Dollar Drifts Lower On Virus Concerns

Trading 07 mar 2020 Commentaire »

Despite data showing a stronger than expected jobs growth in the month of February, and narrowing trade deficit, the U.S. dollar stayed weak right through the session on Friday amid concerns about the spread of the coronavirus in the U.S.

The Federal Reserve earlier this week cut interest rate by 50 basis points, almost two weeks ahead of its scheduled monetary policy meeting, to help fight the impact of the virus outbreak on the economy.

The dollar index dropped to a low of 95.71 and despite recovering to 96.01 later on in the session, was still languishing in negative territory with a sharp loss of about 0.82%.

Data from the Labor Department said employment surged up by 273,000 jobs in February, matching the upwardly revised spike in January.

Economists had expected employment to increase by about 175,000 jobs compared to the jump of 225,000 jobs originally reported for the previous month.

With the much stronger than expected job growth, the unemployment rate unexpectedly edged down to 3.5% in February from 3.6% in January. The rate had been expected to remain unchanged.

A report released by the Commerce Department on Friday showed the U.S. trade deficit narrowed to $45.3 billion in January from a revised $48.6 billion in December. Economists had expected the trade deficit to narrow to $46.1 billion from the $48.9 billion originally reported for the previous month.

Another report from the Commerce Department said wholesale inventories in the U.S. fell by 0.4% in January after slipping by a revised 0.3% in December. Economists had expected wholesale inventories to edge down by 0.2%, matching the dip originally reported for the previous month.

Against the Euro, the dollar weakened to $1.1305 from Thursday's close of $1.1235.

Against pound sterling, the dollar drifted down to $1.3048 after initially hovering around $1.2940 - $1.2950 levels.

The Japanese Yen strengthened to 105.40 a dollar, gaining from 106.16 yen a dollar on Thursday evening.

The Aussie gained about 0.4% to $0.6640. Against Swiss franc, the dollar eased to 0.9384 franc, losing about 0.75%.

Against the loonie, the dollar was down at $1.3425. A report from Statistics Canada showed the economy created 30,000 jobs in February and the unemployment rate increased by 0.1 percentage points to 5.6%.

Another report from Statistics Canada said Canada's merchandise exports fell 2.0% in January, while imports were down 0.5%. As a result, Canada's merchandise trade deficit with the world widened from $732 million in December 2019 to $1.5 billion in January.


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Treasuries Show Another Substantial Move To The Upside

Trading 07 mar 2020 Commentaire »

Treasuries moved sharply higher during trading on Friday, extending the strong upward move seen over the past couple weeks.

Bond prices spiked early in the session and remained firmly positive throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plunged by 22 basis points to 0.706 percent.

With the steep drop on the day, the ten-year yield once again ended the session at a near record closing low.

The rally by treasuries came as traders continue to worry about the economic impact of the coronavirus outbreak.

Recent data points to a slowdown in new coronavirus infections in China, but the disease seems to be spreading more rapidly around the rest of the world.

So far, more than 100,000 infections have been confirmed worldwide and more than 3,300 people have been killed by the virus.

The worries about the outbreak overshadowed the Labor Department's usually closely watched monthly employment report.

The report showed much stronger than expected job growth in the month of February, although traders view the data as old news as the coronavirus fears have ramped up only recently.

The Labor Department said employment surged up by 273,000 jobs in February, matching the upwardly revised spike in January.

Economists had expected employment to increase by about 175,000 jobs compared to the jump of 225,000 jobs originally reported for the previous month.

With the much stronger than expected job growth, the unemployment rate unexpectedly edged down to 3.5 percent in February from 3.6 percent in January. The rate had been expected to remain unchanged.

"We know the US economy started 2020 on a firm footing, but that won't count for much as spending slows and recession worries mount due to the economic disruption the virus is already causing," said ING Chief International Economist James Knightley.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed more than expected in the month of January, as the value of imports fell by more than the value of exports.

The Commerce Department said the trade deficit narrowed to $45.3 billion in January from a revised $48.6 billion in December.

Economists had expected the trade deficit to narrow to $46.1 billion from the $48.9 billion originally reported for the previous month.

News on the coronavirus front is likely to remain in focus next week, overshadowing reports on consumer and producer prices, import and export prices, and consumer sentiment.


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Oil Futures Plummet 10% As OPEC+ Fails To Agree On Deeper Production Cuts

Trading 07 mar 2020 Commentaire »

Crude oil prices plummeted to the lowest level in several years on Friday after the Organization of the Petroleum Exporting Countries' proposal for deeper output cuts was rejected by it allies.

Also, mounting worries about the economic impact of the coronavirus outbreak and an imminent drop in energy demand weighed on oil prices.

West Texas Intermediate Crude oil futures for April ended down $4.62, or about 10.1%, at $41.28 a barrel, the lowest settlement since August 2016. The contract touched a low of $41.11 a barrel.

Brent crude futures declined to a low of $45.18 a barrel, the lowest level since June 2017.

The meeting between OPEC and its allies concluded today with the cartel and its allies failing to agree on the former's proposal of reducing production by another 1.5 million barrels per day from April to end of this year.

The meeting concluded with the participants deciding to continue with the existing level of production cut till the end of this month. The OPEC+ has decided to meet in early June to review the situation.

Baker Hughes reported today that the number of active U.S. rigs drilling for oil rose by four to 682 this week, after seeing a decline of one rig in the previous week. The total active U.S. rig count has now climbed to 793.

Meanwhile, according to reports, over 100,000 infections due to the novel coronavirus have been confirmed worldwide, and more than 3,300 people have been killed due to the outbreak.

The number of infections due to the virus has soared in Italy, France, Greece and Iran. A cruise ship has been stationed off the Californian coast to test passengers showing symptoms of the disease.

The Asian Development Bank said today that the coronavirus outbreak will cut global growth by 0.1% to 0.4% and it will have a significant impact on developing Asian economies through weak domestic demand, tourism, trade and production linkages and supply disruptions.


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Gold Futures Settle Modestly Higher On Safe-haven Demand

Trading 07 mar 2020 Commentaire »

Gold prices rose on Friday as worries about the potential financial damage due to the coronavirus prompted investors to shun riskier assets and seek the safe haven of the yellow metal.

The dollar's sharp decline and falling U.S. treasury yields supported gold's uptick.

The dollar index dropped to 95.71 before regaining some lost ground. Still, at 96.11, the index was down as much as 0.74% from previous close.

Gold futures for April ended up $4.40, or about 0.3%, at $1,672.40 an ounce. The contract rose to a high of $1,690.70 before giving up a significant portion of its gains.

On Thursday, gold futures for April ended up $25.00, or 1.5%, at $1,668.00 an ounce.

Silver futures for May ended down $0.130 at $17.263 an ounce, while Copper futures for May settled at $2.5605 per pound, down $0.0125 from previous close.

Worries about the economic impact of the coronavirus spread continue to take a toll of riskier assets such as equities.

According to reports, the virus has infected over 100,000 people worldwide, and has killed more than 3,300 people.

The number of new infections due to the virus has risen in Italy, Greece, France and Iran. A cruise ship has been halted off the Californian coast to test passengers showing symptoms of the disease.

The Asian Development Bank has said the coronavirus outbreak will cut global growth by 0,1 to 0.4%, and will have a significant impact on developing Asian economies.

The outbreak and subsequent spread of the coronavirus "has brought with it new risks to the economic outlook", New York Federal Reserve President John Williams said on Thursday.

This week's 50-basis points rate cut was "strong policy action" that provides "meaningful support to the economy and will help sustain the economic expansion. But "the outlook is evolving and highly uncertain", he added.

In economic news today, a report from the Labor Department showed employment in the U.S. surged up by 273,000 jobs in February, matching the upwardly revised spike in January.

Economists had expected employment to increase by about 175,000 jobs compared to the jump of 225,000 jobs originally reported for the previous month.

With the much stronger than expected job growth, the unemployment rate unexpectedly edged down to 3.5% in February from 3.6% in January. The rate had been expected to remain unchanged.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed to $45.3 billion in January from a revised $48.6 billion in December.


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