Monday January 27th, 2020

Chinese CNY and commodity currencies remain under selling pressure as the coronavirus cases spreads to ten countries. Fears of the spread of the China virus grows as infected cases rise to over 2,800 people, with more than 80 reported deaths. Safe have JPY has rallied over 1% since the outbreak and has the potential to extend towards Oct19 lows of 106.50 vs US$. US New Home Sales may provide a distraction for investors, but the primary focus will remain on the China virus updates.

Crude prices extended their losses dropping below $60 per barrel, their lowest level in 3 months as a result of the China virus. Expectations that oil prices will continue to ease with more businesses expected to shut down as the coronavirus spreads. Weaker oil prices and BOC dovish comments are starting to impact C$, which weakened to a one month low vs US$. A breach of 1.3215 could see a potential re-test of 1.3320 vs US$. The coronavirus and the resulting weak oil prices will have a negative impact on C$ in the short term.

Euro remains under-pressure, hitting a fresh one month low vs US$. Weak German IFO survey data released this morning put additional selling pressure on the currency. Fears of the coronavirus and its potential impact on global growth is having a negative impact on Euro as investors switch to safe-have currencies. Outside of the China virus, US housing data and a speech by EBC’s Mersch could impact Euro today.

It is going to be a big week for GBP with BOE’s rate policy on Thursday and Fridays Brexit from Europe. GBP as a whole has been performing relatively well, managing to avoid the China virus sell off. Despite the Coronavirus and political risk with Brexit, investors appear to be bullish GBP.