Wednesday January 22nd, 2020

Increased concerns over the outbreak of the new Coronavirus in China caused a shift-back towards safe-haven/risk adverse currencies. Yen and US$ both firmed against the major currencies as the number of confirmed coronavirus cases rise to 440. Intraday markets will focus on any fresh comments from Davos, the China virus and US Home data releases for direction.

Goldman Sachs (GS) comments that oil demand by China could drop due to the outbreak of the coronavirus. GS estimated the coronavirus could hurt crude prices by as much as $3 per barrel. Overnight oil prices eased by almost 1%, but C$ managed to hold within its current trading range. A slew of Canadian data out this morning including the BOC rate decision. BOC is expected to keep rates unchanged.

Euro eased back below 1.1100 level as US$ strengthened amid concerns of the China virus. ECB monetary policy meeting on Thursday with rates expected to remain unchanged. Intraday expect Euro to stall within its current range with1.1065 providing the base. We expect investors to remain sidelined until after the ECB monetary policy statement.

GBP appears to be somewhat of an outlier, managing to hold onto its current strength and not impacted by safe-haven buying. GBP firmed to a two week high vs Euro as concerns that BOE will cut rates at the next meeting eased. Friday’s UK January’s purchasing managers index which is seen as a « forward looking indicator » will be watched closely for clues on interest rate direction. Intraday 1.3200 remains a key resistance level for GBP/USD.