Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, notes that huge equity losses on Monday triggered another round of de-leveraging – this time in the commodity space (Platinum off 25%) and in popular unhedged positions in CE4 bond markets. 

"The demand for dollar cash continued to see stress in the USD funding markets, where the 3m EUR cross currency basis swap briefly widened to -85bp. Today, however, there are hints of less panicked conditions starting to emerge."

"It was always going to take time for governments to organise fiscal rescue packages, not just to deal with the health emergency, but also to deal with the hole in aggregate demand. And we are now starting to see these come through." 

"The major focus will be the US, where late yesterday Senate Democrat leader, Charles Schumer, said he would today be proposing a US$750 billion stimulus package – again worth around 4% of GDP."

"Markets will also be focusing on the USD funding markets again where eight of the largest US banks have said they’ll use the Fed’s discount window in order to de-stigmatise its use."

"Clearly it will take much to restore confidence – especially as Covid-19 cases rise over the next two to four weeks – but it seems as though politicians are finally stepping up to the plate."

"The dollar can hold onto its gains as markets understandably remain very fragile, but when the dust settles, we think the dollar will end up a little lower. DXY best levels may be 99-100."