Pound rises on positivism; Coronavirus scare subsided

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Pound rises on positivism; Coronavirus scare subsided

JANUARY 22, 2020

The U.S. Dollar has maintained familiar ranges but lost serious ground to the Pound as confidence data surprised on the other side of the Atlantic.

Overview

Stock indexes are hoping to get back to normal as a deadly virus is now being contained by Chinese health authorities. The illness affected and killed almost a dozen in China while it managed to make it all the way to Washington state. We are hopeful this matter of life and death can be taken away from market focus as well as people’s livelihoods. The Chinese Yuan has overnight managed to recover after falling the most in five months yesterday.

For the most part, the buck is quiet with Sterling being the main exception, and Mexican Peso and Canadian Dollar are not suffering from a drop in oil prices to WTI Crude $58.0/barrel. We shall see what Bank of Canada brings to the wire at 10 AM, which also is a time for U.S. Existing Home Sales. Any market headlines on Davos will be monitored to see if it causes any waves.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The shared currency is not moving a ton, but it’s trending weakly as some political headaches come back from Italy. This morning we are seeing the reaction from Luigi Di Maio’s resignation from his role as leader of the Five-Star Movement political party, which has been the senior member of two governing coalitions since the last general election of 2018.

Regional elections this weekend forecast a decline in support for the party, one that has suffered losses in the legislative body either to being expelled or leaving the party behind. As the third-largest economy of the Union, Italy is a cause for concern with anemic indicators and a government that lacks but needs to find cohesion to reform banks and spend the budget under EU regulations. For now, our crystal ball on the Euro is not pointing at short-term appreciation.

GBP

Sterling jumped following the release of very impressive Business Optimism. The Confederation of British Industry’s (CBI) Business Optimism survey was expected to show a negative reading basically since pessimism has been ever-present since the Brexit referendum of 2016. In fact, today’s data is the most optimistic since the vote with its highest result.

The start of 2017 was the last time this survey was in the positive and plummeted dramatically since then. This recovery could be due to businesses foreseeing a Brexit endgame with Boris Johnson as Prime Minister, while also hoping that the Bank of England maintains an accommodative environment with the stimulus, perhaps even a rate cut. BOE meets next week on the 30th.

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