Daily Market Pulse

Senate passes the $2 trillion stimulus bill


The Senate passed the $2 trillion stimulus bill overnight and now the bill will be sent to the House and they will vote on Friday. After two days of positive action, DOW Futures are pointing towards a lower opening of around 300 points later this morning. This may be due to the “buy the rumor, sell the fact” mentality, but the main reason for negativity is the weekly jobless claims number which is predicted to be somewhere around 1.5 million. Some analysts are suggesting the number could be as high as 4 million people. With many businesses having closed and employees being furloughed this number will certainly test the confidence of investors. The USD is lower against the EUR, GBP, CAD, and JPY this morning as traders await the effect of the jobless claims report. US Treasury yields are lower this morning as well with the 10-year note trading at 0.8049% and the 30-year bond trading at 1.3689%. 



The EUR/USD moved higher after the Senate passed the stimulus bill as traders are more focused on US data than EUR data. German consumer confidence fell to 2.7 from 9.8, but that number seemed to have no effect. Technically, the EUR has taken out a couple of resistance levels and is presently trading near overnight highs. Several EU nations, including France, Italy, and Spain are calling for the EU to issue “corona-bonds”, where all European debt will be shared among members. Currently, Germany and the Netherlands oppose the idea, but as cases rise among nations the pressure to do something of this sort is growing. Italy's virus cases, the epicenter of the virus in Europe, seem to be easing which is very encouraging. The EUR may move a bit higher during the day.



The GBP/USD is higher this morning as well, as traders await the Bank of England decision later this morning. Retail sales in the UK fell by 0.3% in February, which was worse than expected, but like the EU news, it was mostly ignored as all eyes focus on the US. The Bank of England is not expected to move rates as they have already cut to 0.1% and added additional bond buying. Are there any surprises that new BOW BOE governor Bailey can surprise the market with? Is open-ended QE on the horizon? We’ll find out later this morning.



USD/JPY followed the other currencies and is trading lower this morning, having moved much lower after the Senate passed the stimulus legislation. Reversal of 'long’ dollar positions helped fuel the move lower as stop-loss orders were triggered and the currency pair fell through a couple of strong resistance levels. Currently trading off the overnight lows, traders are moving back to risk-haven trades ahead of the US jobless claims release. Japanese policymakers did issue the Summary of Opinions yesterday and there is concern that the Japanese economy could fall into a deep economic stagnation due to the coronavirus.



Failure to break resistance levels has seen the USD/CAD reverse and is currently testing overnight lows. Once again, this reversal is partly due to traders liquidating long positions and seeing stop-loss levels executed. Adding to the selling interest is a concern that the jobless claim number will be much worse than expected. Oil prices were mixed yesterday as West Texas Intermediate crude was $0.04 lower at $24.45, while Brent crude rose $0.12 to $27.51. Expectations of less demand based on Coronavirus travel restrictions had traders expecting prices moving lower. 



China is reporting fewer new domestic cases of the Coronavirus, but government leaders are warning local governments not to relax travel restrictions. There was a report that Hubei province, the original epicenter of the outbreak was considering relaxing these restrictions. Officials warned that while the epidemic in Hubei and Wuhan seems to have ended, there is always the risk of renewed outbreaks. There were 81,285 Coronavirus cases in Mainland China as of March 25, resulting in 3,287 deaths.

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