The Canadian dollar continued to sink overnight, weighed down by ongoing risk-aversion sentiment. The Wuhan coronavirus has claimed 170 lives as of January 30, a 28% increase from the day before. The number of confirmed cases sits at 7,711. World leaders are getting nervous. The Philippines and India announced their first coronavirus cases and Russia closed its borders with China. The World Health Organization is holding another meeting today to discuss if this outbreak warrants classification as a Global Health Emergency.
The coronavirus outbreak reverted to be the leading market focus after Wednesday’s Federal Open Market Committee meeting delivered as expected. The FOMC left interest rates and policy unchanged, which was universally expected. Policymakers tweaked the statement wording just enough to suggest the Fed was slightly dovish. The U.S. dollar drifted lower on the news but not against the Canadian dollar. The loonie traded lower on the back of sharply lower oil prices.
West Texas Intermediate (WTI) the North American benchmark fell from $53.32/barrel to a low of $51.90/barrel overnight. Prices were already under pressure after the Energy Information Administration said U.S. crude inventories rose 3.5 million barrels in the week ending January 24. A benign Fed and rising coronavirus fears fueled the selloff.
Increased risk aversion sentiment led to fresh demand for Swiss francs and Japanese yen. USD/JPY dropped from 109.05 to 108.81 and falling U.S. Treasury yields added to its woes.
The Australian and New Zealand dollars didn’t get any benefit from better than expected trade data. Both currency pairs were sold because China is their largest trading partner and concerns about a negative impact on China growth is impacting prices.
EUR/USD benefited from the FOMC statement and managed to increase its gains overnight. Prices are almost back to Monday’s opening levels although the gains are relatively shallow. The short-term technicals are bearish below $1.1040.
The Bank of England took centre stage in early Toronto trading and surprised about half of the traders when it left interest rates unchanged.
GBP/USD jumped to $1.3095 from $1.2974 overnight, as short GBP/USD trades got squeezed. Two dissenters voted for immediate rate cuts. The BoE also cut its growth forecast for 202, predicting GDP growth of 0.8% rather than the previous forecast of 1.2%.
U.S. Q4 Gross Domestic Product is due this morning and expected at 1.8%. Other US data includes Personal Consumption/Expenditures and weekly Jobless Claims. Bank of Canada Deputy Governor Paul Beaudry will talk about "Monetary policy and financial vulnerabilities" this afternoon.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
