USD dominant as markets looks for good virus news
JANUARY 28, 2020
The U.S. Dollar kept gaining ground against its peers in the majors and emerging market currencies as traders keep holding on to USD positions in the midst of risk-aversion.
However, today may mark the beginning of a more controlled mood around global markets since China is pledging to provide liquidity to markets to give relief and expects markets to open on Monday. While the death toll has risen, strong measures to prevent travel and spread are underway. The Hang Seng Index in Hong Kong recuperated some value as stocks here also look to start finding a recovery path.
Nevertheless, when there is a physical threat or crisis, it is hard to escape the buck’s safety and it is dominating, except against Mexican Peso. The currency seems to be the only one benefiting from a return to green in the price of oil. Durable Good Orders in the U.S. for December come with mixed numbers as it shows an expansion of 2.4% when it includes transportation expenses, yet it registers as a contraction when excluding transportation at (-0.1%).
This measure of long-term investment and spending has been mostly in negative territory since the last quarter of 2018 and could eventually put downward pressure on the greenback’s value. For now, next Monday is eagerly in our sights as hopefully this virus and its negative effects can be managed and eventually eliminated.
What to Watch Today…
- Consumer Confidence 10 AM
Complete Economic Calendar can be found here.
The Euro seems to be dwindling further as pessimism seems to be taking a hold of the economic outlook. While the government in Italy is now more stable and trying to spend money to push growth, that same fiscal spirit may be fading in France. In order to comply with Brussels, the French will need to work on decreasing their budget deficit, hoping to decrease it by 0.6% annually.
A much-needed spending package to appease protesters striking against the government at the end of 2018 had a positive effect on household income. Unfortunately, with debt near 100.0% of Gross Domestic Product and the deficit expected to break beyond the 3.0% limit of GDP mandated by the EU, there is little space to maneuver. France is the second-largest economy of the union, but just like Italy, it does not have the surplus that Germany counts with. Our Euro forecasts are taking a bit of a hit.
The Pound is looking feeble ahead of imperative events for the year ahead in the Bank of England meeting Thursday and the Brexit separation Friday. There is a lot of concern that many sectors of the economy on both sides may not be fully prepared for talking trade as separate entities, with fisheries and water usage among the biggest worries.
Additionally, chances of a cut to the interest rate stood at 52.2% for the BOE meeting because Monetary Policy Committee members have hinted at the need to reverse the current slowdown and heading into the unprecedented territory in negotiations with the EU to prevent a no-deal scenario. We will be giving our thoughts on Brexit Friday as the world reacts.