Market Outlook

The biggest move today in Forex has come from the New Zealand Dollar. The New Zealand dollar is taking a beating as the government announces new measures to rein in the country’s booming housing market. The RBNZ will now be able to keep policy lower for longer, resulting in the Kiwi sell-off.

Elsewhere Germany is planning a five-day lockdown over Easter, while Britain’s prime minister has warned that a third wave of the virus is on the way.

The latest employment data from the United Kingdom has just been released, but the results have been mixed, and there hasn’t been much of a reaction in the markets.

Key economic events on the calendar for the remainder of the day include UK CBI Industrial Trends, the United States current account, several Fed speeches, U.S New Home Sales, Richmond Fed Manufacturing Index and Fed Chair Powell’s testimony.

This week there’s a range of important economic events that are worth watching. Pay close attention because these events are likely to be the driving force behind price action this week.

Got something else to add? Share your thoughts in the comments below!

US Dollar

Financial markets will be busy balancing the effects of yet another major relief package, an improving labour market, and a bond market selloff that shows no signs of slowing down. Following the change in Treasuries, the dollar has been soaring, and all indications are that this trend will continue.

The COVID relief bill is nearing completion, and several states have already reopened. The pressure is on for Democrats to quickly deliver this relief bill and move swiftly onto infrastructure spending.  On Wednesday, Texas will reopen completely and remove the mask legislation, meaning that more states could follow suit. Virus variants are still a short-term threat, but they haven’t stopped many states from reopening.

The Fed is fully prepared for a temporary increase in prices, but the bond market may use it as an excuse to raise bond yields and push Fed rate hike expectations forward. The headline annual CPI reading for February is forecast to rise from 1.4% to 1.7% on Wednesday.

Euro

EU debt markets have tightened again this week, but officials’ comments suggest they are concerned about increasing government bond yields. With Jerome Powell appearing to take the opposite stance, the chances of the EUR/USD falling next week are growing. It is currently testing support at 1.1960 and is aiming for 1.1800, with 1.1600 as a secondary target.

On that note, the ECB’s recent rate decision on Thursday takes on even more significance. If the bond saga continues, European Central Bank officials can send a clear signal that the bank will speed up bond purchases if necessary to keep interest rates from rising. Long story short, the Euro is in a bad way.

British Pound

Overall, the UK budget was well received, with the corporate sector set to bear the brunt of potential tax increases. The government will hold the fiscal stimulus taps open until September in the short term. On Friday, UK GDP and Industrial Production could surprise us if it’s not as bad as expected, which would boost equities and the Pound.

The British Pounds price action has returned into its rising 6-month channel this week. As the Bank of England remains silent on increasing Gilt yields, it is outperforming the Euro. Just a break of 1.3800 by the GBP/USD indicates a deeper correction to 1.3500. The faster pace of vaccinations and a widening yield differential will keep EUR/GBP under pressure, and it may fall below 0.8500 this week.

Got something else to add? Share your thoughts in the comments below!

Looking Ahead as Q1 Comes to a Close

We’re into the final hours now of quarter one of 2020 and what a roller-coaster ride it has been for traders.

Volatility could very well pick up as we move into the close. There have been reports of
month end quarter in dollar demand, we’ve already been seeing some of that on Tuesday in the stock market.

Things seem to have calmed down as investors are feeling better about news coming out about the coronavirus. We could be seeing signs of the virus peaking now in New York and Italy. We may not be over the bump just yet though, there’s still plenty that can go wrong. Nothing should surprise you if you’ve been trading the markets in recent weeks.

Looking forward, we’re paying close attention to the oil market. The commodity has suffered huge losses in recent weeks and may well be well oversold as we move into Q2 2020. Keep an eye on your news sources, there has already been talk of efforts to stabilize the price. We need a significant sentiment shift to give us a high probability trading opportunity on one of the commodity currencies.

An Important Week Ahead and it’s all about COVID-19

We’ve witnessed a historic week which saw stocks in a meltdown falling 10%-15% from all-time highs. In the week ahead we can expect volatility to remain high as the markets try to price in the global impact of the coronavirus.

Although the economic damage from the coronavirus is expected to be temporary, central banks will be scrambling in the coming weeks to limit the damage to their respective economies.

Until the World Health Organization downgrades the global risk assessment of the coronavirus, we may well see investors continue to remain bearish. There is also the growing risk that they will declare the virus a global pandemic.

So focus this week is all about the COVID-19 and each and every update coming in regarding the virus.

Tuesday will be an important day.

There are a few key interest rate decisions coming in from Australia and Canada on Tuesday. On the same day we also have the OPEC+ decision on any further cuts to oil production.

Further trouble in Wall Street.

It is a safe bet that we can expect more company profit warnings during the week ahead. This will put a further strain on the stock markets and cause an equal response in the Forex market.

The Fed and several other central banks are expected to attempt to intervene this week by offering fresh stimulus. Whilst this will be positive for stocks, investors believe the virus will test the limits of our central banks.

The week ahead will be an interesting one. Will we see stocks make a slight recovery or will they plunge further? Whichever way it goes make sure that you watch the news wires closely as it’s going to be a volatile week for the currency market.

The Coronavirus continues to make investors nervous.

It’s the start of a new trading week once again all eyes are on the Coronavirus. The virus is seen to be a threat to the global economy and as a result we have seen money move toward safe havens and away from China’s major trading partners. Last week the effects of this were most clearly seen in the Australian Dollar and New Zealand Dollar. This may well continue into the week ahead if we continue to see the virus spread at a rapid rate.

Safe haven flows are likely to continue in the US Dollar.

We may well see safe-haven flows resume in the US Dollar if the Coronavirus continues to make investors nervous. 

The UK withdrew from the EU.

The UK withdrew from the European Union at 11pm on 31st January 2020. The topic of conversation now moves towards a trade deal between the UK & EU. Trade negotiations will be the focus of attention for the next 11 months before the transition period ends abruptly on 31 December 2020.

Australia continues to suffer.

This week’s data forced local banks to push back rate cut expectations. The decision did little to help the Australian Dollar which is still suffering as a result of traders becoming more risk averse. Of course a surprise cut at Tuesday’s meeting is still a possibility and would be bad news for the AUD.

China is Australia’s largest trading partner in terms of both imports and exports. Until we know the extent of the damage to the Chinese economy we may continue to see further downside pressure to the Aussie Dollar.