Euro falls as Italian government quarantines the country
US stocks had their worst day since 2008 while Treasury yields fell to record lows as investors reflected on the impact of coronavirus. The disease has spread around the world and killed more than 3k people. In the US, states like New York and California have already declared an emergency. In Europe, Italy has announced a countrywide quarantine, which will affect growth. Additionally, investors were afraid of the energy sector after the price of crude oil declined by more than 30%. On a positive note, the price of crude oil and US futures recovered during the Asian session. Futures tied to the Dow and Nasdaq rose by 595 and 225 points respectively. Meanwhile, the price of Brent and WTI rose by 6.52% and 7.40% respectively.
The euro declined after Italy announced a nationwide quarantine in the government’s most dramatic step to contain coronavirus. Italians will only be permitted to travel for urgent health or work reasons. This happened as the number of cases rose to 9,171. Additionally, 463 people have died from the disease and 724 have recovered. Schools and universities have been closed and public gatherings have been banned until April 3. The new action spells trouble for the third biggest economy in the European Union. We will now wait for a response from the European Central Bank (ECB), which will start its meeting tomorrow.
Risk haven assets declined during the Asian session as investors started to price-in a fiscal stimulus from the US. Media reports say that Donald Trump is considering options to rejuvenate the economy. According to CNN, Trump is considering payroll tax cuts to ease the burden on consumers and companies. He will also meet with senior Wall Street executives on Thursday to deliberate on options to rejuvenate the economy. Gold declined by 60 basis points while the Japanese yen declined by 1.75% against the USD.
The EUR/USD pair declined from yesterday’s high of 1.1498 to an intraday low of 1.1371. The price is slightly above the 14-day and 28-day exponential moving averages on the hourly chart. The dots of the Parabolic SAR are above the current price while the Average True Range has started to decline. The pair could move lower as traders wait for the ECB decision on Thursday.
The XBR/USD pair rose during the Asian session as traders hoped for a truce between Saudi Arabia and Russia. The pair is trading at 37.02, which is higher than yesterday’s low of 31.32. The price remains significantly lower than Friday’s close of $53. The average true range has continued to rise while the Chaikin Oscillator has declined to a multi-month low. The same is true with the accumulation/distribution indicator. The pair may attempt to recover from yesterday’s decline.
The USD/JPY pair rose to an intraday high of 103.87 on optimism of a fiscal stimulus from the Trump administration. Still, the price is below Friday’s high of over 105. The RSI has moved from a low of 14 to above 36 while the signal line of the MACD has continued to decline. The price is below the moving averages. The pair may see some volatility as the coronavirus situation keeps on changing.