It was a sea of red in global stocks and futures after Donald Trump announced a ban on all travel from Europe to the US. In a televised statement, the president blamed European leaders for not acting fast enough to curtail the spread of the disease. This news matters because Europe is the largest regional destination for US travellers. It also matters because of its impact on the airline industry, which has been the most affected. Additionally, the president directed the small business administration to provide liquidity to small companies hit by the outbreak. Dow and Nasdaq futures dropped by 1,100 and 375 points respectively. This is after the two indices declined by 1,465 and 392 points respectively.
The euro rose slightly against the USD ahead of the monetary decision by the European Central Bank. The bank, which began its monetary policy meeting yesterday, is expected to leave the deposit rate facility rate at -0.5%. It is also expected to leave the marginal lending facility unchanged at 0.25%. The decision will come a day after Christine Lagarde warned of a 2008/9 crisis unless European leaders acted. She called for EU governments to coordinate to prevent such a crisis. Today, we will hear the monetary decisions she will make for the region.
The price of crude oil declined in overnight trading after Donald Trump banned travel from the EU. The ban will affect demand of oil at a time when we are expecting more supplies. Saudi has already announced a drastic increase in oil production while other countries are expected to follow suit. The biggest challenge will be among US shale producers, who will struggle to stay in business in a period of low oil prices. Meanwhile, today, we will receive CPI data from Sweden, industrial production data from the EU, PPI data from the US, and economic forecast from Switzerland’s SECO.
EUR/USD
The EUR/USD pair rose to a high of 1.1335 from yesterday’s low of 1.1250. The price is along the middle line of the Bollinger Bands on the four-hour chart while the RSI has moved from the overbought level of 76 to the current 53. Additionally, the two lines of the Stochastic indicator have moved to the oversold level. With big news expected from European leaders and the ECB, the pair may see some volatility today.
XBR/USD
The XBR/USD pair declined by almost 5% after Trump banned flights from the European Union. The pair is trading at 34.70 from yesterday’s high of 40.00. On the four-hour chart, the price is below the 14-day and 28-day exponential moving average while the signal line of the MACD has remained below the neutral line. The likely scenario is that the pair will continue moving lower to test Monday’s low of 31.35.
USD/CAD
The USD/CAD pair continued the rally that started in January when the pair was trading at 1.2950. It reached a YTD high of 1.3822, which is above the short and medium-term moving averages. The RSI has remained slightly below the overbought level of 70 while the signal line of the MACD has continued to rise. The pair may continue rising as crude oil falls.
