The USD is stronger this morning as concerns remain over the Coronavirus and traders are moving away from risk. The USD is up against the EUR, GBP, and CAD, but lower against the JPY. The Fed left rates unchanged yesterday at 1.50-1.75% and the vote was unanimous. During the post-meeting press conference, Chairman Powell stated that the current monetary policy is “appropriate”. After closing the day pretty flat yesterday, DOW Futures are pointing to a lower opening this morning of around 175 points for the US equity market. While the Fed's decision and comments showed optimism over the US economy, traders seemed more focused on the spreading Coronavirus. Fourth-quarter US GDP is due out later this morning and is expected to be 2.1%, the same as the last quarter. The USD should remain “better bid” as this crisis continues.
EUR/USD remains under pressure after the “dollar positive” Fed meeting yesterday. German CPI numbers are expected later today, but traders seem to be given more concentration to the Coronavirus as European equity markets are all lower this morning. European parliamentary lawmakers will be meeting today with Brexit on the agenda. Technically, the EUR should test lower and poor economic releases may increase the pressure.
GBP/USD is trading lower this morning ahead of the Bank of England rate decision later today. This will be the last meeting for Governor Mark Carney. While markets are pricing in a 45% chance of a rate cut as of yesterday, the BOE should leave rates unchanged at 0.75%. Concerns earlier this month that a rate cut was imminent were relaxed after data showed a strong improvement in business optimism. It would not be surprising to see a rebound in GBP if rates remain unchanged. Tomorrow is the Brexit day, so that may come into play regarding the direction of the pound.
USD/JPY continues to move lower as traders enter safe-haven trades. The JPY has been the second best performing currency in January after the USD. As long as serious concerns remain regarding the virus issue, expect traders to refrain from risk trades and continue buying JPY.
USD/CAD continues to make new highs for the year as concerns over the Coronavirus as well as lower oil prices are pressuring the Canadian Dollar. Brent crude prices were down almost $1.00 and U.S. crude prices were lower as well.
China’s National Health Commission announced yesterday that the number of confirmed cases of the Coronavirus has risen to 7711 cases, with serious cases growing to 1370 and the death toll now at 170. The WHO is now becoming more concerned as the number of cases grows. The health organization also said, “although the numbers outside of China are still relatively small, they hold the potential for a much larger outbreak.”