Monex: Dollar krabbelt terug - EUR/USD onder druk

30 maart 2020

Hieronder volgt een commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

USD

After paring back a good chunk of its gains from the past month last week, the US dollar is trading with a slightly firmer tone this morning, after Donald Trump signed a historic $2 trillion stimulus package into law on Friday. The bill was ultimately passed in the House of Representatives with a rare “voice vote”, signalling broad consensus. The extraordinary impact of the coronavirus pandemic, and the containment measures, will be in focus this week, after weekly jobless claims spiked to an astonishing 3.4 million, the highest on record by a factor of more than four. In addition to another weekly jobless claims print on Thursday, the monthly non-farm payrolls report will be released on Friday. Most elements of financial conditions showed some signs of easing last week, as credit spreads tightened and equities rallied after massive liquidity injections from the Federal Reserve and other global central banks, accompanied by matching fiscal stimulus from many major economies. Signs of pressure on US dollar funding also eased, as cross currency basis swap pricing also reduced, amid USD liquidity injections by global banks using swap lines with the Fed. The evolution of these conditions will be worth watching this week, as the virus shows no signs of slowing down in the US and global investor risk appetite remains fragile.

EUR

The euro has traded on the back foot against the dollar since today’s open as surges in virus figures and tightened lockdowns globally continue to spur safe haven demand. In order to help the region recover some of the recent and most likely upcoming economic turmoil, the European Commission will propose changes to the multiannual financial framework (MFF), the EU’s long-term budget. In the statement released over the weekend, Commission President von der Leyen expressed that the changes will include a “stimulus package that will ensure that cohesion within the Union is maintained through solidarity and responsibility”. Von der Leyen also stated that “the Commission will participate in these discussions and stands ready to assist, if supported by the Eurogroup”, following the disagreement of the 27 EU leaders on an adequate economic response to the pandemic during the video-conference on Thursday. In addition to this, European Central Bank Vice President Luis de Guindos stated this morning that the central bank “will try to make sure the European economy has the best financing tools at its disposal”, while also acknowledging that the current shock cannot be compared to the global financial crisis and “aid schemes applied then are not valid now”. The ECB also asked banks to postpone dividend payments until at least October, which should free up €30 bn of capital. The support seen in both fiscal and monetary space deems necessary as the BTP - bund 10 y yield spread continues to climb this morning, reflecting mounting angst over Italian government debt.

GBP

Sterling enjoyed a sensational rally last week, enjoying its biggest weekly rally against the US dollar for decades as risk appetite improved globally. This morning the pound is paring back some of last week’s rally, and is the worst performing G10 currency against the dollar, after a number of negative developments. Prime Minister Boris Johnson is isolating following a positive test for Covid-19, the UK’s credit rating was downgraded from AA to AA- by Fitch, and a surge of cases is expected to hit the public health system over the next two weeks. The Fitch downgrade seems to have been taken well by fixed income investors, with UK sovereign debt yields unaffected this morning. Fitch cited the impact of the coronavirus pandemic on public finances, and due to the fact this shock will also be seen elsewhere, the marginal downgrade in the UK’s rating has little meaning in relative terms. After last week’s dismal flash purchasing managers' indices for March, no new timely data will be released this week, although final PMIs for the month will be released on Wednesday and Friday.