The Coronavirus continues to dominate the news after a rise in confirmed cases over the weekend have seen equity markets fall and traders head for safe haven currencies. The USD and the JPY have been the currencies that traders are turning to as the number of confirmed cases reached a total of 2744, with the number of deaths reported at 80. The virus has spread to a number of countries including the US, France, and Australia, as well as most of the Asian countries. Equity markets in Asia and Europe are all lower and DOW Futures this morning are lower as well, indicating a negative opening for US equity markets of around 300 points. Traders will begin to focus on the FOMC meeting which begins tomorrow and ends Wednesday afternoon. After cutting rates three times in 2019, the Fed is not expected to make any moves this week, but as always, the accompanying statement and press conference by Fed chair Jerome Powell will be closely watched.
EUR/USD is trading near its YTD lows after German IFO numbers were released this morning below market expectations. German IFO Business Climate for January came in at 95.9 below expectation of 97.0 and German IFO Expectations came in at 92.9, also below expectation of 95. These numbers added to the tension regarding the Coronavirus and have pushed EUR lower. The pressure will remain on the single currency moving forward this week.
GBP/USD is trading higher this morning as traders look towards the Bank of England meeting later this week on Thursday. Traders are uncertain of the intentions of the BOE, with the possibility of the Central Bank lowering rates. Then there is the concern about how the markets will be affected by Brexit on Friday. The UK will not actually leave the EU until later this year and it could leave GBP in the crosshairs moving forward.
USD/JPY is lower as traders move into JPY as a safe haven due to the Coronavirus. Anti-risk trades are not surprising as the virus news has had a negative effect on equity markets across the globe. USD/JPY traded at its lowest level since January 8th and most expect the currency pair to continue its move downward. It should be noted that USD/JPY is reaching technically oversold levels on hourly charts and there could be a bounce-back on traders taking profits.
The “loonie’ reached overnight highs heading into Monday as the oil markets were under pressure due to the Coronavirus. Brent crude prices dropped to $8.90, the lowest since last October. As a commodity currency, the C$ moves are usually connected to the moves in oil and gold.
The Chinese Yuan has moved lower this morning, as traders are reacting to the increase of viral cases over the weekend. The Chinese government has extended the Chinese New Year to February 2 from January 30 in an attempt to strengthen the prevention and control of the virus, and the US and other countries are preparing to evacuate their citizens from Wuhan.