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.

AUD/USD challenges four-week highs beyond 0.7000

AUD/USD continues its march north, this time leaving behind the key 0.7000 hurdle and trading at shouting distance from multi-week tops. The persistent recovery in spot comes amid further losses in the Greenback amid extra improvement in the risk complex.

USD/JPY remains confined in a familiar range below 158.50

USD/JPY sees some dip-buying in the Asian session on Wednesday, though it remains confined within a multi-week range near 158.50 as the uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. Meanwhile, hawkish Fed expectations, bolstered by inflation risks stemming from volatile oil prices, underpin the US Dollar. However, looming intervention fears could limit JPY losses and cap the currency pair.

Gold advances modestly; targets $4,150

Gold prices manage to reverse three consecutive daily declines, trading just below the $4,150 mark per troy ounce on Wednesday. The precious metal’s recovery comes amid a slight drop in the US Dollar, mixed US Treasury yields across the board and a widespread cautious tone from the US-Iran front.

Bitcoin eyes a break above $85,000 as institutional demand returns

Bitcoin edges higher above $83,000, extending its rebound from the 50-day EMA near $80,786. US-listed BTC spot ETFs recorded over $23 million in net inflows on Tuesday, following Monday's $526 million, signaling a return of institutional demand.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.