The Greenback Gives Up Gains As Safe-Haven Asset Underperform

OFX Daily Market News

Posted by OFX

USD – United States Dollar

Fed Chairman, Jerome Powell gave the first of two days of testimony before lawmakers in Washington yesterday, providing a relatively upbeat assessment of the U.S. economy. Powell said the Federal Reserve is also “closely monitoring” the deadly outbreak of the Coronavirus, which has now been officially named by the World Health Organization as COVID-19. Powell went on to say the virus has “lead to disruptions in China that spill over to the rest of the global economy,” he stopped short of saying the outbreak had changed the Fed’s outlook for the U.S. economy for the next few quarters. The overall expectation among many members of the FOMC is that rates will remain on hold through 2020.

The U.S. dollar edged lower through trade on Tuesday and into Wednesday morning, edging off four-month highs as risk appetite improved and demand for haven assets abated. With volatility across currency markets largely non-existence as of late, the greenback remains mostly well supported, and we expect the broader bullish narrative to continue, especially as investors look to short the Euro in a carry play to foster a higher yield return. The Euro fell through 1.09 touching 1.0870 before the shift in risk sentiment helped foster a small bounce into this morning’s open.
With safe-haven assets underperforming overnight, we expect broad-based direction to continue fluctuating on headline new updates and events concerning the COVID-19. Attention turns to Fed Chair Jerome Powell as the primary macroeconomic driver in his second day of testimony on Capitol Hill.

Key Movers

The recent outbreak of the coronavirus was given its own name identifying its unique strain by the World Health Organisation yesterday, identifying it now as “COVID-19.” After a solid day of gains in most equity markets around the world yesterday, most are showing green numbers again as concerns over the outbreak seemed to decrease as daily infection rates slowed. China begins preparations to send children back to school and re-open business in a staggered fashion. USD/JPY has finally got a foothold above 110 for the first time in over three weeks after falling short several times over recent days showing evidence there is some confidence returning to the markets. The aussie and kiwi dollars are also higher, with the latter also gaining from a more hawkish interest rate decision from the Reserve Bank of New Zealand. Rates were held at 1% as expected; however, they seem to have closed the door on any further cuts this year as long as the COVID-19 outbreak doesn’t dramatically deteriorate. NZD/USD popped up to .6470 from around .64 dragging AUD/USD higher (as is often the case with the two antipodeans), which rose from about .6710 to currently trade close to .6750.

Expected Ranges

EUR/USD: 1.0887 – 1.0926 ▼

GBP/USD: 1.2945 – 1.2992 ▼

USD/CAD: 1.3245 – 1.3330 ▼

AUD/USD: 0.6711 – 0.6749 ▲

NZD/USD: 0.6398 – 0.6488 ▲


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