Due this week, the PMI figures should give a first assessment of the economic toll following a widespread lockdown in Europe since the
coronavirus outbreak took over the old continent. The data will likely print the sharpest weekly declines on record, with both the
manufacturing and services PMI are seen below 40 across the Euro zone.
Tragic data could further accelerate the panic sell-off across
global cross-asset markets. Both in equities, bonds, currencies and commodities, investors liquidate their positions and turn into the
US dollar, which is the only asset that offers a credible safe harbour as all classic safe havens such as gold, yen and Swiss franc have been
squeezed by the global sell-off.
For those who still have the courage, and the funds to invest, US treasuries seem attractive, though
the US sovereigns are equally crowded with hectic up-and-downs. The US 10-year yield retraced back to 0.81%, after having spiked past 1.25%
during last week’s debasement.
The EURUSD extended losses to 1.0635 in the overnight trading session. The massive inflows into the US
dollar and expectation of cataclysmic PMI figures could encourage a further sell-off toward the 1.05 mark.
The pound, on the other
hand, is licking its wounds after last week’s devastating sell-off to levels last seen in 1985 against the US dollar. The RSI, though
improved, remains in the oversold territory hinting that sterling has potential for a further correction above the 1.20 mark in the coming
days. But of course, the general dollar strength could cap the rally nearing this level.
Gold hovers around the 1500 mark, its 200-day
moving average, but the precious metal has fallen from grace after its negative correlation to risk assets broke several times during the
past weeks, leaving investors uncovered when they most needed a shelter.
WTI crude holds ground near the $20 a barrel, as global oil supply
is threatened below this level, giving some support to the black gold regardless of the strong headwinds across the equity markets.
By Ipek Ozkardeskaya