The USD is mixed this morning as the Coronavirus continues to dominate the news. The Chinese government has closed down the city of Wuhan, where the virus originated. The WHO (World Health Organization) will meet today to decide whether the virus should be classified as a global health emergency. US equity markets were slightly lower yesterday, as trader concerns about the virus took center stage. This morning, Dow Futures are lower, as equity markets in Asia and Europe remain pressured by the virus news. The US equity markets are expected to open 45 points lower this morning. The death toll from the virus has reached 17 and the number of confirmed cases of the virus has reached 571.
The European Central Bank (ECB) has left rates unchanged at their monthly meeting this morning. While the ECB expressed a more positive outlook for the EU economy, traders were not impressed, and the EUR did not move much. However, as ECB President Lagarde began her remarks, the EUR is approaching overnight highs. Lagarde stated that monetary policy must remain accommodative to support inflation. Inflation is increasing in line with ECB expectations which is what was stated at the December meeting. It was also mentioned was that the growth in the Eurozone was slower than expected and that falls in line with the global economy. While risks remain “tilted” to the downside, they have become less pronounced as some of the uncertainties of international trade have receded. The immediate “euphoria” and EUR buying seems to have stopped and the single currency is now trading lower.
The GBP/USD has rallied overnight trading near overnight highs after good economic news on the manufacturing sector, as the Quarterly Business Situation index rose to +23 in January from -44 in October. This is the best level since April of 2014 and the 67-point turnaround was the largest since 1958. The optimism of stronger economic growth has tempered expectations of a BOE rate cut, aiding the pound. The House of Lords approved the Withdrawal Agreement Bill as we get closer to the January 31 Brexit deadline.
USD/JPY has fallen to near two-week lows as concerns over the Coronavirus have traders moving towards JPY as a safe-haven alternative. Today is the third consecutive day of USD/JPY selling as the “flight to safety” is supporting the JPY. JPY buying should continue as long as the virus fears continue.
The Canadian Dollar collapsed overnight after the Bank of Canada expressed concerns about the economy. The central bank also said it has considered cutting rates. Adding to the pressure on the loonie is the sharp fall in oil prices after the International Energy Agency stated that there would be a significant surplus in oil in the first half of this year.
The Chinese government closed the town of Wuhan, where the coronavirus originated, but concerns remain about the virus spreading as the Chinese New Year will see many Chinese people traveling around the globe. Major airports are already preparing for these travelers. China has confirmed 571 cases of the virus.