Here is what you need to know on Monday, March 23:
The constant increase in coronavirus cases and deaths, alongside the failure of US politicians to strike a deal on fiscal stimulus is weighing heavily on markets. US stock futures hit limit down alongside Asian stocks, and bonds are in demand. The drop in US yields is weighing on the dollar vs. majors, with EUR/USD recovering above 1.07 and USD/JPY dropped under 110. The greenback is gaining ground against commodity currencies, oil is falling, and gold remains pressured under $1,500.
Coronavirus has taken the lives of over 14,000 people and infected more than 330,000. The death tolls in Italy is especially devasting, nearing 6,000. The eurozone’s third-largest economy announced tighter restrictions, closing non-essential factories. Spain’s death toll also extends its rapid increase, with the government announcing that the state of emergency will last through at least April 11.
German Chancellor Angela Merkel is in self-isolation after a doctor she was in contact with tested positive for Covid-19. She announced more rigid limits on movement. Eurozone Consumer Confidence is set to show a significant drop later in the day. Members of the European Central Bank say more can be done after last week’s €750 billion in new bond-buying.
In the UK, Prime Minister Boris Johnson hinted of tougher measures to enforce social distancing after the public seemed to flout the guidance over a sunny weekend. London announced vast support to employees losing their jobs.
US coronavirus cases reached 35,000, the third-highest in the world as testing has been ramped up. James Bullard, PResident of the Saint Louis branch of the Federal Reserve, said the unemployment rate could hit 30% and Gross Domestic Product could fall by 50% in this planned shutdown. Bullard said everything is on the table while Neel Kashkari, his colleague from Minnesota, said that the Fed has more tools.
Senate Democrats voted against a fiscal stimulus bill brought forward by Republicans as it consisted of too few strains attached. Democrats are opposed to unlimited bailouts. Reports suggest the size could exceed $2 trillion dollars and would include 50-year bonds funded by the central bank. Frantic negotiations continue in Washington.
Finance ministers and central bankers of the G-20 will hold a video conference later on but are unlikely to issue a statement.
The Bank of Japan stepped into markets by offering ¥800 billion of repo operations. Tokyo is under growing pressure to cancel the Olympics due in late July.
NZD/USD: The Reserve Bank of New Zealand announced a Quantitative Easing program while the government places the country on lockdown. NZD/USD has been one of the biggest losers, falling around 1%. The Reserve Bank of Australia kicked off QE last week. In the eurozone and in Britain, printing new money seemed to help the currencies.
See Is money printing positive for currencies? Lessons from Lagarde’s largesse, Bailey’s bailout
Cryptocurrencies are edging higher after ticking down over the weekend. Bitcoin is trading just under $6,000.