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Last week’s news

• U.S equities posted its worst week since the global financial crisis with the S&P 500 falling to its lowest level in three years, ending the week 15% down. Oil sank 29% and the U.S treasury 10 year fell back below 1%. This comes on the back of a flurry of emergency packages from major central banks intended to buffer economies and financial markets against the global economic shutdown triggered by the coronavirus pandemic.
• The European Central Bank unveiled plans last week to buy an extra €750bn worth of bonds and issued a ‘no limits’ commitment to defend the Eurozone in response to the worsening pandemic around Europe. Dubbed the Pandemic Emergency Purchase Programme, it will last until the coronavirus crisis is judged to be over. Head of the ECB Christine Lagarde commented, ‘There are no limits to our commitment to the euro. We are determined to use the full potential our of tools, within our mandate’.
• The Bank of England also deployed its weaponry, slashing interest rates to 0.1%, the lowest in the Bank’s 325-year history. It also announced a £200bn asset-purchasing programme, similar to that already installed by the ECB. Andrew Bailey, the BoE’s new head Governor has also put the onus on UK’s and Europe’s politicians to begin spending to support businesses and individuals through this unprecedented period in history.
• Cable dropped to its lowest level since 1985 after falling for 8 consecutive days, its worst run of daily losses since May 2018 against the U.S. Dollar. The Pound was able to find some relief on Friday rising +3.4% against the USD, its biggest advance in more than 11 years. This brief rally was attributed to a weaker USD but the critical time for the dollar will come around this end of the quarter.

Looking ahead

• The Aussie dollar breached its 2008 support of 0.58 putting into perspective the next support level, the record low of $0.4776 if a rush for safety continues to push demand for U.S dollars. AUDUSD fell as much as 4.6% last Thursday after breaching support of 0.60 on the day. The decline in the pair may accelerate if the RBA’s emergency measures to support the economy are deemed insufficient. AUDUSD is starting the week trading at 0.5750.
• The traditional safe-haven Gold is losing out to the U.S dollar as investors look for shelter from the virus-driven storm that has wreaked havoc over risk assets. With the USD soaring last week, Gold headed for its lowest close in three months. Some reasoning behind the fall is that investors are cashing-in from long positions built before the recent spike to be able to pay margin calls or losses in other assets.

Key market events this week

• Christine Lagarde speaks at ECB and its Watchers Conference – Tuesday
• EUR Markit Eurozone Manufacturing PMI – Tuesday
• RBNZ Official Cash Rate Decision – Wednesday
• GBP Consumer Price Index YoY (Feb) – Wednesday
• USD Durable Goods Orders (Feb) – Wednesday
• BoE Central Bank Rate Decision – Thursday
• USD Advance Goods Trade Balance (Feb) – Thursday
• MXN Overnight Rate Decision – Thursday
• JPY CPI YoY (Mar) – Friday
• GBP United Kingdom Sovereign Debt to be rated by Fitch – Friday
• USD PCE Core YoY (Feb) – Friday