Forex Today: Coronavirus clobbers markets, dollar on the defensive (for now), Bitcoin battered

Yohay Elam FXStreet

Here is what you need to know on Wednesday, February 26:

Markets are trying to find their feet after the second consecutive day of 3%+ drops in US shares. US ten-year bond yields fell to record lows, weighing on the US dollar. EUR/USD is near 1.09, GBP/USD temporarily topped 1.30, and USD/JPY dipped below 110 before stabilizing. Gold prices remain elevated at around $1,650.

The latest trigger has been a spread of the coronavirus disease to additional countries in Europe including Germany, Switzerland, Austria, Croatia, and mainland Spain. The first infection was also reported in Brazil. The number of cases in South Korea has surpassed 1,100 while only China – the epicenter of the outbreak – has announced a deceleration in the number of deaths.

The World Health Organization has expressed concern about the spread of the respiratory disease but has refrained from declaring a global pandemic. Concerns are growing about the spread of the disease in the US after a warning from the Center for Disease Control (CDC).

Brexit: The EU published its mandate for talks about future relations with the UK which are set to begin on Monday. Brussels demands a level-playing field that London opposes.

US data: The Conference Board's Consumer Confidence gauge for February missed expectations with 130.7, yet still at high levels. New Home Sales for January are set to show an increase.

Fed: Neel Kashkari, President of the Minnesota branch of the Federal Reserve, speaks today. His colleagues at the central bank have expressed concern about coronavirus but have refrained from suggesting cutting rates. Markets are pricing three cuts by January 20201.

WTI Crude Oil is clinging to $50 after a sharp decline. Weekly oil inventory figures are eyed later in the day.

Cryptocurrencies have dropped with Bitcoin trading around $9,200 and Ethereum around $240.

See Dollar domination set to continue, with or without coronavirus fears

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD holds range below mid-1.3600s amid Fed risks and Iran tensions

The GBP/USD pair extends its sideways consolidative price move for the second straight day, and trades around the 1.3630 area during the Asian session. The US Dollar is looking to build on its modest recovery from the lowest level since May 14, and is acting as a headwind for the currency pair. The lack of follow-through selling warrants some caution for bearish traders.

EUR/USD gains support amid hawkish ECB expectations, subdued US Dollar

EUR/USD inches higher after posting minor losses in the previous day, trading around 1.1670 during the Asian hours. The pair finds support as rising oil prices, elevated bond yields, and escalating Middle East tensions drive Eurozone inflation concerns. These factors have boosted expectations for a more hawkish stance from the European Central Bank, which is widely anticipated to deliver a 25-basis-point rate hike in September.

$4700 tested as Gold pulls back but bullish potential remains intact

Gold has pulled back sharply from fresh 15-week highs of $4,697, snapping a two-day uptrend in Asia on Tuesday. The US Dollar (USD) holds onto recovery gains, capping further upside in the bullion.

Bitcoin tops $80,000 as US Treasury fights high yields – AERO, VIRTUAL rally

Bitcoin extends gains above $80,000 as broader market risk-on sentiment persists. The scarce asset could extend its rally as the US Treasury combats high yields in the long-dated bond market, with further interventions on the horizon. Aerodrome Finance (AERO) and Virtuals Protocol (VIRTUAL) emerged as top performers over the last 24 hours.

The forex market is switching to a ‘debasement trade’

The US dollar has stabilised near three-month lows thanks to a rapid recovery in Treasury bond yields. Yields on 30-year bonds are returning to the levels seen following the Treasury’s announcement that it was increasing the minimum purchase volume to $4 billion. The greenback got support from falling stock indices, the continued rally in Brent crude, and positive signals from the US economy.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.