Wednesday January 29th, 2020

The coronavirus continues to dominate the markets focus as the number of confirmed cases rises to near 6,000 and 130+ have died of the virus. The virus has spread to 15 countries prompting airlines to reduce flights to China and BA cancelling all flights. Currency markets have started to somewhat stabilize with the US$ holding at a 2 month high vs major currencies. The focus intraday will shift to the Fed’s interest decision and the FOMC press conference. Markets expect US rates to remain unchanged, but will be following the FOMC conference closely for indications of future changes.

Oil prices rebounded on a combination of declined US stockpiles and OPEC possibly extending its output cuts to offset the coronavirus impact. The key 1.3215 level held yesterday with the rebound in Oil prices helping the loonie strengthen by a 1/4% vs US$. The coronavirus impact on the global economy remains the primary threat to C$ weakness in the near term. Canada’s GDP out on Friday will be watched closely for its impact on expectations for a BOC interest rate cut.

Euro continues to hold above the key 1.0980 level but remains vulnerable to further weakness. The combination of trade negotiations with both the US & UK and the coronavirus is making Euro unattractive to investors. Intraday US Fed decision and Coronavirus updates will dictate intraday direction.

GBP is doggedly holding onto the 1.30 level vs US$. With no confirmed cases of the Coronavirus yet in the UK investors remain focused on BOE rate decision tomorrow and Brexit on Friday. The UK decision to use Huawei equipment is positive with China, but might backfire with the US during trade negotiations. BOE rate decision Thursday will dictate GBP direction for the near term.