US DOLLAR OUTLOOK: BULLISH
- US Dollar[1] may rally on haven demand as coronavirus pandemic triggers recession fear
- Greenback is gaining despite downward pressure of swelling Fed rate cut expectations
- Equity selloff may amplify risk aversion, boost USD[2] amid concerns of financial stability
US DOLLAR MAY RISE ON HAVEN DEMAND FROM COVID-19 VIRUS
The US Dollar may prosper in a risk-off environment as the coronavirus spurs haven demand amid a market-wide selloff in global equities. Not surprisingly, easing expectations from central banks – notably the Fed – have swollen but have failed to drag USD down with growth prospects. This in large part has to do with the Greenback’s unparalleled liquidity and position as the world’s reserve currency; but more on that later.
Two weeks ago, the IMF Managing Director Kristalina Georgieva sent a chilling message at the G20 summit in Riyadh about the coronavirus. She warned that it is the most pressing uncertainty in the world today, and that its impact on global growth is a “stark reminder of how a fragile recovery could be threatened by unforeseen events”.
For a few months, markets enjoyed a comparatively less-uncertain environment as US-China trade tensions and concerns about a no-deal Brexit temporarily fizzled. This allowed investors a moment of respite after a politically-turbulent 2019. However, global stabilization is now at risk of being derailed by COVID-19, and the demand for easing measures will likely swell along with demand for haven assets like the US Dollar.
NONFARM PAYROLL DATA MAY INFLAME FED EASING EXPECTATIONS
Nonfarm payrolls data is expected to show 195k new jobs added for February, though pessimism around the effect of the coronavirus may be reflected in softer employment statistics. This comes after the prior report registered the strongest figures since November 2019. Consequently, this
