Fingers Crossed.

The dollar rose and risk assets wobbled, in a somewhat inauspicious start to what promises to be an eventful (and possibly harrowing) week.

Coming off its worst week since 2009, the greenback rebounded against all G-10 peers save the yen following downgrades that dented the pound and put pressure on EM FX, especially the rand, which fell to a record low. Wall Street is divided on the dollar’s path from here. “I don’t think what a rating agency thinks of a G10 economy’s creditworthiness really matters much but in EM, where inclusion in indices and therefore bond portfolios is partly determined by rating, it’s much more important”, SocGen’s Kit Juckes remarked.

Crude, meanwhile, plunged. WTI sank below $20 at one juncture. Brent is poised for its worst month on record (down 54%) and WTI will almost surely log its largest quarterly decline in history.

Traders and investors face a daunting set of hurdles this week, as key data rolls in and the US is expected to see more grim days in its fight to contain the coronavirus.

Donald Trump’s Sunday evening press conference did little to calm frayed nerves. His decision to extend social distancing protocol through April came with an explicit acknowledgement that things are likely to get worse. Even as the longer time table was a good move from a public health perspective, Trump’s admission that the US economy likely won’t start reaccelerating in earnest until at least June 1 underscores that America is in the early innings of the COVID-19 fight.

Easing from China and Singapore and more stimulus from Australia did little to placate investors globally, although Australian shares did log huge gains.

“Massive monetary and fiscal spending is giving investors just enough breathing room to figure out the extent of the economic damage done [but] that oxygen supply is rapidly depleting with increased US COVID-19, and global case counts”, Axicorp’s Stephen Innes said. “To that end, markets are trading on the back foot as risk appetite wanes, pointing to more turmoil ahead”.

Underscoring the human toll and read-through for local economies is BofA.

“[It’s] a quadruple whammy to the hot spot areas, causing not only many cases, but an unusually big hit to the economy, serious damage to local government budgets and damage to the finances of local hospitals”, the bank writes, noting that in New York, “subway ridership is down 90% or so and car traffic is down 25% around bridges and tunnels. In Louisiana, “movement in New Orleans is down 73% according to press reports and food banks reportedly have only two days worth of goods”.

US equity bulls will likely cling to the month- and quarter-end rebalancing story, and JPMorgan thinks the short covering the bank predicted early last week “is still at the early stages”.

“The Quantity-On-Loan, of the SPY US Equity ETF had increased steeply over the course of the previous four weeks, exceeding its previous high in December 2018, appears to have peaked and is now declining having unwound around a quarter of its previous rise”, the bank notes. “This again suggests that we are still at early stages of short covering [as does] our broader short interest proxy in Figure 17, i.e. the Quantity-On-Loan on all stocks and equity ETFs globally, [which] has also started declining this week having unwound around an eighth of its previous rise”.