The Fed released minutes from their January 28-29 FOMC meeting yesterday afternoon and it was stated that the current monetary policy was appropriate. They also stated that leaving the Federal Funds rate at 1.50-1.75% allows the FOMC “time for fuller assessment of ongoing effects on economic activity." There was mention of the Coronavirus emerging as a new risk to global growth. Keep in mind, the virus was in its early stages as the Fed met last month. The USD is trading higher this morning against the major currencies as US economic strength as well as growing virus contagion in Asia has traders favoring the greenback. US equity markets were higher yesterday and Dow Futures are indicating a positive opening of around 25 points. Earnings reports will be today’s focus, as Domino’s Pizza, Norwegian Cruise Line and ViacomCBS report before the bell, while Dropbox reports earnings after the bell.
EUR/USD continues under pressure trading at levels not seen since April of 2017. While the US economy continues to be upbeat, the exact opposite is happening in the Eurozone. German Confidence was lower coming in at 9.8, as traders await European Central Bank release of their meeting minutes. Any bearish comments regarding rate movement and fiscal stimulus from these minutes will fuel EUR selling. The EUR is technically “oversold”, so some profit-taking could see the EUR/USD move up, but that will just give traders better levels to sell.
GBP/USD initially traded higher earlier today after UK retail sales came in at 0.9% in January, beating the expected 0.7%, and much better than the previous -0.5%. This rally has not lasted and the British Pound is testing overnight lows as this commentary is being written. Pessimism regarding Brexit negotiations between the UK and EU has pushed the GBP lower. Continued problems between negotiators as well as continued positive USD strength should keep pressure on the GBP.
USD/JPY is much higher this morning as the JPY has given up its safe-haven status, which was quite strong a few days ago. The continued spread of the Coronavirus in China has many worried that the virus could spread to Japan. Adding to the JPY woes are concerns that Japan’s economy is very close to falling into recession. Considering that the USD at the moment can offer safety as well as yield, traders are exiting JPY trades. Traders are also speculating Prime Minister Abe may need to add further stimulus, which would have negative implications on the JPY.
Continuing USD strength has put pressure on the Canadian Dollar despite an uptick in oil prices. USD/CAD is trading at overnight highs this morning, as traders continue to buy USD. Oil prices were higher this morning as traders showed concern over a possible supply squeeze in Libya and the market reacted to US sanctions on the Russian energy firm Rosneft.
The latest release out of China shows that confirmed cases of the Coronavirus have eased a bit. Only 394 cases were reported yesterday, the lowest amount since January 23. Confirmed cases are now at 74,576, while the death toll now is at 2,118. The outbreak of the disease is spreading in Asia, as the number of infections in Japan has grown to 74, while South Korea’s number is now at 82 and the number of cases in Singapore is at 84.