The dollar reversed some of its month-end slide against the majors, led by a plunge in the pound as markets focus on the difficult business of upcoming transition talks between the UK and EU. Both sides are taking a hard line ahead of the March meetings, and cable’s rally after the BoE held rates steady last week left the pound ripe for retreat.
EUR/USD also fell back from Friday’s short-covering high, with 10-year Treasury and Bund yields both bouncing off key supports, though U.S. yields more so.
ISM beats initially supported Treasury yields and the dollar, but yields and risk have come off with the European close, apparently led by WTI cracking support at $50.
USD/CNY’s 1.2% rise caught up to the offshore yuan’s slide during the extended Lunar New Year trading break marred by the coronavirus.
China took several measures Monday to mitigate the impact on the markets and the economy, but the jury remains out as to the ultimate impact of the epidemic and efficacy of mitigation steps.
USD/JPY used Monday’s respite from risk-off trading, 10-year Treasury yields bouncing off of key support by 1.5% and S&Ps off the 50-DMA to rebound to the daily cloud base at 108.81 before risk-off flows ramped up again by midday NY.
A 2.5% slide in WTI below $50/bbl and knock-on selling of positively correlated commodities like copper, came despite rumblings about OPEC+ looking to cut production by another half a million barrels per day.
Copper is probing below September’s low and nearing long-term Fibo support at 2.4651, while silver and gold both struggled due to dollar gains and some hopes the worst of the epidemic has been priced in.
Latam currencies recovered after recent thrashings.
CAD’s slide intensified in the midst of WTI’s breakdown.
Iowa caucus results, Trump’s SOTU address and services ISM and NFPs are the non-virus event risks this week.