Most things on hold as virus remains, safe-havens rise

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Most things on hold as virus remains, safe-havens rise

JANUARY 27, 2020

The U.S. Dollar gained ground as a safe-haven commodities and stock indexes across the globe lose value based on the coronavirus spread fears.

Overview

Thousands of cases reported and now 80 deaths make for a physical threat to stability in the second-largest economy that surely threatens the activity of global markets. Asian markets are off on holiday and China extended the New Lunar Year holidays in order to incentivize people to stay home. We will keep a close eye on headlines as any suggestion of establishing control overspread is surely to quickly turn around the sentiment.

Oil prices are now at three-month lows, thus crushing a seven-week run for emerging markets and negatively impacting Mexican Peso. Australia and New Zealand witnessed their respective currencies fall to their weakest levels since November. New Home Sales numbers will be released at 10 AM in the U.S., which could further affirm strengthening in that sector that has been experienced in recent months and adds to the buck’s upward momentum.

What to Watch Today…

  • New Home Sales 10 AM

Complete Economic Calendar can be found here.

EUR

The Euro failed to manage any advancement following an anxiety-driven weekend in Italy over regional political elections. Indeed, Prime Minister Giuseppe Conte’s government can continue as a center-left bloc led by the Democratic Party defeated the populist Northern League. Its leader, Matteo Salvini, had hoped that the region of Emilia-Romagna could mean pressure to have an early general election that could give him a chance to re-take power.

However, the loss creates a much-needed sense of continuity for the Italian government that is arduously trying to make necessary reforms and a budget that meets EU standards. We see this as development that can aid the shared currency later when other troubles fade.

GBP

The United Kingdom starts its last week as part of the European Union as it is scheduled to separate on Friday. Sterling has found support in a less dovish Bank of England and surprising numbers in sales and productivity, but pressures on global markets and uncertainty over what trade in the future will look like can start making dents on the Pound’s progress. We think a lot is at risk even as a separation is agreed upon and that Sterling will pay with depreciation. For now, the virus is what must be combatted immediately and the main risk to markets.

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