The US dollar slumped on Thursday as the stock market melted down on coronavirus fears. Forex traders are increasingly betting on a rate cut by the US Federal Reserve at the 18 March FOMC meeting to cushion the impact.

The implied probability for a March cut, according to CME’s FedWatch tool, has surged to 96% from 33.2% a day ago. The market also expects more rate cuts down the road this year as uncertainty remains high in terms of the impact of the virus on consumer behaviour.

Covid-19 infections have been found in many countries, spreading across all continents except Antarctica. It has escalated to become a global issue, rather than a China or Asia problem. We are still at the early stage of a global outbreak and the number of infections could rise sharply in the weeks to come if no proper measures are taken to contain the spread.

The S&P 500 index has fallen over 12% from its recent peak to 2,978 points, breaking down a key support level of 3,000, with strong downward momentum. This unusual sell-off was not attributed to Covid-19 alone, but also due to its high valuation that rendered a technical correction inevitable. Technically, the S&P 500 was severely oversold this week, according to the RSI, DMI and MACD indicators. It suggests that the market is due for a technical rebound soon.

Crude oil prices slumped for a sixth day to reach $51.4 (a 200% Fibonacci extension), which is a key support level for Brent. This is its lowest level observed since December 2018, when the global demand outlook was dampened by the US-China trade war. This round, Opec+ perhaps need to take decisive actions to cut, in order to shore up confidence in the oil market.

In Asia, markets are more resilient, as they already absorbed an initial shockwave 4 weeks ago, and the relatively lower valuation provided an extra layer of protection. The Shenzhen stock market has registered a 9% year-to-date gain, making it one of the best performing stock markets in the world this year.

Probability of March US rate-cut surges to 96% - FedWatch

 

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination. CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information. CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.

CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.