Morning Commentary: Closing out a Tough Week

Foreign Exchange - Morning Commentary
Closing out a Tough Week
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David Atkinson
David Atkinson
Foreign Exchange Sales Manager
Markets this morning are somewhat in a snap back mode.  After a 10% single day loss in US equities yesterday, trading moved to Asia, which was a bit mixed in terms of equity performance.  Then we got to Europe, where there is a big rebound going on with equities up 7-8%.  US equities opened up about 5.00%.  The 10-year Treasury is up to 0.93%, along with a mini-recovery in oil.

Besides selling fatigue, markets seem to have responded positively to the liquidity injections from central banks.  As an example, the Fed offered $1 trillion of repo liquidity to the market, and had less than one-tenth of that taken up by banks.  It is one of those “Markets just feel good knowing it’s there” kind of policy goal.  Norway’s central bank became the latest monetary authority to issue an emergency 50 basis point rate cut.

Longer term, we are starting to get economic forecasts of what this whole pandemic will cost the world economy.  I am seeing some banks look for -2.00% or -3.00% in the first half of the year, with 2020 ending up flat after a second half recovery.  EU Commission announced today that it expects EU GDP to shrink around 1% for the year.

Our weekly Global Perspectives video focused on the collapse of emerging market stocks and currencies.  We filmed that yesterday for release today and sure enough, emerging markets have stabilized and currencies are recovering against the US dollar today.
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