The Panic Continues Even After Federal Reserve Action

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Updated: 17 March 2020

With there being no slowdown in the spread of the coronavirus markets have continued to freefall with investors and traders panicking.
One of the most important news releases this week came on Sunday night from China that showed the toll the virus has taken on their economy.

We also have the US interest rate decision on Wednesday, although with their emergency rate cut on Sunday taking interest rates in the country to 0-0.25% it is hard to see where they can go from here.

Central banks have been extraordinarily active in the past week with The Bank of Canada and Norges Bank both cutting their rates by 0.5% on Friday.
The Fed also announced a new programme of QE, while the Reserve Bank of New Zealand cut their rates by 0.75%, taking their interest rates to 0.25%.

We still have central bank meetings to come, along with the Fed, the BoJ, SNB, and Norges bank also have meetings scheduled.
The PBOC will also meet on Friday to set it's loan prime rate.

We are expecting a lot of volatility over the next few days, and we urge traders to manage risk accordingly.

GBP

The pound has continued its seemingly never-ending decline with losses against most major currencies last week. As you can see from the chart below, it is now trading at 1.2085 against the dollar.

The reason for the decline may be because of the UK governments strategy in combating the COVID-19 virus, which people have labelled as risky. The markets are also anticipating a possible rate cut from the BoE, hot on the heels of the last one.

From a technical point of view, we are approaching a key area, with the critical level of 1.1960 not too far off we may start to see some buyers come in.

There is UK data released today, which is the claimant count change, at 9:30 am.

Oil

Oil started the week lower again with both Brent and WTI down by over 5%.
The oil industry is seeing issues on either side of the sector. The price war within OPEC plus is causing countries to sell at a discount and increase production, while the demand for oil is falling due to the global downturn.

The critical $30 level has been broken to the downside this morning, and due to the continued sell-off in assets globally I believe we will see further selling continue.

There is some data out this week with the API crude oil stock change released at 8:30 pm GMT.
On Wednesday the EIA crude oil stock change number is released at 2:30 pm GMT.

USD

The US dollar has seen a considerable rise over the last few weeks as investors flock to safe-haven assets.
It was exacerbated by the weak data from China early Monday morning, which suggested a significant downturn in countries that are heavily infected by the coronavirus.
USD volume spiked yesterday although we may see that reduced heading towards the Fed meeting on Wednesday. Still, we expect to see continued USD strength in the coming week.

The critical data from the US this week is the Fed meeting on Wednesday at 6 pm GMT.

Gold

Gold has unexpectedly suffered during the downturn, even after the Feds emergency rate cut on Sunday. We did see an initial pop, but price headed straight back down soon after.

We have also seen price break the critical psychological level of $1500, and it is currently trading at $1472 with there being no sign of a move higher just yet.

It seems gold as a safe-haven is coming into question, although we may see some reaction after the Fed meeting on Wednesday.