CFD Markets News and Forecasts — 27-03-2020

On Monday, at 07:00 GMT, Switzerland will publish the KOF leading indicator for March. At 08:30 GMT, UK will report changes in the volume of net loans to individuals, the volume of the M4 money supply aggregate and the number of approved mortgage applications for February. At 10: 00 GMT, the eurozone will present the consumer confidence index, the index of economic sentiment, the index of business optimism in industry and the index of business sentiment for March. At 12:00 GMT, Germany will release the consumer price index for March. At 14:00 GMT, the US will announce a change in the volume of pending home sales for February. At 21:45 GMT, New Zealand will announce changes of building permits for February. At 23:01 GMT, UK will present the GfK consumer confidence indicator for March. At 23:30 GMT, Japan will report changes in the unemployment rate for February, and at 23:50 GMT - changes in industrial production and retail trade for February.

On Tuesday, at 00:00 GMT, New Zealand will release the ANZ business confidence indicator for March. At 00:30 GMT Australia will report the change of private sector credit for February. At 01:00 GMT, China will publish the manufacturing PMI and non-manufacturing PMI for March. At 05:00 GMT, Japan will report a change of housing starts for February. At 06:00 GMT, UK will report on the change of current account for the 4th quarter. At 06:30 GMT Switzerland will announce the change of volume of retail trade for February. At 06:45 GMT, France will announce changes in consumer spending for February and release the consumer price index for March. At 07:55 GMT, Germany will report changes in the unemployment rate and the number of unemployed for March. At 08:30 GMT, UK will report changes in GDP and investment for the 4th quarter. At 09:00 GMT, the Euro zone will publish the consumer price index for March. At 12:30 GMT, Canada will announce the change in GDP for January and release the producer price index for February. At 13: 00 GMT, the US will present the S&P/Case-Shiller home price index for January. At 13:45 GMT, the US will release the Chicago purchasing managers ' index for March, and at 14:00 GMT, the consumer confidence indicator for March. At 21:30 GMT Australia will present the index of activity in the manufacturing sector from AiG for March. At 23:50 GMT, Japan will publish the BoJ Tankan. Non-Manufacturing Index and BoJ Tankan. Manufacturing Index for the 1st quarter.

On Wednesday, at 00:30 GMT, Australia will announce changes of building permits for February. Also at 00:30 GMT, Japan will release the manufacturing PMI for March. At 01:45 GMT China will release Markit/Caixin Manufacturing PMI for March. At 05:00 GMT, Japan will present the consumer confidence indicator for March. At 06:00 GMT Germany will report the change of volume of retail trade for February. Then the focus will be on manufacturing PMI indices for March: Switzerland will report at 07: 30 GMT, France at 07:50 GMT, Germany at 07:55 GMT, the Eurozone at 08:00 GMT, and UK at 08:30 GMT. At 09:00 GMT, the Euro zone will report changes in the unemployment rate for February. At 12: 15 GMT, the US will announce the change in the number of employees from ADP for March. At 13:45 GMT, the US will publish the index of business activity in the manufacturing sector for March, and at 14:00 GMT - the ISM manufacturing index for March. Also at 14: 00 GMT, the US will announce changes of spending in the construction sector for February, and at 14: 30 GMT-changes in oil reserves according to the Ministry of energy.

On Thursday, at 06:30 GMT, Switzerland will release the consumer price index for March. At 08:30 GMT, UK will publish the construction PMI for April. At 09:00 GMT, the Euro zone will present the producer price index for February. At 12: 30 GMT, the US will announce changes in the trade balance for February and the number of initial applications for unemployment benefits. At 14:00 GMT, the US will announce changes in production orders for February. At 21:30 GMT Australia will present the index of activity in the construction sector from AiG in March.

On Friday, at 00:30 GMT Australia will report the change of volume of retail trade for February. At 01:45 GMT China will release the Markit/Caixin Services PMI for March. Then the focus will be on the Services PMI for March: France will report at 07: 50 GMT, Germany at 07: 55 GMT, the Eurozone at 08:00 GMT, and UK at 08:30 GMT. At 09:00 GMT, the Euro zone will announce changes in retail trade volume for February. At 12: 30 GMT, the US will report changes in the unemployment rate and nonfarm payrolls for March. At 13:45 GMT US will release the Services PMI for March, and at 14:00 GMT - ISM Non-Manufacturing for March. At 17:00 GMT, the US will release a Baker Hughes report on the number of active oil rigs.

• Death toll soared to 519

FXStreet notes that the U.S. Senate passed a 2.2 trillion USD stimulus bill to combat the devastating impact of COVID-19 and social distancing on the U.S. economy. These measures should be able to sustain the economy in a state of “suspended animation” for some time, according to David Kelly from JP Morgan Asset management.

“This bill could limit the damage to GDP growth to a very negative second quarter, with the economy then slowly beginning a recovery late this year and then surging once a vaccine has been put in place.”

“This package should be good for U.S. equities and other risk assets as it should leave U.S. corporations in a better position to weather the economic downturn and thrive in the rebound.” 

“It should ultimately be seen as a negative for Treasuries, as a commitment to do ‘whatever it takes’ today could both boost inflation and undermine the credit-worthiness of the U.S. government in the years to come.”

• Says Canada to offer businesses CAD40,000 interest-free loans for a year
• Sales taxes due and import duties deferred until June
• He is pleased with BOC actions today

NFXStreet reports that Benjamin Reitzes from BMO Economics notes that the Bank of Canada (BoC) has brought policy rates back to 2009 crisis low as the economic hit from COVID-19 is expected to be severe.

“The BoC cut rates 50 bps to 0.25%, moving policy rates back to the lows seen during the financial crisis just over a decade ago.” 

“The BoC announced it is officially joining the QE club, as it will purchase at least $5 bln per week in Government of Canada bonds, that equates to about 1% of GDP per month. Furthermore, the Bank is launching a Commercial Paper Purchase Program (CPPP) to support short-term funding markets.”

“At the presser Governor Poloz addressed the option of negative rates, saying that while -0.5% is the theoretical lower bound for policy rates, it's something that's not high on their to-do list.”

EUR/GBP: Towards the all-time high at 0.98029 – Rabobank

FXStreet reports that analysts at Rabobank apprise that the price action in EUR/GBP fits into a sideways trend despite the often sharp moves witnessed over the past few years.

“The upside has been limited by the resistance area at 0.94/0.93 and the downside has been constrained by the support area around 0.83.”

“The monthly chart implies that the bias is skewed in favour of a break higher towards the all-time high at 0.98029 as EUR/GBP has been trading over the past few months above the pivot around 0.83.”

• We will be offering guidance to different regions in the country in days ahead
• We are working with China to combat virus

FXStreet notes that the Bank of Canada (BoC) cut the overnight rate by 50bps to 0.25% today. The CAD weakened on the news, strategists at TD Securities inform.

“The BoC cut rates by 50bps to 0.25% while unveiling two new programs to support liquidity.”

“We think today's move reinforces that 1.40 in USD/CAD is an effective floor until we see activity pick-up again. We think it is both a heroic and dangerous assumption to assume that CAD's outperfromance earlier this week can continue.”

“We think USD/CAD must trade higher. 1.45 marks a benchmark level for USD/CAD, but we reckon it will trade above this for some time.”

• Coronavirus-related death toll rose by 181 (or 31%) to 759, the sharpest day-on-day increase so far
  
  

The Commerce Department reported on Friday that consumer spending in the U.S. rose 0.2 percent m-o-m in February, the same pace as in January. Economists had forecast the reading to show a 0.2 percent m-o-m growth.

Meanwhile, consumer income climbed 0.6 percent m-o-m in February, also the same pace as in the previous month. Economists had forecast a 0.4 percent m-o-m increase.

The February advance in personal income primarily reflected gains in compensation of employees and farm proprietors' income.

The personal consumption expenditures (PCE) price index, excluding the volatile categories of food and energy, which is the Fed's preferred inflation measure, rose 0.2 percent m-o-m in February, following a revised 0.2 percent m-o-m advance in the prior month (originally a 0.1 percent m-o-m uptick). Economists had projected the index would rise 0.2 percent m-o-m.

In the 12 months through February, the core PCE increased 1.8 percent, following a revised 1.7 percent growth in the 12 months through January (originally a 1.6 percent increase). Economists had forecast a gain of 1.7 percent y-o-y.

The final reading for the February Reuters/Michigan index of consumer sentiment came in at 89.1 compared to a preliminary reading of 95.9 and the February final reading of 101.0. That was the lowest reading since October 2016.

Economists had forecast the index to be revised down to 90.0.

According to the report, the index of the current economic conditions dropped 9.7 percent m-o-m to 103.7 from February's final reading of 114.8.

Meanwhile, the index of consumer expectations plunged 13.5 percent m-o-m to 79.7 from February's final reading of 92.1.

Richard Curtin, the Surveys of Consumers chief economist, noted that an 11.9-point drop in consumer sentiment in March was the fourth largest one-month decline in nearly a half-entury, which was due to the spreading coronavirus. "Stabilizing confidence at its month's end level will be difficult given surging unemployment and falling household incomes", he added. "The extent of additional declines in April will depend on the success in curtailing the spread of the virus and how quickly households receive funds to relieve their financial hardships."

• We are also working to keep the financial system functioning, helping make sure credit is available to people and companies
• Intent of our decision today is two-fold: to immediately support financial system so it keeps on providing credit, and, over the longer term, to lay the foundation for economy's return to normalcy
• Commercial Paper Purchase Program will help to restore key source of short-term funding for businesses
• Acquiring of Government of Canada securities in the secondary market will help address strains in debt market and to enhance effectiveness of all other actions taken so far
• Governing Council stands ready to take further action as required to support the Canadian economy and its financial system and to keep inflation on target

U.S. stock-index futures fell on Friday after a strong three-day rally, sparked by expectations of massive fiscal stimulus, as investors priced in the prospects of the U.S. becoming the next global epicenter of the COVID-19 pandemic.

Global Stocks:

Q1 will be flat

Q2 will be negative

Q3 and beyond is very tough to forecast, trajectory will depend on how we deal with the issue

Strains in some markets appear to be easing

We don't want a repeat of what happened to housing in great recession

(company / ticker / price / change ($/%) / volume)

USD traded mixed as in the European session on Friday as coronavirus situation reined in some market optimism, boosted by the fiscal and monetary efforts to support the coronavirus-hit economy.

The U.S. dollar, the world’s most liquid currency, fell against GBP, CHF and JPY, as pledges of the wolds' governments of hefty economic stimulus, including a $2.2 trillion U.S. package, and efforts by global central banks to increase the supply of dollars bolstered a rally in other major currencies. A record surge in U.S. weekly initial jobless claims and the fact the U.S. is now the country with the most confirmed cases of COVID-19 put additional pressure on the U.S. dollar.

Meanwhile, USD rose against EUR as the EU still struggles with the stimulus to support the region's economy. It also gained against most currencies that are closely tied to commodities, including NZD, CAD and NOK, but traded little changed against AUD.

FXStreet reports that  according to analysts at Danske Bank, EUR/USD has broken above 1.10 and in the short run it may trade in the 1.10-1.12 range.

“We continue to see coronavirus numbers peaking over the next few weeks, financial stress is coming down with the economic help from global fiscal policy.” 

“EUR/USD trades as a credit bond, so good news is good news for EUR and bad news, irrespective of the country origin, is bad news for EUR. 

“Looking ahead to H2, we stick to our call for 1.07.”

NFXStreet reports that analysts at Credit Suisse inform that USD/CAD remains in a consolidation phase after the dramatic surge came to a temporary stall just ahead the 2016 high at 1.4660/90.

“Below 1.4148 has completed a small top to suggest a particularly nasty correction may occur, with next supports for a pullback seen at 1.4012/3961, however we would certainly look to fade this dip.” 

“The market still holds a very large bull ‘wedge’, keeping our broader bias to the upside post a correction, with resistance seen initially at the aforementioned 1.4690. Removal here would see a further acceleration towards the next resistance at the ‘neckline’ to the 2001/02 top at 1.5035.”

FXStreet reports that in the opinion of analysts at ANZ Bank, the uncertainty unchained by Covid-19 is set to cap the EUR/USD recovery.

“Given the euro area’s high beta to global trade, we expect more global uncertainty around the virus to keep any upside capped.”

“The economy remains weak, and the huge shock to supply chains will be felt for some time.”   

“Spot: 1.10 ANZ Fair value: 1.07”

• Latest figure, however, indicates that rate of new infections could be slowing (an 18% increase was recorded a day earlier)
  
• Coronavirus-related death toll in Spain climbed by 769 (or 19%) in the last 24 hours to 4,858

FXStreet reports that given the large moves seen across markets, analysts at TD Securities are starting to see more attention on month- and quarter-end rebalancing flows, especially ahead of the Japanese FY end next week.

"The USD/JPY pair has had a decent move lower. We continue to like downside potential there and seem likely to trade to 105 if we can close below 108 today.

"The bounces we've seen in EUR and GBP are starting to look a little tired and may reverse."

"In the AUD/USD pair, we think it would be worth chasing a push below trendline support that comes in at around 0.5970 on the hourlies today if we do happen to get one."

FXStreet reports that it may be some time before China returns to normal activity levels given the likely slower recovery in confidence and the weaker global economic environment due to the virus spread, Gerard Burg from the National Australia Bank reports.

"We expect an unprecedented decline in China's GDP in Q1, down by 12% yoy."

"We expect the rebound in China's economy will be spread across Q2 and Q3. For the full year, we now forecast no growth."

"Due to the weakness in early 2020 (particularly in Q1), the resumption of normal activity in China will result in a rapid acceleration in annual growth in 2021, now revised up to 10.9%."

• Government will close entertainment facilities i.e. gyms, cinemas, playground

• Government will ask restaurants to reduce customer numbers by half

• Restaurants should only allow for four people maximum at each table

• To limit crowds to up to four people only; except weddings, funerals

FXStreet reports that the third and largest bill dealing with the corona crisis came out of a battle between Republicans and Democrats about who should benefit: businesses or households. It appears that in order to get both parties to agree, the cost of the bill has increased, per Rabobank.

"The House of Representatives is expected to approve the $2.2 trillion fiscal stimulus package that the Senate passed yesterday."

"Jobless claims report suggests that the unemployment rate is already at about 10%. We would not be surprised to see unemployment peak at 20-30% in the coming months."

"The big fiscal stimulus package is not likely to prevent a very sharp contraction of the economy in March and April, but it could help soften the impact in the remainder of the year."

"If the corona crisis lasts longer than the US lawmakers anticipated when writing this bill, we may see even more trillions pumped into the US economy during the course of the year."

CNBC reports that the stock market's three day win streak may be in jeopardy. Canaccord Genuity's Tony Dwyer warns the S&P 500 just hit a level that sets the stage for another meltdown as the country copes with the coronavirus impact.

"We put 2,575 as a level for this relief rally," the firm's chief market strategist told CNBC's "Trading Nation".

The S&P 500 is coming off its biggest three day gain since 1933. On Thursday, it closed up more than 6% to 2,630. However, it's still almost 23% off its record high.

Dwyer cites human nature of fear as the likely catalyst to interrupt the latest leg higher.

"Once you make a panic low, you typically have this relief rally," Dwyer said. "Unfortunately, the vast majority of time you go back down and test that low."

But his forecast isn't all doom and gloom. It carries optimism, too.

"You've already panicked, so down 34% at the low to say that it's going to get significantly worse is not the case," he added. "The time to be cautious was in January and February. We made the panic low. While we may test that low, it's not the time to get scared."

Dwyer, a long-term bull, has warned for weeks the coronavirus pandemic would spark a deep economic shock.

FXStreet reports that gold prices fell sharply at a time when there was panic on equity markets and frantic buying of the dollar though last week, the dynamics changed. Strategists at ABN Amro expect weakness in the yellow metal price.

"The closure of gold refineries in Switzerland, resulted in a sense of shortage in physical gold at a time that more investors wanted to buy. So gold prices moved back to USD 1,600 per ounce."

"We continue to expect weakness in gold prices as sentiment on financial markets deteriorates again and the US dollar strengthens."

"Long gold is still a crowded trade, especially investment gold. The sense of shortage in physical gold could continue as long as the refineries are closed. Investors may start to realise that they may not have the gold investment that they would have loved to have."

According to the report from Istat, in March 2020, the consumer confidence climate slumped from 110.9 to 101.0. The heavy deterioration affected all index components. More specifically, the economic climate plummeted from 121.9 to 96.2, the personal one deteriorated from 107.8 to 102.4, the current one went down from 110.6 to 104.8 and, finally, the future one collapsed from 112.0 to 94.8. As for the business confidence climate, the index (IESI, Istat Economic Sentiment Indicator) crashed from 97.8 to 81.7.

The confidence index in manufacturing drastically reduced passing from 98.8 to 89.5. The confidence index in construction decreased from 142.3 to 139.0. The market services confidence index tumbled from 97.6 to 79.6. The retail trade confidence index plummeted from 106.9 to 97.4. The retail trade confidence fell both in the small and medium scale distribution (from 102.3 to 92.7) and in the large scale one (from 109.0 to 99.4).

FXStreet reports that EUR/USD is now in a short-term consolidation phase following the sharp reversal lower last week and is bouncing from the bottom of the medium-term channel downtrend, analysts at Credit Suisse brief.

"A clear and conclusive break beneath pivotal supports at 1.0815/1.0752 would see the downswing accelerate further, with next key support seen at the April 2017 low at 1.0570, before the February 2017 low at 1.0494."

"Resistance at 1.1083/1146 ideally caps the rebound higher. Above would suggest the market is undergoing another turn higher within the shallow channel downtrend."

FXStreet reports that after the failure of the OPEC+ meeting to reach a new production cut agreement, the risk of an even bigger supply glut triggered profit taking on long positions and oil prices were pushed down, strategists at ABN Amro report.

"Global oil demand dropped and expectations are that in Q2 even between 10-15% of global demand will diminish. This pushed prices down to the lows of 2002/03."

"We have revised our oil price forecast lower. For the coming months, oil prices will remain volatile and could see even more downward pressure."

"We think that this will be temporary and an oil price rebound towards USD 45/bbl could be seen as soon as the coronavirus measures are cut back and the economy starts to recover."

According to the report from Society of Motor Manufacturers and Traders (SMMT), british car manufacturing fell -0.8% in February. Some 122,171 vehicles rolled off production lines in the month, representing a loss of just over 1,000 units compared with February 2019. The decline was driven by slower demand in some key global export markets.

In the month before the coronavirus pandemic started to be felt in the UK, global shipments fell -3.1% to just short of 95,000 units. Although combined EU demand rallied (up +3.6%), exports to the US and Asia fell substantially. Meanwhile, there was positive news for the domestic market, where output rose +7.8%, with 27,172 cars produced. Year-to-date figures show a -1.5% year-on-year drop in overall production.

Mike Hawes, SMMT Chief Executive, said: "Despite the myriad global challenges the UK automotive industry has faced in recent times, it remains fundamentally strong and February's figures reflect that. However, these figures also reflect the calm before the storm. With UK car plants now effectively on national shutdown and many global markets closed, the outlook is of deep concern. We wholeheartedly welcome government's extraordinary package of emergency support for businesses and workers, but this must get through to businesses now. If we're to keep this sector alive and in a position to help Britain get back on its feet, we urgently need funding to be released, additional measures to ease pressure on cashflow and clarity on how employment support measures will work".

During today's Asian trading, the US dollar fell against the main world currencies on the background of some improvement in market sentiment due to the authorities ' promises to support the global economy in the face of the spread of coronavirus infection.

Investors are pinning their hopes on measures taken by governments and Central banks in various countries that are easing monetary policy and introducing programs to stimulate the economy, which has been affected by the coronavirus pandemic.

In the US, the number of initial jobless claims rose sharply last week - from 282 thousand to 3.283 million, which is the highest figure since data began to be recorded in 1967.

The head of the Federal reserve system Jerome Powell said that the US economy will recover, and the Central Bank will contribute to this. The Fed will continue lending and help change the situation after the situation with the spread of COVID-19 is brought under control.

The European Central Bank (ECB) on Thursday began buying bonds as part of an emergency program of 750 billion euros, designed to support the euro zone economy in the crisis caused by the COVID-19 coronavirus pandemic. "The ECB will explore all options and opportunities to support the economy and help it cope with this unprecedented shock," the ECB said in a statement.

Market participants are also waiting for the adoption of the law on measures to support the US economy by $2 trillion. The US Senate, after delays related to the settlement of another disagreement between Republicans and Democrats, approved it on Thursday night. The document will now go to the House of representatives and is expected to be approved as early as Friday or Saturday

FXStreet reports that in light of the recent price action. NZD/USD could still advance to the 0.6170 region, noted FX Strategists at UOB Group.

24-hour view: "NZD soared to an overnight high of 0.5986. The firm daily closing in NY (0.5962) suggests there is room for further NZD strength towards 0.6050. This level is a strong resistance and may not yield so easily (next resistance is at 0.6080). Support is at 0.5930 followed by 0.5900."

Next 1-3 weeks: "The strong +1.89% surge in NZD yesterday came as a surprise. The price action suggests that last week's 0.5469 low is short-term bottom. The current recovery has room to extend to 0.6150. On the downside, only a break of 0.5840 ('strong support' level) would indicate the current upward pressure has eased."

• CNBC reports that China's National Health Commission said that there were 55 new cases, of which 54 were "imported." Five new deaths were also reported, all of them in Hubei province.

• More people have died in Italy from exposure to the fast-spreading coronavirus than anywhere else in the world. As of March 26, 6 p.m. local time, at least 8,165 people have died, according to Italy's health ministry.

• There were 91 new reported cases and eight people have died from exposure to the virus, according to the Korea Centers for Disease Control and Prevention.

• Singapore says people who do not practice social distancing in public can face stiff fines of up to 10,000 Singapore dollars or a maximum jail term of six months, or both.

• Global cases: More than 531,800

• Global deaths: At least 24,000

• Top 5 countries: United States (85,653), China (81,782), Italy (80,589), Spain (57,786) and Germany (43,938)

MUFG Research discusses GBP outlook and sees scope for further gains in the near-term.

"The pound's rebound has been less impressive so far. Cable has risen back towards the 1.2100-level after hitting an intra-day low of 1.1412 on the 20th March, but still remains around 10 big figures below where it was trading at the start of the month," MUFG notes.

"Financial market conditions would need to normalise further in the near-term to encourage the pound to extend its rebound," MUFG adds.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1234 (2955)

$1.1169 (2093)

$1.1127 (4264)

Price at time of writing this review: $1.1043

Support levels (open interest**, contracts):

$1.0985 (1757)

$1.0953 (3842)

$1.0917 (3292)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 3 is 85750 contracts (according to data from March, 26) with the maximum number of contracts with strike price $1,1000 (4264);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2395 (33)

$1.2337 (86)

$1.2292 (343)

Price at time of writing this review: $1.2227

Support levels (open interest**, contracts):

$1.2162 (350)

$1.2145 (1803)

$1.2126 (712)

Comments:

- Overall open interest on the CALL options with the expiration date April, 3 is 18656 contracts, with the maximum number of contracts with strike price $1,3200 (2379);

- Overall open interest on the PUT options with the expiration date April, 3 is 22390 contracts, with the maximum number of contracts with strike price $1,2900 (2837);

- The ratio of PUT/CALL was 1.20 versus 1.18 from the previous trading day according to data from March, 26

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.