The Coronavirus remains the main topic this week, as reports of the virus spreading have traders moving towards safe-haven assets. Italy, which confirmed 3 cases on Friday, has now confirmed more than 130 cases as of Sunday. While the USD has remained better bid against the EUR and GBP, traders are also looking at JPY as a safe-haven alternative. After falling over 225 points on Friday, Dow Futures are indicating a drop of more than 700 points when markets open later this morning due to the spread of the Coronavirus onside of China. Traders remain concerned over the impact that the spread of the virus will have on the global economy.
After rallying in early Monday morning trade, the EUR/USD has once again moved lower. The virus outbreak in Italy has closed the carnival of Venice, closed schools and Italy has attempted to “seal off” affected towns in the north. Italian officials are attempting to find out how and where the virus began. Despite better than expected German IFO numbers, the single currency has been unable to rally. February German Business IFO rose to 96.1 after last month’s 96.0, better than the expected 95.3. There was already concern as to how the Coronavirus would affect the Euro economy and while the IFO number is positive, it may prove to give traders better opportunities to sell the EUR.
The GBP/USD is trading in the middle of its overnight range as traders focus on better than expected economic numbers while awaiting the next round of Brexit talks. There are concerns that the UK may renege on certain pledges related to Northern Ireland and this could pose a problem for future negotiations. Continued concerns regarding the virus as well as the possibility of the UK “crashing” out the EU will keep some pressure on the GBP and as traders look towards the USD as a safe-haven bet, any moves higher in GBP will give traders selling opportunities.
While the latest economic data has reinforced the concern that the Japanese economy is heading into a “technical” recession, traders are moving away from risk and moving into the safe-haven on Japanese Yen trades. While trading in a small range overnight, as the North American market opens the USD/JPY is trading near session lows. Considering how negative the economic releases have been from Japan and the expectation that they will not improve, it shows how concerned traders are regarding the Coronavirus.
The Canadian Dollar remains under pressure as oil prices fall. Brent crude moved $1.69 lower to $56.81 per barrel, while U.S. crude futures fell by $1.40 to $51.98. The spread of the Coronavirus has investors concerned about lessening demand. Canadian wholesale trade sales are due out later this morning and they are expected to improve to 0.4% after the previous -1.2% number. As a commodity-based currency, better economic numbers may not be able to keep the loonie from falling if oil prices continue to fall.
Total confirmed cases of the Coronavirus continue to rise and now are at 78,854 worldwide, with confirmed deaths at 2,465. The majority of cases remain in China, but the virus is spreading to other countries as well. According to EU Economic Affairs Commissioner Gentiloni, the EU “has full confidence in the Italian authorities and the decisions they are taking”. He also said there is “no need to panic.” The next move will be to see if the virus spreads further through Europe.