Equities and currencies traded higher today after Dr. Fauci, the US’ Director of National Institute of Allergy and Infectious Diseases said there could be a COVID-19 turnaround next week. Fauci noted that the US death toll is now lower than initially thought, a sign that the curve may be flattening.  The response in currencies have been mixed with the US dollar strengthening against the euro, Canadian dollar, Swiss Franc and Japanese Yen but slipping against sterling, the Australian and New Zealand dollars. This price action suggests that investors are not convinced that the gains are sustainable particularly after NY State reported the largest daily increase in positive cases to date.
On Tuesday, President Trump talked about reopening parts of the economy in 4 to 6 weeks which is possible, but that doesn’t diminish the damage done to corporate sector which will take time to recover.  The good news is that the US can watch China’s comeback and how their process of restarting social and economic activity affects the number of COVID-19 cases. If the country successful avoids a second wave, there’s hope for the rest of the world but if the number of cases surge, forcing parts of the country back into lockdown, then it would be safe to assume that a restart of the US economy will be delayed as well. 
The muted performance of the dollar is also a reflection of the March scheduled and unscheduled FOMC minutes. Their economic outlook deteriorated sharply last month and their economic projections have been downgraded significantly, which is no surprise considering that the central bank acted quickly to cut interest rates to zero and restart Quantitative Easing. With that said, the impact on the dollar was nominal because their dovish outlook was largely discounted by the market.
Tomorrow we could see some big moves in currencies. The US dollar remains in focus with jobless claims, inflation and consumer sentiment numbers scheduled release. Between lower oil prices and a strong dollar, PPI is expected to slide. The University of Michigan sentiment index should also fall sharply as states settle into lockdown mode. But the main focus will be on the OPEC meeting. Oil prices are down 50% year to date after Saudi Arabia increased production. Investors will be eager to see if the price war between Saudi Arabia and Russia will end with an agreement by all parties to cut world production by 10 million barrels. All signs are pointing that way as Putin seems willing to play ball but its unclear how Saudi Arabia feels. This will be a crucial meeting for the oil market, the Canadian dollar and likely risk appetite. In many ways, it could supersede the impact of Canadian labor market numbers which are also due for release tomorrow. Given the sharp decline in the employment component of the IVEY PMI index, significant job losses are expected for the month of March. If OPEC leaves production unchanged and labor data is weak, we could see USD/CAD head for a move back above 1.42. If they cut production, USD/CAD could sink below 1.40.
G20 leaders are also meeting to discuss the health and economic emergencies caused by COVID-19. Many leaders are looking for coordinated action and while there could be steps taken on the healthcare front including increased healthcare spending, very little coordination is expected on an economic front. 
Meanwhile the weakest currency today is the euro which was hit from all sides. Spain reported the highest daily increase in coronavirus cases and deaths in 4 days. The ECB said they have obligation to keep rates low for a long period of time while leading Germany economic forecast institutes see the economy shrinking as much as 10% in the second quarter. German trade numbers are due for release tomorrow – softer data could accelerate the slide in the currency. UK industrial production, trade and monthly GDP numbers are also due for release and with manufacturing PMI plunging, retail sales and trade activity weakening a string of softer numbers are expected that could renew the slide in GBP.

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex Analysis

Editors’ Picks

EUR/USD chops around amid end-of-month flows, ahead of Trump

EUR/USD is battling 1.11, close to the two-month highs amid choppy trading. Hopes for a fiscal boost in Europe and mixed satisfactory data have supported the currency pair. , Sino-American tensions are rising and investors await President Trump's China announcement.


GBP/USD advances amid US dollar weakness, shrugging off concerns

GBP/USD is trading above 1.23, edging higher amid US dollar weakness and Britain's gradual reopening. Intensifying Sino-American tensions and the Brexit impasse are ignored. 


Cryptocurrencies: $348M in matured derivatives boost the market

Futures and options contracts' expiration brings a wave of volatility to the crypto market. Ethereum takes advantage and attacks resistances in the market dominance chart, Bitcoin goes back. Ripple disappoints despite regaining the third place in market capitalization.

Read more

Canada's economy falls by 8.2% annualized in Q1, better than expected, USD/CAD shakes

The Canadian economy squeezed by an annualized rate of 8.2% in the first quarter of 2020, better than -10% expected. Quarterly, Gross Domestic Product (GDP) squeezed by 2.1%. Most of the downfall occurred in March, with a drop of 7.2%, better than 8.5% projected. 

Read more

WTI drops 4% and eyes $32 mark amid risk-off, weakening demand

The selling pressure around WTI (July futures on Nymex) accelerates following the break below the 33 level, as bears now target the 32 support zone heading into the key US macro data and US President Donald Trump’s response to the Hong Kong issue.

Oil News

Forex Majors