The Coronavirus continues to dominate the news, as the number of people affected, and the number of fatalities grows. Chinese authorities have now confirmed 4,515 people infected and 106 deaths. Equity markets in Asia continue to sell off, while European stocks have somewhat recovered this morning. The Dow fell over 450 points yesterday, the worst one-day drop since last October. Dow Futures this morning are pointing towards a positive open of around 50 points. Traders will turn their focus towards US economic data with Durable Goods MoM released at 8:30 am and Consumer Confidence at 10:00 am. US Durable Goods orders for December came in at 2.1%, which is the biggest increase since August 2018. Consumer Confidence is set to rise to 128.0 in January after a previous release of 126.5. The FOMC meeting begins this morning and the Fed will announce their rate decision tomorrow afternoon. The USD remains higher against the EUR, GBP, and CAD, while trading lower against the JPY.
EUR/USD remains pressured near 2020 low as USD strength and concerns over the Coronavirus weigh on trader’s minds. Economic data such as the German IFO release show the EU economy deteriorating while economic releases from the US show an economy that has remained strong. With this divergence to continue, it seems inevitable that the EUR will test new lows sooner rather than later.
GBP/USD remains under pressure as USD strength added to “dovish” Bank of England expectations and hard Brexit concerns have traders selling GBP. There is uncertainty regarding the BOE meeting on Thursday concerning their rate decision. Comments made lately by BOE governors have traders possibly expecting a rate cut. Add to that the possibility of a hard Brexit and GBP will remain a sale. Negotiations between the UK and the EU are not going as well as expected, as EU negotiator Michel Barnier warned there is still a chance of a “hard” Brexit at the end of this year.
USD/JPY continues to test new lows for 2020 as traders move into JPY and safe-haven purchases continue. Traders continue to purchase the currency as the Coronavirus continues to spread. Analysts are now concerned that beyond the obvious health issue, an economic problem has now arisen as the impact of China’s tourism and overall economy could affect global economic growth. JPY has risen during the last five trading sessions and that should continue until there is some positive news out of China.
Oil prices are lower for the sixth straight day, pressuring the commodity currencies and the USD/CAD has moved to overnight highs. As long as the oil prices remain under pressure the CAD will remain a sale. USD/CAD has reached some technical resistance so there may be some profit-taking but the direction remains for the downside to continue for the Canadian Dollar.
As the number of people affected and the number of fatalities continues to rise, the virus is spreading around the world. Germany confirmed their first case on Monday. The US Centers for Disease Control said the number of “patients under investigation” has risen from 63 to 110. The Chinese Yuan was quoted in the offshore market at its lowest level since December 30. Concerns about the economic impact of the Coronavirus on the Chinese economy continues to grow.