S stocks markets put in their worst first quarterly performance in an over one-hundred year history, as investors fled higher risk assets in favour of the safe-havens. The COVID-19 virus has also wreaked havoc in the FX market in the past three months. Emerging market currencies have witnessed violent sell-offs akin to the financial crisis, many shedding one-fifth of their value against the US dollar. The safe-havens have unsurprisingly outperformed, with the higher risk major currencies such as the Aussie and New Zealand dollars and the Norwegian krone falling violently.

The dollar had retraced much of its gains last week as action from central banks and governments calmed the markets. It has been back on the front foot again so far this week though, with investors beginning to turn their attention to what kind of impact the strict containment measures will have on the global economy. We are already beginning to see the impact on the flash PMI survey figures across the globe, with today’s manufacturing indices in Asia all showing sharp contractions in March.

Best case scenario is that we get a V-shaped recovery, in which the incoming sharp downturn is followed by a swift bounce back once the worst is over. This is, however, optimistic given the likelihood that the containment measures will probably be unwound gradually for risk of making the situation worse.

US employment data key for the dollar this week

We’ll get the next big data release that covers the crisis period this afternoon – the March US ADP employment change number. This number, which represents net jobs created, or in this case lost, in the US private sector, is generally seen as a precursor and decent gauge as to the strength of the more important nonfarm payrolls report. The market consensus suggests a reading of negative 150k, which would be the most jobs shed since 2009. Given last week’s much worse-than-expected jobless claims number, we think that there is a good chance this surprises to the downside.

This afternoon’s US ISM manufacturing data is also on tap, although given that the sector contributes only a fraction to overall output we expect its release to go somewhat under the radar. Markets will then be fully focused on Thursday’s initial jobless claims and Friday afternoon’s nonfarm payrolls report.

Sterling holds firm after tumultuous month of March

Of all the major currencies, March was one of the most tumultuous for the pound. The currency suffered from a violent sell-off of historic proportions in the first three weeks of the month, before rebounding sharply last week and recovering around half of its losses.

Sterling has spent much of the past 24 hours or so relatively rangebound, by recent standards at least. This morning’s manufacturing PMI for March was revised lower, although not as much as expected, coming in at 47.8 versus the initial 48.0 estimate. Output and new orders both fell by the most since 2012, while the rate of hiring in the sector declined to its lowest level since July 2009. Manufacturing is, however, so far holding up much better than services, which relies far more heavily on consumer demand that has, of course, collapsed in the past two weeks. That being said, we think that the worst is yet to come given that the tighter containment measures have not yet been in place long enough to be reflected in a full months worth of data.