As the amount of new cases of the Coronavirus continue to grow the USD continues to trade higher as it joins the Japanese Yen and gold as safe-haven destinations. Fed Chairman Jerome Powell concluded his second day of testimony before Congress and stated that in the event of an economic downturn, the Fed would use “Quantitative Easing and forward guidance aggressively”. He also stated that he expects the economic expansion to continue and like all other central banks, the Fed is keeping a close eye on the Coronavirus outbreak. Consumer Price Index (CPI) number for January is due out later this morning and the forecast is for an increase to 2.5% from last month’s 2.3%. After finishing over 275 points higher yesterday, DOW Futures are indicating a negative opening later his morning of around 200 points, as investors remain concerned about the Coronavirus. There are a number of companies that will release earnings before the opening bell including Airbus, Alibaba, Barclays and PepsiCo. Traders will also be watching for comments made today during speeches by Dallas Fed President Kaplan and New York Fed President Williams as both will talk about the economic outlook and monetary policy.
EUR/USD continues to fall and is now trading at levels not seen since 2017. Worsening economic conditions across the Eurozone and the possibility of more European Central Bank stimulus are pressuring the single currency. Having broken technical support, the selling could continue as there seems no positive economic news on the horizon. German and French economic numbers have been troubling and there doesn’t seem to be a turnaround in sight. The overall strength of the USD is also weighing on the EUR, as is the Coronavirus.
GBP/USD is trading higher after testing overnight support levels. Better than expected GDP numbers released on Tuesday are supporting the pound, though traders continue with their concern over Brexit negotiations. Investors are worried that the UK and EU will not be able to come to an agreement on the UK leaving the EU by the end of the year. Once again, the strength of the USD has not allowed the GBP to move much higher. Adding to the uncertainty, UK Prime Minister Boris Johnson is preparing for a reshuffling of his government before official Brexit talks begin.
USD/JPY has moved lower overnight, as safe-haven buying of the JPY has once again occurred. The currency pair was unable to break through technical resistance, which added to the overnight move. After reports of a sharp increase in the number of those infected with the virus, traders left risk trades and returned to safe-haven assets. While the USD has seen improvement against the major currencies, USD/JPY may continue to move lower.
Despite higher oil prices and comments from the Bank of Canada’s Poloz, the Canadian Dollar remains under pressure heading into today’s trading session. The BOC governor stated that the Canadian economy is in a good place, but buyers seem reluctant to buy the loonie. Concerns over how the Coronavirus will affect the Canadian economy are keeping buyers sidelined. Oil price rose for the third consecutive day as traders are concerned over possible output cuts.
The death toll continues to rise regarding the Coronavirus and that number has now reached 1,310. The virus has forced a higher demand for safe-haven assets, and it seems there’s no end in sight at the present time. Traders remain concerned over the economic effect on China, which likely won’t be realized for the next few months.