ForexLive European FX news wrap: Dollar surges higher on funding squeeze

Forex

Forex news from the European morning session – 17 March 2020

Dollar
Headlines:

Markets:

  • USD leads, AUD lags on the day
  • European equities lower; E-minis up 0.5%
  • US 10-year yields up 6 bps to 0.78%
  • Gold down 2.9% to $ 1,469
  • WTI up 1.8% to $ 29.20
  • Bitcoin up 7.8% to $ 5,285

EOD 17-03
The dollar is steamrolling the major currencies bloc in trading today as funding pressures blew up in the European morning session.

EUR/USD 3-month cross currency basis saw its spread widen to levels last seen since 2011 as borrowing for the dollar turns more expensive amid the surge in demand.

As such, the story of the day was rather simple as the greenback rose against every major currency with EUR/USD falling from 1.1150 to 1.1000. Meanwhile, cable fell to fresh lows since September last year back under 1.2100.

USD/CAD surged from 1.3990 to 1.4150 while AUD/USD fell from 0.6100 to its lowest level since 2003 – back under the 0.6000 level briefly.

Amid the funding squeeze, European equities saw early gains wiped out as stocks turned 2-3% gains into 2-3% losses with US futures also being humbled after hitting limit up earlier.

S&P 500 futures erased gains in the span of an hour to fall by more than 1% before recouping some ground as we look towards North American trading now.

Although the market is heavily focused on the funding squeeze right now, let’s not forget about the economic fallout from the virus outbreak as more and more countries are stepping up precautionary and lockdown measures.

Hong Kong saw its jobless rate spike to its highest level since 2011 in perhaps an early sign of things to come elsewhere. Looking ahead today, there is also the focus on US stimulus measures so let’s see how that all plays out.

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