- Dow futures tumbled more than points Wednesday night, pointing to another volatile start to trading in New York.
- The US dollar index broke for the first time in almost three years. The fastest bear market in history shows no signs of abating anytime soon. In the near term, this means an even stronger dollar.
- The strength of the greenback proves once again that cash is king in times of crisis. Unfortunately, this could stoke another liquidity crisis – in foreign exchange markets, no less.
U.S. stock futures plunged in overnight trading Wednesday, as cash once again proved to be the ultimate safe haven in times of crisis.
As investors dumped everything from stocks to Treasurys and even gold , the US dollar soared to its highest level in three years.
Dow Futures Point to Somber Thursday Open
Futures on all three major US stock indexes traded lower Wednesday night. Dow futures plunged by as much as 1200 points, pointing to a grim start to Thursday trading.
At the current pace, the Dow Jones Industrial Average is set to open at more than three-year lows once New York trading begins.
S&P 596 futures fell 3.3%. Nasdaq (futures were off by 2.4%.
US Dollar Index Soars
As The Wall Street Journal recently reported , markets are entering a phase “where cash is all that matters.”
Nothing was off-limits during Wednesday’s market selloff
, as gold, stocks and Treasurys plunged. This massive liquidity event has been ongoing for the better part of a month and has even dragged down non-correlated assets like bitcoin . The US dollar index (DXY), which measures the performance of the greenback against a basket of six peers, has appreciated 5.1% this year. After crashing in early March, DXY has gained 6.7% over the past seven trading sessions. It now sits at , the the highest since March The US dollar hasn’t been spared volatility, but its trajectory has been higher since the start of the year. | Chart:
The all-encompassing selloff affecting equity, credit and commodity markets is a clear sign there are very few places to hide in today’s bear market. In the process, the U.S. dollar has surged against all currencies, creating a potential liquidity crisis in the FX market.
That’s because nobody in the foreign exchange world wants to bet against the greenback ahead of a potential lockdown in the United Kingdom – the world’s largest FX trading hub .
Pound sterling fell as much as 5% on Wednesday, en route to its lowest level since 2019.
Several analysts believe London’s trading floors are about to close as the British government enacts stricter controls to combat coronavirus. U.K. prime Minister Boris Johnson has been following Europe’s lead by increasing restrictions on the local population.
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