(20 March 2020)DAILY MARKET BRIEF 1:Swiss National Bank (SNB) remained seated on its hands

We expect more international companies to announce their contingency plans as we have a better understanding on how the situation evolves, even though the situation develops rapidly, and toward the wrong direction across other continents. Meanwhile there are rumours that China may not be fully transparent about life having returned to its normal pace.

Nevertheless, the trading ranges have narrowed in some parts of Asia as well. The ASX 200 advanced 0.70%, Shanghai’s Composite gained 1.61%, but stocks in South Korea and Taiwan jumped 7.44% and 6.37% respectively. Japan was closed.

In the UK, the Bank of England (BoE) cut the interest rates to 0.10% in a renewed emergency action on Thursday and announced 200-billion-pound worth of asset purchases to fight the coronavirus-led economic slowdown, after the pound smashed to a 35-year low against the US dollar on Wednesday. Although, in theory, an interest rate cut should have a negative impact on a currency, the pound rebounded on prospects of a less dramatic economic contraction than otherwise. Remains the question of Brexit negotiations, as the coronavirus crisis messed up with Boris Johnson’s year-end deadline. Johnson showed no willingness to extend talks beyond December so far. The fewer the meetings, the higher the chances of a no-deal Brexit. Hence, the pound will likely remain under a decent fundamental downside pressure against both the US dollar and the euro in the medium term.

The FTSE 100 reversed earlier losses following the BoE intervention and closed 1.40% higher on Thursday. Activity in FTSE futures (+1.34%) hint at a positive start in London. The oil-heavy index should be fueled by a quick recovery in oil prices, and finally a positive market reaction to the synchronized monetary and fiscal support across the globe.

In the FX markets, the rally in the US dollar pushed the USDJPY above the 110.00 mark and pulled the EURUSD to 1.0650 on Thursday. The greenback has lost some field since Thursday’s spike. In the absence of major economic data, the improved market sentiment and a slowdown in fund liquidations could slow down or pause the USD rally into the weekly closing bell.

Finally, the Swiss National Bank (SNB) remained seated on its hands on Thursday and pledged to continue fighting the strong franc via direct interventions in the FX markets, despite the risk of being pointed at as a currency manipulator by the US. The SNB’s balance sheet showed an increased activity in the FX markets since January, confirming the SNB has walked the talk. The franc’s sell-off against the US dollar accelerated. The USDCHF advanced to the highest level since December.

By Ipek Ozkardeskaya