USD funding pressures ease, but European bond rout raising new fears
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Wed Mar 18, 9:52AM CDT

ANALYSIS

USDCAD

Dollar/CAD continues its surge today on the back of an extremely positive NY close above 1.4080 yesterday. US dollar funding pressures have eased somewhat today after European banks took up $112bln in funding via a special ECB auction and while this was the biggest use of international USD swap lines since the 2008 global financial crisis and has led to a contraction in 3-month EURUSD cross currency basis swap pricing to just -12bp, traders are now finding new reasons to keep buying the USDthe continued plunge in European bonds.

Europes bond rout continued for a the third day this morning and seems to have reached a fever pitch after ECB governing council member Holzmann admitted that monetary policy had reached its limits:"when markets saw that Lagarde meant it, and that the ECB was unanimous about it, they realized that overvalued equity levels couldn't be maintained"; "it was impossible to meet market expectations anyway.The German 10yr bund yield shot all the way to -0.20% and the Italian 10yr BTP yield briefly went above 3%! US 10yr yields went for the ride higher as well, but global bonds have since recovered somewhat after Holzmann corrected himself and after reports circulated about the Bank of Italy intervening to buy BTPs.

Broader risk sentiment doesnt appear to be recovering however as the S&P futures remain locked limit down at -3.7% and as the April oil futures plunge 12% to new contract lows. All this is adding even more fuel to the fire for USDCAD, which has just crossed the 1.4400 mark. The Canadian CPI numbers for February were just reported in-line with expectations of +0.4% MoM vs +0.3% for January. Bank of Canada governor Stephen Poloz and Finance Minister Bill Morneau are now expected to make a statement at 11:15amET.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

3-MONTH EURUSD CROSS CURRENCY BASIS SWAP HOURLY

APR CRUDE OIL DAILY


EURUSD

Euro/dollar is holding up relatively well amidst todays bond rout in Europe and we think this is mainly because of the deterioration in the broader risk tone. Yesterdays chart support zone in the 1.0960-80s continues to hold. A break below this region would open up further decline to the 1.0880s in our opinion. We think how US stocks trade today will be key for EURUSD. The US administration is now pushing for a $1trillion dollar stimulus plan and President Trump said this morning that money will soon be coming to you. For the people that are now out of work because of the important and necessary containment policies, for instance the shutting down of hotels, bars and restaurants, money will soon be coming to you. The onslaught of the Chinese Virus is not your fault! Will be stronger than ever!.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

APRIL GOLD DAILY

APRIL GOLD DAILY


GBPUSD

Its getting worse and worse for sterling after todays Eurobond-driven move lower in risk sentiment knocked GBPUSD below chart support in the 1.2020-60 zone. Its been downhill ever since and not even the September 2019 lows in the 1.1950s could stem the selling. The market is now entering an extremely precarious spot technically where we could see a panicky fall to the 2016 post-Brexit lows in the 1.14s and you can tell that even the new Bank of England governor knows this. Speaking to reporters just now, Andrew Bailey said:

BOE'S BAILEY SAYS WE WATCH STERLING VERY CAREFULLY, WE WILL TAKE NOTE OF RECENT FALL AND CONSIDER EFFECTS CLOSELY AT NEXT MPC MEETING

BOE'S BAILEY SAYS HE HAS NO "SINGLE STORY" ON LATEST STERLING FALL

BOE'S BAILEY SAYS KEEPING MARKETS OPEN IS IMPORTANT, UK MARKETS ARE NOT OUT OF CONTROL

BOE'S BAILEY SAYS GLOBAL CENTRAL BANK LIQUIDITY STEPS ON SUNDAY HAVE HELPED CALM SOME MARKETS

BOE'S BAILEY SAYS MEASURES SUCH AS 'HELICOPTER MONEY' ARE FISCAL, FOR GOVERNMENT TO DECIDE

BANK OF ENGLAND'S BAILEY SAYS "EVERYTHING IS ON THE TABLE THAT IS REASONABLE, WITHIN THE POLICY TOOL SET" - SKY NEWS

BOE'S BAILEY , ASKED ABOUT PRINTING MONEY TO GIVE TO INDIVIDUALS, SAYS: "I DON'T RULE ANYTHING OUT, FRANKLY, BUT PLEASE DON'T THEREFORE INTERPRET IT THAT WE'RE ABOUT TO DO IT EITHER"

BANK OF ENGLAND GOVERNOR BAILEY SAYS INVESTORS WHO ARE MAKING MONEY BY SHORTING, AGAINST INTEREST OF UK ECONOMY, SHOULD "JUST STOP" BBC

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Australian continues its plunge this morning as theres very little to stop it. We can throw technicals out the window because there are no support levels on most traders charting packages any more. Broad risk sentiment continues to deteriorate with trading in the S&P cash expected to be halted again at the start of trade this morning. April crude oil prices are now extending their losses to -12% for the day. Talk on the street is that the RBA will cut rates to zero on Thursday and finally launch quantitative easing. There are no reasons to try and pick a bottom here in AUDUSD right now.

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen indeed filled its Sunday opening chart gap yesterday (107.56-107.88) after the 107.10s gave way and while this led to ok, whats next type of pullback in Asia today, we think the markets renewed bid since the European open has been US yield driven. The rise in yields were seeing today is definitely not risk-on driven, which we think is generating some new pause for concern here in global markets. Are market participants going to get so panicked over the coronavirus pandemic that they literally sell everything in an effort to generate casheven bonds?

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: Reuters Eikon


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