News

Monetary Easing Chances c Dollar Lower, Stocks Recover

USD

The dollar index, which measures the greenback against a basket of major currencies, extended selloff where DXY futures traded at a one-month low of 97.91. The increased prospects of significant monetary policy easing by the Federal Reserve weighed on the dollar. The US Treasury yields declined to record lows with the 10-year yields reaching 1.11%, and 30-year yields dropping to 1.68%. The CME Fed watch tool is currently showing a probability of 100% that the Fed will cut interest rates by 50 basis points on March 18 meeting, and heightened probability that rates will settle at 0.50-0.75% in June. The EURUSD rose to a one-month high of $1.1093, the AUDUSD recovered to $0.6568, and the NZDUSD surged to $0.6275.

Equities

Major US stock-index futures recovered from sharp declines on hopes that central banks will do the necessary to offset the effects of the novel Coronavirus on the economy. Equity markets around the globe had their worst week since the financial crisis as investors were weighing the consequences of the virus on the profitability and forward guidance of corporations. The rising prospects about central banks stepping in to support the markets eased investors' woes. The Dow Jones Industrial Average futures rose to 26000, the S&P500 futures advanced to 3019, and Nasdaq futures rallied to 8677. In Europe, the DAX futures had similar track as US equities rising to 12213, while the FTSE MIB extended losses as to a five-month low of 21697 amid growing new cases in Italy.

Metals

Gold prices trimmed Friday's losses supported by easing prospects. The precious metal incurred sharp losses on Friday as funds liquidated positions to cover stock losses and margin calls. However, the increased chances of serious monetary policy easing by major central banks lifted gold prices again. The price of a gold ounce edged higher to $1606, the price of a silver ounce appreciated to $17.06, and palladium futures advanced to $2564.

Oil

Oil prices inched higher on hopes that OPEC+ will agree to ease production. Oil benchmarks lost more than 30% from their January peak as the novel Coronavirus affected the economic activity around the globe and lessened oil-demand levels. OPEC and other oil producers will meet on Thursday and Friday to discuss the possibility of cutting production to support stabilizing the market. The West Texas Intermediate crude futures rose to $46.66, and Brent futures inched higher to $52.00.

Major Economic Events

GMT Country Event Expectation Previous

8:55

EU

German Manufacturing PMI (Feb)

45.2

45.3

9:00

EU

EZ Manufacturing PMI (Feb)

47.8

47.9

9:30

UK

 UK Manufacturing PMI (Feb)

49.8

50.0

15:00

US

US ISM Manufacturing PMI (Feb)

50.5

47.2


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