- Market remains cautious as millions travel for Chinese New Year
- WHO provides some positivity with a recent public announcement
- Forex markets across Asia remain tentative
As hundreds of millions of people traveled across China on Friday to mark the Chinese New Year and the beginning of the year of the rat, fears remained high across the nation that has been gripped by coronavirus in recent weeks. This has taken its toll on the forex market with the majority of trade remaining stagnant at best. Moving into the weekend will bring a clear chance for reflection in the markets across Asia. A keen eye will be on virus progression over these days. A further spread sure to indicate a negative for the market reopening on Monday.
Holiday travel stokes fear of further spread
The death toll rose to 41 on the day of the Lunar New Year with millions set to travel to home towns across the country. The city at the epicenter of the crisis, Wuhan, still remain on lockdown also, with travel both in and out completely restricted. At the time of writing, Chinese President Xi has also commented on the crisis for the first time, saying that China faced a “grave time” in fighting the virus. This will most certainly impact market sentiment on reopening.
The next several days will be crucial for both the forex market and the country in general as the spread of the virus will remain closely monitored over this holiday period. How much it spreads during this time could really impact the market sentiment coming into next week.
WHO positivity abates some concerns
A statement from the World Health Organization at their Thursday press conference did work to calm the market before the weekend break somewhat. Their statement that the virus does not yet constitute a global health risk, although being high-risk in China certainly injected some positivity into the markets across Asia. This has contributed to balancing many markets to a neutral stance.
Positive steps taken in containment across China including a $145 million investment in the Hubei province to help support containment and recovery efforts have also worked to manage fears in the market. This has included the immediate, and expedited construction of 2 hospitals, expected to be complete within 7-days to help manage the patient flow in Hubei province.
Domino effect across Asia
Other forex markets and currencies across Asia and globally have reacted defensively through the end of the week with both the USD/EUR, and the USD/JPY staying in a neutral position. This lack of strength from the US Dollar could also be factoring in the ongoing impeachment process. Many traders may be holding back on taking a strong position as US President Trump begins to mount his defense. Either way, the next week provides for several geopolitical tests of the forex market.
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US Dollar Forex Market Comeback Continues as Stocks Struggle
- EUR & GBP Both Dip Ahead of US Data
- Slowdown in Durable Goods Orders Expected
- US Markets Under Pressure Again
What has been a turbulent week for both the forex market and others, is set to come to a close Friday with yet more uncertainty. The US Dollar has regained some much needed strength this week, though it is in the face of difficulty as many worry about a second wave of coronavirus cases. The Euro was down to a two-month low, while the Pound continued its recent negative run down to below the $1.27 mark prior to US Durable Goods data being released. Another tough day on Wall Street is also expected with market futures pointing downward.
Further Slump as Majors Await US Data
Since reaching highs in recent weeks which were more in response to USD weakness rather than their own strength, it has been a difficult road for both the Euro, and Pound. Both are down further today with the Euro nearing $1.16, a point it has not seen since July. The Pound meanwhile continues to falter and is now well below its recent peak.
The main issues at play here which forex brokers have noted, are the continued uptick in COVID-19 cases in Europe. This has created a negative sentiment which has carried the market lower. Those forex trading have become fearful of a return to lockdown restrictions, and another big stall in the economy. This fear is shared in the UK and has also impacted the Pound. British PM Johnson has noted that the UK will strengthen restrictions if needed. This comes at an increasingly difficult time for Britain as it struggles to address the ongoing Brexit trade deal issue.
American Data Expected to Disappoint
A huge drop off in US durable goods orders which had occurred during the shutdown was followed by rampant recovery within the last three months. The orders data impressed with double digit rebounds in two of the last three reported months. That growth rate looks set to slow dramatically today as August numbers are due later in the afternoon.
The durable goods order data which tracks long lasting consumer goods is expected to come in at an added 1.5% for the month of August. This is a big drop on the 11.4% growth in July and matches the drop off in improvement from the retail sales data which also came in at just a 0.6% improvement earlier in the month.
More Selling Predicted at Opening Bell
It has been a challenging week on Wall Street too with heavy sell offs to start the week only being slightly abated yesterday. Friday looks to be another down day for the markets at least at the open. The pre-market points to a drop of around 150 points in the Dow Jones.
September is traditionally a tough month for the markets, and this is proving to be the case. Even major names like Apple are suffering having lost almost 20% from their high point earlier in the month, while all the major indices are down more than 5% this month to date.
New Restrictions Hurt GBP Forex Market as US Pledges More Aid
- GBP Had Started Stronger on Positive Rates News
- Mixed Opinions From US as Powell Pledges Support
- Markets Continue to Struggle With Second Wave Fears
The Pound has struggled to catch a positive break again today as the UK announce new restrictions to curb the spread of COVID-19. The GBP forex market has struggled for some time to break back to anything high of $1.30 against the Dollar. There were mixed messages too in the US with differing approaches supported the Fed Hierarchy. Meanwhile, markets opened higher, but remain weighed down by fears of a returning coronavirus.
Pound Bounces Back to Tough Position
There was an early boost on Tuesday for Sterling. The currency had originally jumped on comments from the Bank of England Governor Andrew Bailey which dispelled the thought of negative interest rates which many fear have been under consideration. This boost in the forex market was short lived though. The Pound was sent back in the opposite direction by an announcement from leader Boris Johnson that new restrictions will be imposed.
Those forex trading the market remain poised to hear exactly what these new restrictions will be. The exact details are currently being laid out by Johnson, but they are to include increased penalties for non-wearing of masks, and the closure of hospitality venues from 10pm. These changes are being made at what the PM referred to as a “perilous turning point”, and are sure to further rock the currency and economy which has seen a host of troubles lately.
Not All Agree as Powell Pledges Continued Support
Chief of the Federal Reserve Jerome Powell backed up his previous stance strongly on Tuesday in comments to the House Financial Services Committee. He said the Fed “remains committed” to the long-term support of the economy, and will use all their available tools to do so. He noted that although the economy had started to pick up, the road ahead remains vastly uncertain. His tone was one which did not rule out more support, noting that the Fed will continue its support for “as long as needed”.
This sentiment was not echoed by everyone though. There was a different view from Federal Reserve Bank of St. Louis President James Bullard. He is of the opinion, along with several others, that the economy now has enough momentum to get back on its feet even without further economic stimulus.
Markets Open Cautiously Again
US markets have endured a very tough September so far. This challenge only intensified on Monday with another large scale sell-off. The Dow Jones suffered its worst day of the month, while the S&P 500 shed more than 1% en-route to a fourth consecutive losing day.
Forex brokers were not alone in feeling a slight return to form on Tuesday. The major indices climbed a little higher on the opening bell, hopes being held that the slump is over. The next moves though will be largely driven by the news on coronavirus cases, and any further financial aid.
Forex Market Majors Down Further Amid Fiscal Uncertainty
- EUR/USD at Monthly Low as Fed Remain Hesitant
- Pound Falls Further on Negative Rates Possibility
- US Jobless Numbers Drop Lower Again
The EUR/USD continued to fall on Thursday. Hitting its lowest point in one month, the market seems to be heading on a downward trajectory as there was no rush to further stimulus despite a grim economic outlook from the Fed. The GBP also continued to struggle lower on news from the Bank of England that negative rates remain under consideration. In the US meanwhile, although the number of jobless claims fell more than expected, the total still remains challengingly high.
Dollar Strength Returns as Euro Falls
Demand for the US Dollar has rebounded slightly todays as the Euro has continued to slip back against the currency. The pair has now reached its lowest point in a one month period with forex brokers projecting a further battle ahead. This comes in the wake of the FOMC meeting, and comments from chief of the Federal Reserve Jerome Powell that although more fiscal support may be needed, nothing in particular seems to be forthcoming from the Fed at this moment.
The Fed reluctance to add any more stimulus, coupled with the poor retail sales figures showcased for August in the US would appear to have pushed those forex trading the markets, back toward the relative safety of the Dollar. Though this may be no bad thing for the struggling Greenback, it leaves the Euro in a tentative position with many already seeing it as largely overbought.
Brexit Trade Hope Balances Struggling Pound
News that the Bank of England are looking into the possibility of setting negative interest rates to stimulate the economy of the UK made sure that Sterling started off the day with added woes. The Pound bounced back slightly though on news that a Brexit trade deal may not be as dead in the water as was previously expected.
Though the EU and UK have both been at loggerheads during the trade negotiations and with no positive resolution in sight, news emerged today that the UK has offered some concessions on fisheries to the EU. This has prompted the EU chief negotiator, Michel Barnier to say that he still believes a deal can be done. This though, would still appear a long way from certain.
US jobless Claims Slightly Lower Than Expected
Initial unemployment claims continued to trickle down for the last week in the US. Coming in at 860,000 the number of new claims slightly beat estimates, with the number of continuing claims also falling. This number still remains staggeringly high though at 12.6 million.
The general consensus is, that while the numbers are continuing to fall slowly, indicating that more and more people are getting back to work, the numbers remain too high, and falling at too slow a pace to really boost the economy. This is another factor which has backed a push back into the US Dollar as much of the road ahead remains still unknown.