Denmark and Austria present their Covid-19 'exit strategy'

Danske Research Team Danske Bank A/S

Market movers today

The biggest event of the day is the Eurogroup video conference. The finance ministers are expected to discuss three proposals: (1) a common economic response to the COVID-19 hit countries, including using ESM facilities or creating a common debt instrument, (2) a pan-European guarantee fund to increase EIB's capacity to EUR200bn and (3) a EUR100bn backstop for employment protection schemes. We believe the end game will be some kind of debt mutualisation or rescue fund with transfers to the most heavily affected countries, but it will be a bumpy road. A press conference is planned at 20:00 CEST tonight.

PM Abe is set to announce a one month state of emergency today for seven Japanese prefectures including capital Tokyo due to a worrying increase in infections. The government is also finalising a significant fiscal package worth JPY108tn equal to 20% of GDP. Abe is set to approve the package at a cabinet meeting later today and hold a news conference at 12:00 CEST on the state of the emergency plans.

There are no major economic releases today.

Selected market news

Risk sentiment continued to be supported by further evidence that the virus has peaked in most countries in Europe. In Asia, most equity markets are rising following the significant increase in the US yesterday, where the S&P 500 rose 7%. On virus developments, the US has seen improvements in recent days in the growth of infections and deaths. The UK is behind the rest of Europe and yesterday Prime Minister Boris Johnson was taken into intensive care due to complications from his coronavirus infection. Risk sentiment in Asia was also boosted by better-than-expected reporting by Samsung, the Korean chip maker, as COVID-19 increased chip orders from datacentres helping to connect millions of people stuck at home globally.

As the coronavirus is increasingly getting under control in Europe, countries are starting to present their 'exit strategy' from the strict lockdown measures. Yesterday the Danish Prime Minister announced that she expects to open day care and schools up to 5th grade from 15 April, but that all restrictions on businesses and travel will remain in place until at least 10 May. More employees will be allowed back at the workplace, but not all. This opening will help businesses suffering from lack of labour, but those still shut down represent around 10% of total employment, so the opening will far from restore the economy. If most of the remainder is opened from 11 May, we could still reach our optimistic forecast of -2.5% GDP growth in 2020.

In Austria, Chancellor Sebastian Kurz also introduced the country's 'exit strategy' yesterday. From 14 April, small shops will be allowed to reopen as well as state parks but with tight entry controls. From 1 May, all shops, shopping centres and hairdressers will be allowed to open. Schools are also expected to reopen by the start of May. Restaurants, hotels and bars are set to remain closed until further notice.

Download The Full Daily FX Market Commentary

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.