The growing spread of the coronavirus outside of China and the fear of a pandemic is impacting equity, commodity and currency markets alike. Equity and commodity markets have fallen significantly, causing central banks to consider cutting interest rates in an attempt to stem a possible global economic slowdown. Anticipation that the FED may cut rates to offset the impact of the coronavirus caused the US$ to weaken vs the major currencies. Asian & trade-related currencies continue to remain weak and vulnerable to further selloff. A number of US data releases today including GDP and non defense capital goods orders will be watched closely for intraday direction.
Oil prices continue to fall for a 5th day hitting fresh 2020 lows as Coronavirus fears continue and supply demand falls. C$ weakened on the falling oil prices, breaching the key 1.3315 level and hitting new 2020 lows. Further weakness in oil prices could see a knockoff effect for C$ towards 1.3460. Canadian Q4 current account data, alongside the US data will be watched closely for direction.
Euro firmed vs a weakening US$ as us treasury yields fell and speculation of a FED cut grows. Hopes for German fiscal stimulus has added some support to the Euro in recent days. ECB and several Eurozone governments are urging German to relax its current fiscal policy in the current coronavirus environment. Indications are that German could be willing to change which is proving positive for Euro.
GBP weakened vs US$, but its sell off was somewhat muted by a falling US$ on FED easing concerns. The EU/UK trade rhetoric has notched up with the UK treating to walk out of post-Brexit talks in the coming months. Official negotiations begin on Monday, but investor concern of a no-deal is impacting GBP. Another key factor for sterling is the prospect that the BOE could cut interest at its next meeting. Expect more volatility over the coming months as the EU/UK trade saga unfolds.