USD: Policy discord won’t help risk assets - ING

Chris Turner, Global head of markets at ING, thinks that President Trump’s prime time address has failed to calm asset markets. 

"Instead of a European travel ban, investors were looking for a co-ordinated policy response to soften the economic fallout of Covid-19."

"The lack of global policy co-ordination (and hints of US nationalism) look likely to weigh further on equities as Covid-19 cases continue to rise sharply in Western Europe and the US."

"Financial measures of stress are hitting extremes too. The 3m USD FRA-OIS spread has widened to levels last seen in 2009 and the US energy sector is very much under scrutiny, with high yield CDS widening sharply. It feels as though the Federal Reserve will have to be very aggressive next week in taking the policy rate closer to zero and seriously considering re-starting quantitative easing."

"Capital preservation should be the priority through March, which favours core sovereign yields staying very low, high yield and commodity FX under pressure and a continued flight to safety into the Japanese yen and Swiss franc – given that Fed QE could easily and deliberately weaken the dollar. DXY looks a sell at 96.60/97.30."