TD Research discusses the likely impact of the USD funding operations on the USD direction over the coming days.
"For currency markets, USD funding issues are a top priority. The impact of coronavirus uncertainty runs through the daily functioning of business and consumer actions, reflecting the loss of economic activity. In other words, it's a liquidity problem that can morph into a solvency problem if cash needs are unmet. The USD sits at the epicenter of that, and its strength reflects a mismatch of supply and demand for funding," TD notes.
"The enhanced swap line coordination by the Fed, ECB, BoE, BoC, and SNB will be closely watched in the coming days to see if it mitigates the market stress. If they can succeed, that would help to stem the run in the DXY," TD adds.