The USD was mixed in overnight trading, moving higher against the EUR and lower against both the GBP and JPY. The Coronavirus continues to dominate the news as the death toll in China has risen to 26 people. The WHO (World Health Organization) said on Thursday that the outbreak has not become a global health emergency. These comments seemed to give traders some confidence as global equity markets reacted positively to the news. After being down over 100 points, the Dow finished slightly lower and Dow Futures point to a positive opening of around 50 points later this morning. Traders will be focusing today on US Manufacturing and Services PMI which are due out right after the equity markets open. Manufacturing and Services PMI are expected to come in at 52.5 for January. A number over 50 is considered to be expansionary.
EUR/USD remains pressured after comments from European Central Bank President Lagarde following the monthly ECB meeting were considered “dovish”. Her comments that risks to growth in the Eurozone remain tilted on the downside has seen the EUR fall to levels not seen in the last seven weeks. Eurozone PMI numbers were mostly positive, but this did not help the EUR. Manufacturing PMI was higher at 47.8, while Services PMI came in slightly lower than expected at 52.2. Expect the selling pressure to continue as concerns over Eurozone-China trade due to the virus are now in trader’s minds.
GBP/USD remains firm after their PMI numbers were better than expected with Manufacturing PMI improving to 49.8 and Services PMI improving to 52.9. These numbers have practically eliminated any talk of a Bank of England rate cut when the central bank meets on January 30. GBP at the moment is trading off its overnight highs as traders have taken some profit ahead of the weekend. Moving into next week it will be interesting to see how traders react as we approach Brexit, one week from today.
USD/JPY remains under pressure as “safe haven” JPY buying continues due to concerns over the Coronavirus. Traders remain concerned about the possible spread of the disease and even though the WHO has not declared a world emergency, as the Chinese New Year celebrations begin, traders remain cautious over the possible spreading of the virus. The direction of USD/JPY will be determined by any new “virus” news. On the economic front, Japan Composite PMI rose to 51.1, up from 48.6, turning from contraction to expansion. This has also added to JPY buying.
The loonie is trading slightly higher this morning as the currency is reacting to slightly higher oil prices overnight. Brent crude was up 24 cents to $62.28, as concerns eased over the Coronavirus. Traders remain wary of any possible Bank of Canada action as the bank remains cautious of slower growth and the world economy.
WHO Emergency Committee panel chair Didier Houssin said it’s a “bit too early” to consider it a "Public Health Emergency of International Concern.” It’s now just “an emergency in China”. According to government data, the death toll reached 26, with the number of confirmed cases exceeding 800. Ten cities in Hubei province are now locked up, with public transportation restrictions, including Wuhan, Huanggang, Xianning, Qianjiang, Xiantao, Ezhou, Chibi, Huangshi, Enshi, and Zhijiang.