(30 March 2020)DAILY MARKET BRIEF 2:The US dollar halted its decline

In the currency markets, the US dollar halted its decline as the investor sentiment soured again. The EURUSD retraced to 1.1068. Due today, the industrial and services sentiment indices may have dived to negative in March for the first time since 2013. Despite low expectations, there is potential for a harsh disappointment. Hence, the single currency could test the 1.10 support to the downside as a result of souring economic data. On top, preliminary inflation figures in Germany should suggest a fall to 1.4% y-o-y in March from 1.7% printed a month earlier. With the significant decline in overall activity and meaningfully lower oil prices, inflation in the Eurozone is expected to dive toward zero in the first half of this year, revive the dovish European Central Bank (ECB) expectations and limit the euro’s overall advance against the other major currencies.

Cable, on the other hand, remains offered past the 1.25 mark. Besides the recession worries, Britain heading toward a chaotic split from the European Union as a result of halted trade negotiations should continue weighing on sterling. Whether Boris Johnson’s contamination lead him to change his mind regarding his strict Brexit agenda is yet to be seen. At this point, the deadline should be postponed for at least six months, or ideally a year, to give negotiators the necessary time to consider at least a partial agreement.

By Ipek Ozkardeskaya