Risk-off mood over coronavirus pandemic fears


US Treasury 10-year yields are at fresh record lows under 1.30%

WCRS 27-02

The franc and yen are among the top performers to start the day as there is a growing fear in the market of the virus outbreak turning into a worldwide pandemic.

US futures are down by 1.5% with European futures also pointing to heavy losses (more than 2%) ahead of the open later today. Meanwhile, bond yields continue to be battered with 10-year Treasury yields slipping to fresh record lows under 1.30% now.

That is keeping the likes of the franc and yen bid. But what about the dollar?

Well, the continued rotation out of US stocks may be a factor but there is also some fear that the virus outbreak is going to be more widespread in the US in the coming days.

Should that scenario play out, it will spell bad news for the US economy if it cannot be contained and I reckon that will present real trouble for the greenback.

It is certainly an investor dilemma over the next two days ahead of the weekend.

The loonie is continuing to stay pressured amid weaker oil prices, with WTI collapsing under $48 currently – with the 2018 low near $42.50 a possible target for sellers.

Looking ahead, it is still all about risk as the market continues to digest coronavirus headlines and how the situation is developing. Watch out for news about a more widespread outbreak in Europe and the US as that could be key trigger points in the coming days.

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