UK construction activity falls in March at fastest rate since 2009


© Reuters. FILE PHOTO: Workers are seen as the sun sets behind a construction site in London

By David Milliken

LONDON (Reuters) – Britain’s construction sector saw the sharpest fall in activity since the financial crisis last month, a survey showed on Monday, despite facing much less pressure than other industries to shut down operations due to the coronavirus.

The figures from financial data provider IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) also confirmed data last week that showed the British private sector as a whole is contracting at its fastest rate in more than 20 years.

The construction Purchasing Managers’ Index (PMI) tumbled to 39.3 in March from 52.6 in February, its lowest since April 2009 and well below economists’ average forecast of 44.0.

The 13-point monthly fall was the largest since the survey began in 1997, and the index looks likely to worsen.

“The sector is stuck in quicksand and sinking further,” Duncan Brock, group director at CIPS, said.

Britain’s government has not required general construction work to stop to slow the spread of coronavirus – in contrast to its order for most shops and restaurants to close to the public, and for workers in other sectors to stay home if possible.

Nonetheless, IHS Markit said building companies reported stoppages last month as they sought to comply with guidance to keep workers 2 metres apart where safe to do so, as well as a big fall in new orders.

“Survey respondents widely commented on doubts about the feasibility of continuing with existing projects as well as starting new work,” IHS Markit economist Tim Moore said.

“Construction supply chains instead are set to largely focus on the provision of essential activities such as infrastructure maintenance, safety-critical remedial work and support for public services in the weeks ahead,” he added.

Last week, IHS Markit’s composite PMI for the manufacturing and services sectors fell to its lowest on record at 36.0 for March, and Monday’s all-sector version including the construction industry was also a record low at 36.3.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Bank of England Cuts Key Rate to 0.1%, Ramps up QE By Investing.com


© Reuters.

By Geoffrey Smith 

Investing.com — The Bank of England cut its key interest rate to 0.1% from 0.25% on Thursday and increased the scope of its bond-buying program, ramping up its efforts to contain the economic fallout of the coronavirus pandemic.

The Bank said it would increase its purchases of government and investment grade corporate bonds by 200 billion pounds ($230 billion) to 645 billion pounds.

“The majority of additional asset purchases will comprise UK government bonds,” the bank said in a statement. “The purchases announced today will be completed as soon as is operationally possible, consistent with improved market functioning.”

In addition, the BoE’s Monetary Policy Committee also agreed to increase the size of the term funding program, a backstop for business lending, that it announced last week.

The pound, which hit a new 35-year low of $1.1475 earlier on Thursday, recovered to $1.1663, up 0.5% on the day. Against the euro, it was up 1.7% at 1.0814.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Dollar weakens after another surprise Fed rate cut By Reuters


Dollar weakens after another surprise Fed rate cut

By Stanley White

TOKYO (Reuters) – The dollar fell against a broad range of currencies on Monday after the U.S. Federal Reserve made another surprise interest rate cut and major central banks took steps to relieve a shortage of dollars in financial markets.

The U.S. Federal Reserve cut rates to a target range of 0% to 0.25% and said it would expand its balance sheet by at least $700 billion in coming weeks.

Five other central banks also cut pricing on their swap lines to make it easier to provide dollars to their financial institutions facing stress in credit markets.

The moves come as policymakers respond to a brutal months-long sell-off in financial markets due to worries about the economic impact of the global spread of the coronavirus.

“It’s a modest negative reaction for the U.S. dollar. The Fed moved a little sooner and a little more aggressive that some thought,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

“This cannot prevent the economic fallout from social distancing (used to slow the coronavirus). That will require some fiscal spending and something from the government to make sure small companies are funded.”

The dollar fell 1.5% to 106.35 yen early on Monday in Asia in reaction to the Fed’s move, which was announced on Sunday evening U.S. time.

The greenback also fell 0.9% to $1.2405 per British pound .

Against the euro (), the dollar slid 0.3% to $1.1153.

The dollar fell 0.3% to 0.9507 Swiss franc .

The Fed, the Bank of Canada, European Central Bank, the Bank of England, the Bank of Japan (BOJ) and Swiss National Bank also agreed to offer three-month credit in U.S. dollars on a regular basis and at a rate cheaper than usual.

The move was designed to bring down the price banks and companies pay to access U.S. dollars, which has surged in recent weeks as a coronavirus pandemic spooked investors.

The Fed had already cut interest rates by half a percentage point on March 3 at an emergency meeting, the first emergency cut since the financial crisis in 2008, but that move failed to stem market volatility.

The Fed’s move on Sunday U.S. time was likely aimed at staving off what had the potential to be another volatile week in financial markets, analysts say.

However, U.S. stock futures plunged after the rate cut, suggesting investors remain nervous.

Later on Monday, China will release several important economic indicators that should reveal the scale of damage caused by coronavirus, which emerged in the central Chinese province of Hubei late last year.

The Fed was originally scheduled to announce a policy decision on Wednesday, and the BOJ holds a two-day meeting ending Thursday, and the pressure has been on central banks to do something to restore calm to financial markets.

Worries that travel restrictions and factory closures aimed at containing the coronavirus will cause a global recession have sent equities into a tailspin.

In the offshore market, the yuan edged up slightly to 7.0131 per dollar as traders awaited key Chinese economic data.

The Reserve Bank of New Zealand joined the global easing race with a cut of 75 basis points to its rates, while the Reserve Bank of Australia added A$5.9 billion to the banking system through market repo operations.

The New Zealand dollar fell 0.2% to $0.6045, while the Australian dollar fell 0.38% o $0.6164.



Bank of Canada Slashes Benchmark Interest Rate in Surprise Move By Bloomberg


© Reuters. Bank of Canada Slashes Benchmark Interest Rate in Surprise Move

(Bloomberg) — The Bank of Canada cut interest rates by half a percentage point in an emergency move to buffer the nation’s economy from the double hit from the coronavirus and tanking oil prices

The Ottawa-based central bank lowered it’s policy rate to 0.75% and said it “stands ready” to move again if needed. Governor Stephen Poloz, in a joint press conference with Finance Minister Bill Morneau, announced a new facility to support funding markets for small- and medium-size businesses “at a time when they may have increased funding needs and credit conditions are tightening.”

“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank of Canada said in a statement. “In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.”

This marks the first emergency rate cut by the country’s central bank since the last global recession and it’s part of a global response in order to prevent the world economy from going into a recession. The growing number of coronavirus cases globally, the shock to oil prices and volatility in financial markets have prompted fears that Canada will undergo an economic contraction in the second and third quarters of 2020.

The emergency rate cut was not entirely unexpected following the Bank of Canada’s March meeting, where it lowered interest rates by half a percentage point for the first time in more than four years. Still, the response represents a dramatic move in an effort to keep the economy running amid rapidly deteriorating financial conditions.

“The Bank of Canada is taking concerted action to support the Canadian economy during this period of economic stress,” Poloz said in a statement. “The Bank’s Governing Council stands ready to do what is required to support economic growth and keep inflation on target, and we will continue to ensure that the Canadian financial system has sufficient liquidity.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Investors hope Fed can help calm markets as big rate cut expected By Reuters


© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) near the close of trading in New York

By Lewis Krauskopf

NEW YORK (Reuters) – Interest rate cuts won’t cure the coronavirus but investors are still hoping the Federal Reserve can take some actions to help soothe the roiled stock market.

Only days after a rare emergency rate cut, the Fed is expected at its regularly scheduled meeting next Wednesday to slash its target rate another 75 to 100 basis points to near zero, according to the CME FedWatch website.

The U.S. central bank also may announce measures to ensure sufficient liquidity and lending or to purchase assets by restarting the quantitative easing that the Fed employed during the financial crisis.

A move like that could offer some comfort to investors after Thursday’s bruising decline, in which the notched its biggest one-day drop since 1987.

“If the market feels the Fed is responding appropriately and is helping investors and consumers, and feel like somebody is in charge, maybe that can help settle things down,” said Willie Delwiche, investment strategist at Baird in Milwaukee.

Indeed, stocks briefly pared losses on Thursday after the New York Fed said on it will introduce $1.5 trillion in new repo operations this week and start purchasing a range of maturities as part of its monthly Treasury purchases. But the rebound was short lived and the ended down 9.5% on the day.

Expectations for a more significant rate cut have increased this week as the market decline deepened over fears about the economic fallout of the coronavirus crisis. As of Thursday, the S&P 500 had fallen more than 26% from its Feb. 19 record closing high, including a drop of more than 16% so far for the week.

Traders currently expect the Fed to cut its target rate from its current range of 1-1.25% to as low as 0-0.25%. Some market watchers wonder if the central bank could even eventually go into negative territory.

“Central banks must bolster confidence that they are willing to test the limits of where they view the effective bound on rates,” JPMorgan Chase (NYSE:) economists said in a note this week.

Markets will respond “poorly” should the Fed fail to cut rates, said Nela Richardson, investment strategist at Edward Jones, but added that “the risk of aggressive action now is that you sacrifice valuable ammunition in the short term to boost short-term market sentiment.”

“You might need the ammunition further down the road if unemployment increases or deflation starts,” Richardson said.

Of course, rate cuts may not help equities. The S&P 500 ended up falling 2.8% on March 3 despite the Fed’s surprise half-percentage point cut, which boosted sentiment but also led investors to speculate on what other actions the Fed could take.

Boston Fed President Eric Rosengren said last week that the central bank needed “to think broadly about what tools we would use” if the virus continues to weigh, and that it “could be important” to let the Fed buy assets other than U.S. Treasury and mortgage-backed securities.

Such asset purchases aimed at stimulating the economy, known as quantitative easing (QE), were a key tool used by the Fed to emerge from the 2007-2009 financial crisis.

“Should the Fed gauge that reducing rates is not providing for easier financial conditions, we expect it to quickly turn to quantitative easing,” Morgan Stanley (NYSE:) economists said in a note.

Whatever actions the Fed takes, some investors said they are ultimately secondary to the responses of the world’s governments.

In the United States, partisan gridlock threatens to derail the government’s ability to contain the economic damage. Democrats in the House of Representatives have unveiled a plan that would expand programs including food assistance and unemployment aid. The Republican-led Senate will delay its recess to work next week on its own legislation.

“While we think central bank policy is important, we think the fiscal is much more important at this stage,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.



Norges Bank Slashes Key Rate by Half Point to Fight Crisis By Bloomberg



(Bloomberg) — Norway’s central bank delivered an emergency half-percentage point cut to its main interest rate and signaled more will come as policy makers pump stimulus into the economy a week ahead of a scheduled meeting.

“A lower policy rate cannot prevent the coronavirus outbreak from having a substantial impact on the Norwegian economy, but it could dampen the downturn and mitigate the risk of more persistent effects on output and employment,” the bank said on Friday.

The , which had suffered a dramatic sell-off earlier in the week, rebounded after the central bank announced its support measures, gaining as much as 1.6% against the euro. But the exchange rate remains historically weak.

Policy makers in Norway are the latest to join a global wave of stimulus efforts. The Federal Reserve slashed its main rate by a half point on March 3, and was soon followed by others including the Bank of England. The European Central Bank opted not to cut its main rate, choosing instead to add liquidity, leaving markets somewhat underwhelmed.

Cutting the benchmark rate to 1% from 1.5%, Norges Bank said it “is monitoring developments closely and is prepared to make further rate cuts.” Norges Bank signaled a further reduction of 25 basis points during the third quarter in a new rate outlook that accompanied Friday’s decision.

In measures specifically targeting banks, Norway will also cut the so-called countercyclical capital buffer to 1% from 2.5%, to encourage the industry to keep lending to businesses.

Policy makers in Norway are racing to protect their oil and trade-reliant economy from the ravages of the coronavirus pandemic and a crash in crude prices. Some economists warn that a recession is coming, and investors have dumped the Norwegian krone as the panic spreads.

The number of coronavirus cases in Norway has soared to above 600, prompting school shutdowns and the closure of borders to travelers from the hardest hit countries.

“In the near term, activity in the Norwegian economy will decline considerably owing to the coronavirus outbreak,” Norges Bank said. “Unemployment is expected to rise. Economic prospects have also weakened on the back of the sharp fall in oil prices.”

The Norwegian government is set to present a stimulus package later on Friday, with measures expected to range from new layoff-rules to efforts to help the struggling airline industry.

Some of Norway’s biggest companies have been devastated by the latest developments, given the nation’s exposure to oil and trade. Norwegian Air Shuttle ASA on Thursday extended its plunge so far this year to 80% after the U.S. imposed a partial travel ban targeting Europe. DNB ASA, Norway’s biggest bank and a major provider of loans to the offshore industry, has plunged by a third this year. Equinor ASA, the country’s biggest oil and gas producer, also slumped with crude prices.

As recently as the second half of last year, Norway’s central bank was raising rates to help steer the economy’s growth. The nation’s vast oil wealth, which has helped build a $1 trillion wealth fund, has generally helped Norway weather most storms, but policy makers say it remains unclear what effect the current crisis will have.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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ECB ramps up stimulus in virus fight but stops short of rate cut By Reuters


© Reuters. ECB ramps up stimulus in virus fight but stops short of rate cut

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) – The European Central Bank approved fresh stimulus measures on Thursday to help the bloc cope with the “major shock” of coronavirus but left interest rates on hold, dismaying markets, and said euro zone governments must lead the pandemic response.

ECB President Christine Lagarde told a news conference the virus would have a “significant impact on economic activity” even if it is ultimately temporary in nature and called for “an ambitious and coordinated fiscal policy response”.

With millions of people in lockdown, financial markets in freefall and companies struggling with disrupted supply chains, the ECB said it would give businesses more ultra-cheap loans, raise asset purchases and provide banks with capital relief.

Its bank supervisory arm also said it would temporarily drop capital requirements for lenders struggling with the effects of the virus.

Asked if a euro zone recession beckoned, Lagarde said the consequences for the economy would “clearly depend on the speed and strength” of the collective response to the epidemic, which euro zone governments should lead.

“I don’t think that anybody should expect any central bank to be the line of first response. It’s fiscal first and foremost,” Lagarde said.

The ECB said it would roll out cheap loans for banks, at an interest rate as low as minus 0.75%, and step up bond purchases by a total of 120 billion euros through the end of the year.

But the deposit rate will stay unchanged at a record low minus 0.5%, suggesting policymakers believe it may already be near the so-called reversal rate, where further cuts are counterproductive because they hurt bank margins to the point of thwarting lending.

The euro fell, Italy’s 10-year bond yields jumped to a seven-month high and stocks tumbled as markets expressed their disappointment at the package.

The ECB’s moves follow emergency rate cuts by the U.S. Federal Reserve and the Bank of England. Policymakers fear coronavirus could trigger a global recession and threaten the sort of disruption last seen in the 2008 financial crisis.

SYNCHRONISED MOVE

In an unprecedented synchronised move, the ECB’s bank supervisory arm said it will let euro zone banks fall short of some key capital and cash requirements, to keep credit flowing to the economy.

The European Union’s banking watchdog meanwhile said it has postponed this year’s stress test of lenders until next year. nL8N2B55B8]

“Banks need to be in a position to continue financing households and corporates experiencing temporary difficulties,” said Andrea Enria, the ECB’s chief supervisor.

The central bank kept the door open to further rate cuts, keeping its interest rate guidance unchanged.

“She (Lagarde) delivered what was the consensus. Markets that traded down pretty hard since then did so because clearly they wanted a lot more,” said Barnaby Martin, head of European credit strategy at Bank of America (NYSE:). “But we always knew that the ECB was further up against the political constraints of what they could do than other central banks.”

On Wednesday, the World Health Organization called the coronavirus a pandemic for the first time.

U.S. President Donald Trump meanwhile imposed restrictions for one month on travel to the United States from 26 European countries.

While policymakers insist the financial sector is sound and there will not be a repeat of the 2008 crisis, European stocks () have dropped 28% in the past few weeks and safe-haven German bond yields have tumbled to () minus 0.80%.

SPEND, SPEND, SPEND

Lagarde, who has encouraged ECB staff to work from home if they wish to, has repeatedly warned governments that failure to act quickly on the virus could lead to calamity.

European Commission chief Ursula von der Leyen said in a tweet on Thursday that Brussels was working on responses including a “package to prop up the EU economy”.

Many economists expect Germany, Europe’s powerhouse, to be in recession in the first half of 2020 and some predict a similar outturn for the entire bloc.

While the ECB’s stimulus suggests it is keen to help, it has already used up its most powerful weapons in nearly a decade of stimulus. Interest rates are at record lows, it has gobbled up 2.6 trillion euros ($2.94 trillion) of mostly government debt, and has for years offered essentially free cash to banks to keep them lending.

Low rates may also be sowing the seeds of the next crisis as they compress bank margins and fuelling housing bubbles.

Compounding the ECB’s headache, oil prices have crashed, a double-edged sword for rate-setters.

While lower crude prices boost growth and consumer purchasing power through lower fuel prices, they also drag inflation sharply lower — a problem as the ECB has undershot its target of almost 2 percent since 2013.

Some economists expect inflation to fall to zero this spring if crude prices stay at current levels, raising fears of a damaging deflation spiral.

The ECB cut its quarterly growth forecasts for this year and next on Thursday but said the new estimates, which were collated before the coronavirus outbreak in Europe, were probably already out of date.



Dollar surrenders to euro and yen as rate supremacy ends By Reuters


© Reuters. Dollar surrenders to euro and yen as rate supremacy ends

By Wayne Cole

SYDNEY (Reuters) – The dollar nursed savage losses against the yen and euro on Friday as a plunge in U.S. yields to record lows wiped out the currency’s single greatest attraction for investors – higher interest rates.

Mounting fears over the fallout from the coronavirus has driven a truly tectonic shift in expectations for U.S. rates as markets wager the Federal Reserve will have to cut rates by 50 basis points for a second time this month.

The resulting collapse in Treasury yields has been the death of one of the most popular carry trades globally – borrowing at negative rates in the euro and yen to buy U.S. assets.

“Select USD pairs like EUR/USD are turning because of a dramatic and decisive shift in U.S. rate expectations and related spreads,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank (DE:).

“The USD has lost the single most important source of its over-valuation, a strong carry advantage,” he added, warning this could end a dollar uptrend that has lasted since mid-2018.

In particular, were the euro to close above the December peak of $1.1239, it would breach a down channel from August 2018 and signal a clear break of the bull trend.

The single currency was almost there, being up at $1.1226 () on Friday having surged 0.9% overnight and a world away from the February trough of $1.0775. It was already up 1.9% for the week which would be the largest such gain since June 2017.

There were lots of other miserable milestones, with the dollar sinking to a six-month low on the yen at 105.96 having shed 1.2% overnight. The next bear targets were 105.72 and 104.44, lows from August and September last year.

It also sank to a two-year trough against the Swiss franc at 0.9443 francs , and was down 2% for the week so far.

The yen, euro and Swiss franc are backed by countries that run strong external surpluses, while Japan has the added advantage of being the world’s largest creditor nation.

Those safe-haven attributes had grown in importance as U.S. 10-year yields () tumbled to just 0.91%, a drop of 66 basis points in just 11 sessions.

Fed fund futures were also pricing in more than 80 basis points of further easing by year end.

Yet the dollar was not down and out everywhere, as it still held safe haven status compared to emerging market currencies and those exposed to commodities.

That left it holding gains on the Canadian , Australian and New Zealand dollars , along with a raft of currencies across Asia.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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U.S. Added 273,000 Jobs in February; Jobless Rate 3.5% By Investing.com


© Reuters.

By Geoffrey Smith 

Investing.com — The labor market was in fine form in the month before the coronavirus arrived in the U.S., according to government data released on Friday.

The U.S. economy added a net 273,000 jobs in February, the Bureau of Labor Statistics said. It also revised up January’s job growth to 273,000 from an initial estimate of 225,000.    

The jobless rate ticked back down to 3.5% from 3.6% as a result. The labor force participation rate stayed at 63.4%.

Average hourly earnings growth returned to 0.3% after dipping to 0.2%, the slowest in nearly a year, in January.

Average weekly hours rose to 34.4 from 34.3.

The data are usually among the most eagerly-anticipated in the financial markets’ calendar. However, global markets’ attention is currently focused on the worldwide spread of the Covid-19 coronavirus, and the measures being taken to address it.

The contract ticked up slightly after the numbers but were still down 2.2% from late Thursday.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Dollar Extends Losses as Rate Premium Withers; U.S. Payrolls Eyed By Investing.com


© Reuters.

By Geoffrey Smith 

Investing.com — The dollar extended its slide in early trading in Europe on Friday, as the prospect of collapsing U.S. interest rates continued to erode its appeal vis-à-vis its peers.

Relatively high nominal returns on dollar assets, whether bonds or stocks, have been the key to the dollar’s strength over the last couple of years. But with the U.S. equity market in retreat and bond yields collapsing under the expectation of further interest rate cuts from the Federal Reserve, that argument no longer holds. The release of the U.S. labor market report later, which is expected to show a clear slowdown in hiring last month, is unlikely to change much in that regard.

By 2:50 AM ET (7:50 GMT), the that tracks the greenback against a basket of developed market currencies was down 0.3% at a two-month low of 96.520, on course for a decline of 1.6% for the week.

Its biggest losses were against the , which rebounded 0.5% amid tentative signs that the Chinese economy is picking itself off the floor. However, it also fell against the safe haven yen and Swiss franc.

fell below 106 for the first time since August during Asian trading and was down 0.2% at 105.89. Zach Pandl, the Goldman Sachs’s co-head of global foreign exchange and emerging market strategy, told Bloomberg TV that the yen could rally as far as 95 if global markets stay disorderly for the next couple of months. fell 0.1% to 0.9443.

The euro also hit its highest against the dollar since August, amid concerns that the European Central Bank can’t do anything to stop the differential between euro and dollar interest rates falling further. The ECB’s governing council meets next week, against a backdrop of expectations that are limited to a 10 basis-point cut in the deposit rate and some tweaking of the bank’s long-term refinancing operations.

The ECB is likely to ‘look through’ a surprisingly strong rise in German factory orders in January, which predated the scare over the coronavirus and in any case owed much to volatile elements such as aerospace.

rose as high as $1.1249 before retracing to $1.1234, roughly flat from late Thursday but still up nearly 1.9% this week.

The weak tone in the dollar also helped sterling to its highest level in a week, ahead of the government’s annual budget next week. Sterling has been supported by promises of big increases in public spending that would – all other things being equal – have removed the need for further interest rate cuts from the Bank of England.  Analysts at Pantheon Macroeconomics expect a relatively modest widening of the fiscal deficit to 2.4% of gross domestic product from 2.0% in the current fiscal year.

“We expect the Chancellor to be relatively cautious this year, in order to preserve his firepower for 2021, when the economic costs of Brexit will seriously start to mount,” said Pantheon analyst Samuel Toombes. was up 0.2% at $1.2974.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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