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US Equity Markets Start the Week Cautiously

USD - United States Dollar

The U.S. equity market has started the week cautiously. Today is the first Monday in 3 weeks that has not begun in a limit-down scenario with reaction to the Covid-19 crisis. Markets wavered between gains and losses overnight signally to market participants that we are in for another bumpy ride this week again. Negative sentiment was being priced in as news of President Trump revised his view and ideology of the U.S. economy opening back up by Easter. The President has updated his guidance on COVID-19 to extend social distancing until April 30th. Market participants are pricing in a severe economic recession that will be fought with unprecedented stimulus measures.

U.S. household sentiment hit decade lows in March as Covid-19 cases in the U.S.A. pick up, triggering business closures and concerns about the future of the economy. The rating for current conditions also hit the lowest level since 2008, and a measure of the economic outlook hit its lowest level in more than three years, the University of Michigan data showed last Friday. This is a huge contrast from just a month earlier in which the strong job market and cheap fuel costs contributed to the second-highest sentiment reading since 2004.
More than 3.3 million Americans filed a claim for unemployment benefits last week, a record high that offers the first nationwide picture of the damage to the U.S. economy from the coronavirus shutdown. It is by far the most considerable single-week rise in unemployment claims since the department began publishing records in 1967. The numbers are an early indicator of a drastic slowdown in the U.S. economy, which will no doubt see very dreary results in the next coming months.

Key Movers

The OECD has estimated that for each month of containment to slow the spread of coronavirus, there will be a loss of 2% in annual GDP growth for major economies. The lockdown will directly affect sectors amounting to up to one-third of GDP in the G20 economies. The tourism sector alone is facing an output decrease as high as 70% according to new estimates. Many marketplaces will unavoidably fall into recession as production in affected countries halts, hitting supply chains across the world, and causing steep drops in consumption and consumer confidence.
India's central bank has cut its benchmark rate to its lowest level on record to combat the potential ruinous economic and humanitarian effects of a 21-day shutdown due to the Covid-19 outbreak. The RBI's monetary policy committee cut the country's repo rate by 75 basis points to 4.4%, the lowest since its introduction around two decades ago. They are also injecting $49bn worth of liquidity into the financial system to help banks and lenders support customer's short-term loans.
Sterling has made a good comeback from its worst week since the Global Financial Crisis, to now having its best weekly performance in more than a decade. It was largely attributed to a broad decline in the U.S Dollar, but specific measures by Boris Johnson's government to curb the spread of the coronavirus may have also helped GBP. Sterling was ripe for a rally given that cable sank to 1.1412 intraday low on March 20, its weakest since 1985.

Expected Ranges

EUR/USD: 1.1009 - 1.1144 ▼

GBP/USD: 1.2317 - 1.2467 ▼

USD/CAD: 1.3982 - 1.4183 ▲

AUD/USD: 0.6111 - 0.6184 ▲

NZD/USD: 0.5983 - 0.6063 ▼