Dollar Mixed After Jump in Volatility

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Dollar Mixed After Jump in Volatility

FEBRUARY 04, 2020

Currency markets experienced rare volatility overnight as a confluence of events pulled currencies in opposite direction—overall the Dollar Index is 0.1% weaker than yesterday.

Overview

Safe-haven currencies were on the back foot as risk-on trading looks to resume today.  The People’s Bank of China pumped an additional $57 billion worth of yuan into the banking system to prop up the economy that faces uncertainty caused by the coronavirus.

The Democratic Iowa Caucus was held last night but a technical error has led to a delay in the results.  We should know more at some point today.  Attention will then shift to President Trump’s State of the Union address tonight in Washington.

On the fundamental front, U.S. factory orders and Durable goods orders will cross the wire at 8:30 a.m.

What to Watch Today…

  • Factory Goods and Durable Goods Orders at 10 a.m

Complete Economic Calendar can be found here.

AUD

The Australian dollar jumped half a percent against the U.S. dollar overnight after the Reserve Bank of Australia kept interest rates unchanged at 0.75%.  The move was mostly expected.

Despite today’s relief, the Australian dollar has declined nearly 4.0% over the past month as the Australian wildfires and coronavirus fears in China, their largest trading partner, have clouded the country’s economic outlook.

GBP

The British pound continued its slide overnight after falling dramatically during yesterday’s session.  The sterling is under pressure after Prime Minister Boris Johnson looks to take the hardest approach to trade negotiations with the EU.  Overnight, GBP/USD touched its weakest level since late December. The sterling was able to recover some of its heavy losses earlier this morning after the U.K. related better-than-expected construction data.

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