Investors came to a realisation of the scale and likely impact on the economy the now pandemic could have. Markets crashed across the globe yesterday afternoon and investors flocked from every direction to the US-dollar as it lived up to its long-standing accolade as a global safe-haven currency. The coronavirus panic was only exacerbated by Trumps failure to provide any sort of confidence to the market which triggered the global melt-down.
The FTSE 100 yesterday plummeted 10.87 %. That’s the largest fall in one-day since the Black Monday crash in 1987 and the US stocks also had its biggest fall since 1987.
In the early afternoon we saw EUR/USD crash below 1.1150 and GBP/USD to below 1.26. The dollar unleashed its sovereignty upon other notorious safe havens as we saw gold below $1,600 and USD/JPY topping at 105.
Important to note that EUR/USD initially advanced after the ECB left rates unchanged, before succumbing to the Dollar’s supremacy.
Markets in free-fall, The FED had to act. They announced they would pump $1.5 trillion of liquidity into short-term lending markets. This added massive strength to the US Dollar.
Other news in the UK added fuel to the fire as the carnage caused by the COVID-19 led to cancellation of next week’s EU-UK trade talks, a negative for the pound, and Johnson labelling the pandemic as the ‘worst for a generation’. As result we saw GBP/USD break 1.2500 briefly before bouncing back, now nearing five-month lows. The pair started the day above 1.28.
In terms of potential market movers today, all eyes are on the BOE minutes from the MPC’s meeting on Wednesday. Recall, during this meeting that the BOE decided on an emergency 50bps rate cut. The minutes will be released at 12:00 GMT and the focus will be whether there was an openness for further QE along with the BOE’s assessment of growth across the country as a recession becomes more and more likely.
At the time of writing:
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