Anxiety Rises On COVID-19 International Spread

The buying of US Dollars or selling of the Oceanic currencies has been dominant through inter-market dealings this Monday, as the market's anxiety keeps rising following a dramatic increase in the cases of COVID-19 internationally, with Italy the last country to take extraordinary measures. Have we reached a 'watershed moment', as South Korea puts it? Find out all the latest in today's report.

Quick Take

The market is playing a ‘defensive’ card to start the week as COVID-19 anxiety continues on the rise as the international cases and deaths keep spreading from North Korea, through Iran, all the way to Italy, where over 130 cases are now detected. This has led to extraordinary containment measures by governments to slow down the spreading of cases, while the G20 group, in its weekend meet-up, pledges to be ready to step up to the plate with coordinated fiscal stimulus, stating that it sees heightened “prospects of further downside risk to global growth persisting as the coronavirus raises uncertainty and disrupts supply chains.”

Some authorities in the space of virology, via Twitter, are concluding that while it has taken a while for the spread to take off, we are finally seeing it come to life now. Note, The international spread of the virus means that monitoring of the COVID-19 stats outside China will serve as a more accurate representation of the true evolution of the virus. This, in m opinion, poses downside risks to further episodes of risk-off as these countries hit by the virus have far more robust processes of transparency to report the real situation as opposed to China, which as we know, has been criticized for downplaying the true magnitude of this tragedy. 

In the currency market, the usual suspects (AUD, NZD) gapped down significantly, while there was an important buying frenze towards the USD in inter-market dealings. The Swissy maintains its status as the safe-haven of choice in recent days, especially after the Yen debacle, while the latter appears to now find more buying interest after reaching a huge resistance in USD/JPY above 112.00, a juncture I suspected in my last technical outlook to be a key inflection point. 

Meanwhile, the Euro has seen a positive shift in order flow, and unlike the previous recoveries, this one really looks like it carries more substance judging by the market structure break and most importantly, where it has occurred in the weekly chart (all details in the chart insights). The Canadian Dollar, which has been trading super impressively alongside the USD as it attracted capital flows away from a panic-stricken Asian continent, is easing a bit, but still remains one of the favorites destinations to park one’s money. Lastly, the currency most unaffected by the COVID-19 pendulum remains the Pound, firming up in the last 24h.

(Click on image to enlarge)


Narratives In Financial Markets

* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Twitter, Institutional Bank Research reports.

COVID-19 anxiety on the rise: The sense of fear about a new phase of the COVID-19 spreading internationally is reigning in the markets, which sold off aggressively on Friday as more cases and deaths are reported. Kai Kupferschmidt, Science journalist and molecular biologist at Science Magazine, and a must-follow in Twitter on all things COVID-19 related, warned that “the last few days have felt like a profound shift in the epidemic as we are clearly entering a new phase.” Kai’s thread is an eye-opener for those that want to understand the high uncertainty that exists as the market fears the global slowdown may be more severe than thought.

International cases up: News over the weekend has depressed sentiment further with important gaps in the currencies most sensitive to risk such as the Aussie, Kiwi, Yen, USD. The number of cases has ballooned to over 600 in South Korea and more than 100 in Italy, resulting in officials taking extraordinary containment measures to slow down the spreading of cases. The accepted truth is that the international monitoring of the COVID-19 stats will serve as a more accurate representation of the true evolution of the virus as these are countries where there are more robust processes of transparency to report the real situation as opposed to China.

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The Daily Edge is authored by Ivan Delgado, Head of Market Research at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth ...

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