Author: Rowan Murphy
The AUD and USD lost ground against the JPY overnight as risk appetite continued to sour due to virus containment concerns. Despite the AUDUSD cross holding (albeit at low levels), the risk for the AUD still seems to remain to the downside while infection rates outside of China continue increase.
Overnight the equities bloodbath that started in the APAC region spread into the northern hemisphere’s trading session as traders re-assessed global growth and risk tolerances. US Interest rate futures have jumped, according to Bloomberg markets are pricing in a high likelihood of 25bp cut by the Fed by June/July, where as recently as last month it was priced in for December.
The yield on the US 10y Treasury note fell to a three-year low at 1.36%, just 4bps above its record low (the 30y rate did trade at a record low) and gold has traded at 7-year highs. The S&P500 fell 3.0% and the DJIA fell 3.0%. The DAX fell 4.0% and the FTSE 100 fell 3.3%. Oil also plunged with the WTI down 5.5% at one point during the session, but closed trading only 3.5% down.
The day ahead in global markets will be primarily focussed on the COVID-1 spread/containment, and assessing the potential for further losses in equities (ASX is expected to open ~2.5% lower this morning according to futures). The economic calendar remains relatively sparse, with the only major release being US consumer confidence at 2am tomorrow morning.
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