The markets are gripped with a ‘sell everything’ fever as investors close equity and commodity positions in rapid succession. The wide outbreak of the coronavirus across Europe (Italy has over 35K cases now) has been met with investor fears resulting in some unprecedented falls in European equity markets. Daily falls of more than 5% have become a common feature of this present market and with France, Italy, Spain and Belgium banning short selling of some stocks this week further falls are expected next week. The Dollar Index was the big mover this week as liquidated positions were turned into the most liquid currency, the USD.
Key events from the past week
- GBP: Sterling tumbles, Wednesday, March 18. The GBPUSD reached some of the lowest levels ever and the range for the GBPUSD on Wednesday was 686 points vs a 22 day average of only 180 points. The GBPUSD drop was due to a combination of technicals, negative-GDP sentiment and a USD funding crisis.
- US Oil: Oil markets plunge, Wednesday, March 18. US Oil is nearly down a whopping 50% this month and price hit $20 midweek as the world grinds to a halt. Canny investors will have some long term buy limit orders at $10 and under in case of a ‘flash crash’ in the coming days.
- NOK: Norges Bank under pressure, Thursday, March 19. The Norges Bank said that they may intervene in the coming weeks as NOK endured heavy losses this week due to its strong correlation with oil. A falling oil price weakens the NOK. At the time of writing the USDNOK was up nearly 20% this week alone.
Key events for the coming week
- USD: Long live the dollar, all week. The expectations are that further unwinding of stocks and equities will result in more cash positions. With the USD the most liquid currency, expect more USD buyers this week in the Dollar Index.
- JPY: Safe haven bids, all week. The expectations are that safe haven bids will continue this week as long as equity markets remain pressured. Expect JPY and CHF buyers on pullbacks and sellers in the JPY crosses like AUDJPY and GBPJPY.
- Coronavirus: watch out for the latest virus news. The impact of the coronavirus is now heading towards its peak impact. Expect more profit warnings, company closures, falling equities, more enforced quarantines, and falling oil demand to all weigh on the markets again this week.