(24 March 2020)DAILY MARKET BRIEF 2:EUR/USD remains capped below the 1.08 mark

In Europe, both manufacturing and services PMI are expected to print their sharpest fall on record in March, after the coronavirus shutdowns took a toll on businesses and public life across the old continent.

Services PMI in the UK is expected to fall to 45 in March, but we already know that this number is subject to a significant downside correction from next month as the UK finally announced a complete three-week lockdown to stop the virus from spreading.
The US dollar index advanced past the 102 mark as safe haven inflows left emerging market currencies and cross-asset markets to feed into the US dollar. At this point, the greenback is the safest haven play provided that most global transactions are denominated in US dollars and the fundamental dollar demand can only fade to a certain level.

Hence, the euro remains capped below the 1.08 mark against the US dollar and soft PMI data could give a further support to the bears and encourage a deeper sell-off toward the 1.05 mark.

Cable sees demand below the 1.15 mark, but the crisis situation in Europe leaves little time on politicians’ agenda to talk about bilateral trade deals. We believe that Johnson will have no choice but to extend the year-end deadline by at least six months. With a looming recession, it is perhaps not a right time to rush out of the union without a deal in hand. But until a concrete announcement is made, the pound will likely remain under a fundamental selling pressure. Resistance is eyed at $1.20.
Meanwhile, gold rebounded to $1560 per oz, as safe haven currencies lost field against the US dollar. Gold is now behaving as a risk asset, meaning that another downturn in risk sentiment should rapidly wipe out the recent gains.

By Ipek Ozkardeskaya