USD Forex Market Remains Steady as Oil Continues to Dive
- Traders Remain Steadfast in Dollar Safe Haven
- Oil Markets Post Huge Record Losses
- Other Major Currency Markets Still Sluggish
The forex market retreated to the safety of the US Dollar in early trading on Monday. This comes as yet another week starts off with an overriding tone of caution in the face of the COVID19 pandemic. With the US death toll now moving above 40,000, any cautious optimism of a reopening appears to be quickly fading. This feeling of pessimism is compounded by record setting losses in the oil industry, and further rate cuts from China doing nothing to dispel fears of a global recession.
USD Continues to be Top Choice
The majority of those forex trading on Monday chose to stay with the safe choice of the Greenback. This comes as there had been some movement back toward other markets in the middle and end of last week. This optimism has now begun to fade, with a risk-off approach being very evident in the markets.
This is no surprise as the coronavirus continues to take its toll and lockdowns remain in place across the globe. The UK and Canada have both extended their periods of closure, and the US also looks set to follow suit despite the ongoing tug of war between the President and state Governors.
Oil Prices Continue in Dangerous Free Fall
Another driving factor behind market apprehension on Monday is the plummeting oil price. This has yet to reach the bottom as demand continues to fall off a cliff due to the virus outbreak. This also presents a huge storage problem globally. WTI crude futures fell an astounding 40% on Monday and at the time of writing, were on course for their worst day on record, dating back to 1983.
Brent crude also traded down more than 5% so far in the session. It too has lost huge value in recent weeks, although access to tanker storage that WTI crude does not have, has managed to keep it from falling to quite the same level. With no certain end to the pandemic in sight though, it does not appear feasible that demand will pick up at any time soon. This has also impacted stock markets, and the Canadian Dollar which is highly oil-sensitive. The currency was leading losses for the day, having dropped more than 0.3%.
Euro and Pound Continue to Struggle
Under the weight of movement from traders going back to their USD positions, both the Euro and GBP have failed to make any real headway to start the week. The Euro continues to trade below $1.09 and has fallen around 0.2% so far in the day trading. Sterling is posting similarly poor numbers and remains below the $1.25 benchmark.
Looking ahead, analysts and even the top forex brokers are predicting a tough ride in the coming period with head of research at Pepperstone, Chris Weston commenting that the “eye of the storm” is approaching.
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