The U.S. Dollar picked up steam against the currencies of Europe and the U.K. while hitting the brakes against commodity-based currencies that recovered along with global markets from the coronavirus scare.
Overview
While the figure of 40 million people not being permitted is staggering, it looks like these efforts to quarantine are seen as positive developments towards eliminating the threat altogether. Oil prices continue to fall, the Davos Economic Forum comes to a close without impacting developments, and we are looking ahead to Purchasing Managers Index figures at 9:45AM.
PMIs elsewhere gave mixed signals with the British data surprising and the euro-zone disappointing. We see potential for the buck to maintain its January run as long as data does not surprise on the downside. Anything looking like recent missed estimates could create a sense in the market that there are slow elements worth considering and lowering the taper of quantitative easing may be appropriate. There are no Fed plans to cut rates nor return to adding QE, but recent liquidity injections suggest not all is fine in the financial environment.
What to Watch Today…
- Purchasing Managers’ Index Composite 9:45AM
Complete Economic Calendar can be found here.
EUR
The Euro found more evidence to lead its decline as PMI’s showed that January has been somewhat productive for the Euro-zone as a whole but strikes and political items like in France at end of 2019 negatively impacted the overall progress. It feels like the bigger economies are stunned and cannot fully manage labor strife nor legislative gridlock.
Germany at least showed less manufacturing contraction than expected and surprised with a bigger bump in Services than thought. Ultimately, Euro will rise only if a recovery is strong, yet we are not experiencing that momentum and the currency seems fragile. Regional election in Italy this weekend could put the spotlight, once again, on Italy’s obstacles to govern.
GBP
The Pound did not get a major boost, but the country’s PMI numbers gave hope that the Brexit-process-transition economy could be OK. Services sector reading was the best since September 2018 and January’s Composite expanded overall since Manufacturing is now at the cusp of being in positive expansionary territory. The Bank of England may delay moves to intervene, but not all is going to be rosy with the U.K. as the nation is expected to leave end of the month, which will create anxiety over what trade could possibly look like with the EU after.
