The potential for a US federal reserve interest rate cut of between .5 and .75% has steadied markets temporarily overnight. The biggest mover, the USD which has recovered some of its losses. Asian equity markets took a pause for a breath also. Talk of tax cuts by President Trump and also here in the U.K. at the next budget, offer some fiscal hope. But what we have not yet seen is any corporate fallout. That story is yet to play out following such systemic prices shifts across all asset groups.
In Italy, Coronavirus-led deaths have jumped from 97 to 463 and in reply the Italian prime minister Giuseppe placed the entire country on lockdown last night. All sports events have been cancelled including Italy’s upcoming six nations fixture against France. Globally the number of confirmed cases have passed 111,000 and the death toll is above 3,890.
Holes are starting to show in the omnipotent blanket of negative interest rates that investors have so readily fled too in recent weeks. The market has now started to price in 2 rate-cuts from the ECB by June, rather than one last week. This coupled with US Treasury bonds recovering along with equity futures has led to EUR/USD heading back down towards 1.1300.
GBP/USD has bounced back and is now trading under 1.3100 this morning, mainly due to fresh doubts yesterday in Brexit negotiations. All eyes on Wednesday’s budget as Rishi Sunak is expected to ease constraints on spending and borrowing. The Chancellor is presenting his first budget and has promised to give the NHS ‘whatever it needs’ to cope with the outbreak. The latest equity sell-off as a result of coronavirus and oil price wars may force the BOE to make an emergency interest rate cut in the near-term. We could expect volatility in Sterling.
At the time of writing:
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