CORONAVIRUS UPDATES:
- Total confirmed cases: More than 382,431
- Total deaths: At least 16,569
- Affecting 195 countries and 1 international conveyance (the DiamondPrincess cruise ship).
- US cases: At least 46,145,and deaths: 582
- Italy cases: At least 63,927,and deaths: 6,077
- Iran cases: At least 23,049,and deaths: 1,812
- Thailand cases: At least 827,and deaths: 4
· The dollar slipped on Tuesday on signs tight funding conditions are easing slightly after the U.S. Federal Reserve pulled out all stops to supply much needed greenback liquidity.
The Fed announced unlimited quantitative easing and programs to support credit markets on Monday in a drastic bid to backstop an economy reeling from emergency restrictions on commerce to fight the coronavirus.
The dollar index =USD lost about 0.5% to 101.64, slipping further from Friday’s peak of 102.99, its highest level since January 2017.
Against the yen, the dollar shed 0.6% to 110.58 yen JPY=, having hit a one-month high of 111.59 in the previous session.
The euro gained 0.9% to $1.0821 EUR=, bouncing back from a near three-year low of $1.0636 in the previous session.
The British pound also rose 0.75% to $1.1630 GBP=D4, up more than two cents from its 35-year low of $1.1413 set last week.
“I think the measures taken by the Fed are powerful and should help ease the crisis,” Peter Cardillo, chief market economist at Spartan Capital in New York, told the Reuters Global Markets Forum.
“However, the markets seem to want more. I suspect once the Congress passes the economic stimulus package, it should stabilize the equity markets.”
· The US dollar will test 105 against a basket of currencies in the short term, analyst says
World markets are facing a simple but serious problem: There just aren’t enough dollars to execute trades and transactions.
The dollar spike isn’t surprising given extreme market volatility and investor fears that go along with it. But a number of aspects to the rise are worrying some analysts:
1. Bad news for emerging market assets – With many currencies like the Brazilian real, Indian rupee and Indonesian rupiah plunging to record lows, the next move to watch for is a G20 level currency intervention. With the Fed funds rate in the U.S. down to near zero and most emerging market central banks cutting rates aggressively, the yield advantage for those countries’ currencies has withered away.
2. Negative for US exports – At a time when President Donald Trump has repeatedly said he doesn’t like a strong dollar, the rally will be detrimental for U.S. exports, especially once the pandemic curve flattens and consumer and industrial demand bounce back.
3. Top reserve currency of the world – According to the IMF, more than 61% of all foreign bank reserves are in U.S. dollars. Plus, nearly 40% of the world’s debt is in dollars. Together with the euro, the two currencies dominate 80% of global reserves. The Chinese renminbi, despite the country being an integral part of global trade, makes up less than 2% of global currency reserves. That creates over-dependence on the U.S. greenback.
4. Euro-dollar parity – Foreign exchange markets are watching this currency pair closely. Divya Devesh, forex analyst at Standard Chartered, said he sees diverging economic performance between the United States and Europe. “We project full-year 2020 GDP growth of -3.0% in the euro-area versus -0.3% in the U.S.,” he said in an email. “Expected economic underperformance is likely to weigh on the euro.”
Any solution to the dollar frenzy is linked to an eventual easing of the coronavirus infection rate, said Goh.
“We will need to see the COVID-19 new infection numbers peak and start to trend lower before we see a bottom to the risk selloff and a turn in the dollar strength,” he said.
· Mainland China saw a doubling in new coronavirus cases driven by a jump in infected travellers returning home from overseas, raising the risk of transmissions in Chinese cities and provinces that had seen no new infections in recent days.
China had 78 new cases on Monday, the National Health Commission said, a two-fold increase from Sunday. Of the new cases, 74 were imported infections, up from 39 imported cases a day earlier.
· IOC member says 2020 Tokyo Olympics will be postponed because of coronavirus pandemic
Veteran International Olympic Committee member Dick Pound told USA TODAY Sports on Monday afternoon that the 2020 Tokyo Olympic Games are going to be postponed amid the coronavirus pandemic.
“On the basis of the information the IOC has, postponement has been decided,” Pound said in a phone interview. “The parameters going forward have not been determined, but the games are not going to start on July 24, that much I know.”
· Leaders from the Group of 20 major economies will convene a video conference on Thursday to discuss the coronavirus epidemic, multiple sources told Reuters, amid criticism that the group has been slow to respond to the global crisis.
G20 finance ministers and central bankers agreed during a separate video conference on Monday to develop an “action plan” to respond to the outbreak, which the International Monetary Fund expects will trigger a global recession. A subsequent statement from the Saudi G20 secretariat offered few details.
· Turkey imposed restrictions on Tuesday on grocery store opening hours and numbers of shop customers and bus passengers, adding to steps to combat the spread of the coronavirus after the country’s death toll from the illness rose to 37.
· Germany reported an additional 4,764 confirmed cases of the coronavirus disease, bringing the country’s total to 27,436, according to the Robert Koch Institute, a German federal government agency responsible for disease control and prevention.
The country’s total deaths from the virus have increased by 28 to 114, the institute said
· The U.K. government has tightened restrictions on the British public in a bid to contain the spread of the coronavirus in the country.
As of Tuesday morning, all nonessential public buildings and places are closed, ranging from libraries to churches, outdoor gyms and playgrounds, and all social events including weddings and baptisms have been stopped.
The public has been told to stay at home and can now only leave home for essential trips to buy food or medicines, to provide essential care, travel to work if absolutely necessary or to exercise once a day.
Anyone not following the rules could be liable to a fine from the police, who now have the powers to enforce the measures and disperse gatherings, although it has been conceded that policing the measures will be difficult.
· Mnuchin hopes deal is 'very close' on $2-trillion coronavirus aid package in U.S. Senate
The U.S. Treasury secretary and the Senate Democratic leader voiced confidence late on Monday for a deal to be reached soon on a far-reaching coronavirus economic stimulus package that had been stalled in the U.S. Senate as lawmakers haggled over it.
Negotiators made great progress on the bipartisan, $2-trillion stimulus measure on Monday, but without striking a final pact as they had hoped, Treasury Secretary Steven Mnuchin and Senate Democratic Leader Chuck Schumer told reporters.
· Germany to return to austerity after coronavirus crisis, economy minister says
The German government will return to its savings policy once the coronavirus crisis is over, Economy Minister Peter Altmaier told ZDF broadcaster on Tuesday, adding that Europe’s largest economy had committed to paying debt back from 2023.
Germany on Monday agreed a package worth up to 750 billion euros ($812.25 billion) to mitigate the damage of the coronavirus outbreak on Europe’s largest economy, with Berlin aiming to take on new debt for the first time since 2013.
“Once the crisis is over - and we hope this will be the case in several months - we will return to austerity policy and, as soon as possible, to the balanced budget policy,” he said.
· Oil prices rose on Tuesday on hopes that the United States will reach a deal soon on a $2 trillion coronavirus aid package which could blunt the economic impact of the outbreak and in turn support oil demand.
Brent crude oil LCOc1 futures for May delivery rose by 62 cents, or 2.3%, to $27.65 a barrel by 0346 GMT while West Texas Intermediate (WTI) crude CLc1 futures gained 76 cents, or 3.3%, to $24.12. Both price benchmarks had risen over $1 earlier before pulling back slightly.
· Barclays cuts 2020 crude forecasts by $12 on virus, OPEC+ deal collapse
Barclays on Tuesday slashed its oil price forecasts for 2020, citing considerable downward pressure on the market from a Saudi-Russian price war and demand disruption because of the coronavirus.
The bank lowered its 2020 price outlook for Brent and West Texas Intermediate by $12 each to $31 and $28 per barrel respectively.
Barclays also forecast global available onshore storage capacity at about 1.5 billion barrels with an estimated oversupply of over 5 million barrels per day (bpd) for this year and an oversupply of 10 million bpd on average for second quarter.
Meanwhile, “strategic petroleum reserve (SPR) purchases by the U.S government are unlikely to alleviate U.S. producers’ pain,” the bank said.
Reference: USA Today, Reuters, CNBC
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