March 2020 - Monthly Economic Outlook

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Publication date


Gain an overview of the latest developments on the currency market and anticipate fluctuation risks.


High: 1.1075 / Low: 1.0805 / Change: -2.5%

To understand what happened on currencies in February, simply look at the movements of the dollar index, which measures the value of the US dollar against a basket of major currencies. The dollar index has increased steadily and is nearing 100. Risk aversion related to the Chinese coronavirus has prompted the market to short the dollar and move away from currencies considered to be at risk, such as the euro. Over February, the euro has lost almost 2.50% and nearly 3.60% year to date. This decline in the euro, which is bound to continue, is due to two factors: the political uncertainty surrounding Chancellor Merkel’s succession and, above all, expectations that Europe will be severely affected by the economic consequences of the coronavirus and the slowdown in China. The downward movement of the euro is undeniably excessive, but at this stage, there is no hope of a rebound on the horizon. As long as economic uncertainty persists in connection with the global epidemic, the dollar will remain the most sought-after currency on the FX market.

High: 0.8536 / Low: 0.8333 / Change: -1.5%

The euro has also experienced a series of misfortunes in recent weeks against the pound sterling with a monthly decline of around 1.50%. The UK’s good indicators for January, in contrast with indicators in Germany that continue to be worrisome, as well as the renewed visibility of Brexit, contributed to a rise in the British currency. The next true test for the pound sterling will be on 11 March with the presentation of the budget by the new Chancellor of the Exchequer. The market expects a stimulus budget, particularly for infrastructure, which could further boost the UK economy during this transition period. Given the UK’s recent figures, we do not expect the Bank of England to cut interest rates in the near future.

High: 121.35 / Low: 119.03 / Change: -0.8%

In January, the euro had already lost 1.5% against the Japanese yen. The single currency’s losses worsened in February with a decline of around 0.8%. The yen benefited fully from its safe-haven status during this period of uncertainty despite mainland Japan’s economic setbacks. The latest figures show that the VAT hike decided last autumn depressed economic activity, raising fears of a recession in 2020. However, as we know, Japan’s figures generally have little effect on the exchange rate of the yen. The change in risk perception is paramount for this currency. As things stand, no one can deny that the FX market is in risk aversion mode.

High: 1.0727 / Low: 1.0627 / Change: -1.10%

The Swiss National Bank (SNB) has not yet said its last word. Since January, the Bank has stepped up its FX market intervention very sharply, as can be seen from overnight deposits with the SNB, in order to limit the appreciation of the Swiss franc. Over February, however, the euro lost even more ground (-1.10%), but this decline would have been much more massive without the SNB’s intervention. For the time being, EUR/CHF seems to be stabilising around 1.06, but downward pressures could drive it towards 1.05 due to the numerous international risks.

High: 1.4714 / Low: 1.4313 / Change: -1.10%

The euro also ended on a negative note against the Canadian dollar in February with a decline of 1.10%. Favourable data from the Canadian labour market as well as inflation remaining contained near the central bank’s target continue to support the DAC in the FX market, as was the case in January. Given Canada’s economic conditions, an interest rate cut by the Bank of Canada, which had been mentioned for some time, seems to be ruled out. We expect the central bank to keep its rate unchanged at its meeting on 4 March.

Economic calendar

3 March USD  "Super Tuesday"
4 March CAD Meeting of the Central Bank of Canada
11 March GBP Budget presentation
12 March EUR Meeting of the European Central Bank
18 March USD

Meeting of the US Central Bank

26-27 March GBP EU-UK Summit


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