Daily Market Update

U.S. Dollar joins in rise of safe-havens, China uncertain

February 03, 2020

The U.S. Dollar advanced as China’s markets re-opened and the world continues to monitor the spread of the coronavirus.

Overview

After a long and crisis-filled holiday, China’s economic activity re-started while lockdowns on cities continue and borders with Hong Kong remain shut in most entry areas. In order to appease markets, The People’s Bank of China cut interest rates and injected cash into the financial system, thus depreciating the Yuan along with the rest of the commodity-based tender. Safe-haven Japanese Yen and the upward-moving Swiss Franc continue to see gains.

We shall see if there are any surprises in Construction Spending and also watch for the Institute of Supply Management’s measures for Manufacturing and New Orders in January. Earlier, Markit U.S. Manufacturing PMI came in with a slightly higher reading than expected, common now of low manufacturing production overall. For now, markets and the buck are trying to steady.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

EUR

The shared currency enjoyed a swing in its favor of half a percent to close last week and came out of its weakest level in over two months. Data for both January and December will be out this week giving us insight into Retail Sales and a Composite of Services. Today’s the Markit Euro-zone Manufacturing Purchasing Managers’ Index revealed less contraction than expected, thus showing that in January the effects of the trade-war uncertainty still impacted factory lines.

Many traders believe like we do that the economic growth for the Euro-area can improve since 2019 looks like the bottom. It might be a slow Q1 before we see major signs of true recovery, but Euro is sure to gain if improvement manifests itself.

GBP

The Pound is down after a weekend of celebrations for some and tears from others after the United Kingdom officially separated from the European Union at 11 PM on Friday.  The realization of what could be a tumultuous series of talks towards a trade agreement seems to have struck markets. Once again, the EU will bury its heels in order to have a transition that will be detailed, and new EU Commission President Ursula von der Leyen has explained that 11 months seems like an unrealistic timeline for everything to get appropriately done.

Additionally, Prime Minister Boris Johnson feels empowered to pursue a harder Brexit and has threatened to walk away rather than allow for EU demands to sing on to the bloc’s single market regulations and court rulings. The hardest part of co-existing in separation is starting now.

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