Thursday January 23rd, 2020

The Chinese coronavirus remains a primary focus for investors, with 600 people now infected and the city of Wuhan being locked down. Concerns that the virus could impact Chinese domestic growth has seen the CNY fall 1% since Monday. Investors continue to switch into Yen and other safe-haven currencies adopting a « Risk Off » strategy. In other currency news, AUD rallied 0.5% on positive unemployment numbers. CHF strengthen partly on its safe-haven status and since it was added to the watchlist as a currency manipulator. Intraday focus will remain on the Chinese virus updates, US Jobless claims and ECB monetary statement.

Oil prices remain under-pressure as WTI hit seven week lows on Chinese virus concerns. C$ hit a 1 month low vs US$ after BOC signaled the potential of a future rate cuts. A breach of 1.3185 could open the way for a retest of 1.3265 (Dec2019) level. The combination of the global Chinese virus concerns and lower rates by the BOC will keep pressure on C$. Intraday US data and Chinese virus updates will dictate intraday direction.

Euro remains under pressure with a stronger US$ and global investors concerns over the Chinese virus. The ECB is expected to leave rates unchanged today, with the monetary statement being watched closely by investors. Yesterdays comments by the US President about possible tariffs on auto imports if EU doesn’t agree to a trade deal. The threat of tariffs has increased investor concern, which combined with the coronavirus concerns are weakening Euro. ECB and US Jobless data and Chinese virus updates will dominate intraday direction.

GBP continues to remain the currency outlier as it extended its gains yesterday vs US$. The house of lords gave its final approval to Brexit on January 31st. The quarterly business situation index leaped to +23 in January vs -44 in October its strongest level since 2014 and its biggest swing since 1958. Speculation that BOE may not ease at its next meeting provided investors an extra boost of GBP confidence. GBP hit a two week high, a breach of 1.3215 opens the way for a retest of 1.3510 the high post election.