Trump Drives Demand for the Safe Havens ahead of the ECB Monetary Policy Decision

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar this morning. The Japanese Yen was in action through the early part of the day.

The stats had a muted impact on the majors once more as the markets responded to Trump’s national address.

Among the U.S administration’s steps to tackle the coronavirus, delivered in Trump’s address, were:

• Travel restrictions for European entering the U.S for a period of 30-days. This restriction excludes the UK. In fact, the U.S President blamed European travelers for a large number of clusters in the U.S.
• Deferral of tax payments for certain individuals and businesses affected by the virus.
• Proposal for paid sick leave for hourly workers.
• An automatic 6-month extension for businesses and individuals to file tax returns.
• An offer of federal loans to provide operating funds to affected small companies.

U.S Futures hit reverse in response to Trump’s address, driving demand for the likes of the Japanese Yen and the EUR.

For the Japanese Yen

The Business Sentiment Index for Large Manufacturing Conditions slid from -7.8 to -17.2 in the 1^st quarter.

The Japanese Yen moved from ¥104.474 to ¥104.602 upon release of the figures. At the time of writing, the Japanese Yen was up by 1.15% to ¥103.34 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.31% to $0.6464, with the Kiwi Dollar down by 0.22% to $0.6255.

With the Japanese Yen on the move, the major Asian indexes were deep in the red at the time of writing. The Nikkei and ASX200 were down by 5.03% and by 5.26%.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. On the economic data front, Eurozone industrial production figures for January are due out.

Barring particularly dire numbers, we would expect the stats to have a muted impact on the EUR.

The ECB’s March monetary policy decision is the main event of the week for the EUR.

With the BoE delivering a 50 basis point emergency rate cut on Wednesday and the FED expected to deliver a 2^nd rate cut next week, the pressure is on for the ECB to deliver.

ECB President Lagarde had spoken of the need for deflationary pressures to build before making a move. The rapid spread of the virus, however, and Italy’s shutdown should cause a shift in the ECB’s position.

Failure to deliver zero interest rates could spook the markets, which would also lead to a bounce in the EUR.

At the time of writing, the EUR was up by 0.42% at $1.1317, with risk aversion driving the EUR early on.

For the Pound

It’s a particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide direction.

Following Wednesday’s emergency rate cut and the government’s budget, there should be some support for the Pound.

The market focus will now return to EU – British Brexit negotiations that are set to resume next week. Chatter from both sides of La Manche has continued to test the Pound’s resilience this week.

At the time of writing, the Pound was up by 0.05% to $1.2827.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar, with February wholesale inflation figures due out later today.

While we can expect some Dollar sensitivity to the numbers, the focus will remain on the news wires and chatter from the Oval Office.

A continued spread of the coronavirus has forced the U.S administration into more aggressive containment measures. How far they are willing to go remains to be seen. Simply restricting Europeans from entering will not be enough with the virus already spreading across the U.S…

There is a vote scheduled later today on the coronavirus countermeasures. It could be the Democrat’s chance to really rub salt into Trump’s wounds. The handling of the coronavirus has certainly led to significant criticism of the U.S administration…

The Dollar Spot Index was down by 0.38% to 96.139 at the time of writing.

For the Loonie

It’s yet another quiet day ahead on the economic calendar, with no material stats due out of Canada to provide the Loonie with direction.

The lack of stats will continue to leave the Loonie in the hands of crude oil prices and risk appetite.

The Loonie was down by 0.15% at C$1.3799 against the U.S Dollar, at the time of writing, with demand for the safe havens pushing the Loonie into the red.