to their lowest levels in history. In turn, the lower interest rate on US Treasuries could have weakened the US dollar, which after CDC information began to depreciate. Today in the morning, the US dollar seems to be the weakest currency among the world's major currencies in addition to the Canadian dollar.
It seems that thanks to this the EUR/USD exchange rate has been systematically rising from the lowest level in three years for five days in a row, and the AUD/USD exchange rate does not deepen 11-year lows anymore. There is also a number of comments on the market that President Trump's speeches could have disappointed investors, which has consequences also in the weaker dollar and lower level of futures on US stock indices.
According to investors from the currency options market, the Australian dollar may be one of the most volatile pairs in the near future. The measure of weekly implied volatility for the AUD/USD pair increased to its highest level since August 15. This may be due to expectations for more information about coronavirus this weekend. Next week also the RBA (Reserve Bank of Australia) decision on interest rates will be published.
From the macroeconomic data that will be published today, it is worth paying attention to publications from 11:00 concerning the economic situation in the euro area in February. The next important data, this time from the United States, will appear at 14:30. These will be data on durable goods orders in January and there will be a second US GDP revision for the fourth quarter of 2019.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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