As Virus Sends Ripples Through Markets, How Are Currencies Affected?

Channel: Bloomberg Markets and Finance
Published: 01/27/2020

Jan.27 -- Kit Juckes, chief FX strategist at Societe Generale, discusses the outlook for the global economy and currencies as the intensifying concern about the human impact of the deadly coronavirus sends ripples through markets. Juckes speaks on "Bloomberg Surveillance."

Have you made all your 2020 move off of this terrible thing in china? Have you made all your 2020 move literally in three weeks? No, it's probably the answer to that, and you know i think the the uncertainties are still there in terms of what's happening, we're when the dust settles around all of this, the big question will still be whether the global economy is still slowing, whether the us econo ...
y Is still losing momentum, and you know, and the question right now is: how much does this affect that it clearly has a short-term impact. I think what this has done is it's certainly dealt a major blow to hopes of a chinese economic rebound yeah. Once the trade deal was signed, i think that we can we can park, but the the biggest issue for global economies will be on your side of the atlantic. It'S this u. s. economic slowdown that i think is pretty well entrenched, albeit extremely gradual. Then what is your dollar call right now i mean i understand it's a moving target this morning we are above 98 on dxy. We dipped below that right now. Ninety seven point, eight four on that blended, big market index x, china is well. Can you establish a belief in the dollar here or do you do what the adults do and just stand aside given crisis? You slightly stand aside if the current environment isn't bad for the dollar. The current environment is good for swiss, franc and yen, but but right now you know the current state of play until the us economy loses some momentum and unsaid rate cuts come back on the on the table more meaningfully that this is worse for the euro than It is for the dollar right now right today, so if dxy correlates hugely with euro dollar, the danger right now is your dalek breaks back down through 110. Okay, what happens after 110? I get all bullish about the long-term and all scared about the short term, because 109 is just another number.

You know the that the danger, but the danger in this or the next few weeks is that euro dollar is very stretched in real terms. So the euro is very cheap, so it only goes down painfully slowly because it takes a ton of bad news to drag it lower. So so the danger is the eurodollar moves very slowly lower. That volatility dies again there and the entire focus of of everybody is on other stuff.

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