The U.S. Dollar returned to strengthening following some bad news over the reporting of the coronavirus cases, which revised showed a much larger number of infections.
Economically, this signifies a slowdown in activity and ultimately the potential for the world’s second-largest economy to significantly decelerate in terms of Gross Domestic Product growth. Naturally, the pendulum is once more swinging in favor of the buck, disallowing other commodity-based currencies from improving.
As the greenback enjoys multi-year highs in comparison to its major counterparts, the Pound presented the only challenge by climbing over half a percent. A shocking resignation by the Chancellor of the Exchequer, Sajid Javid, led to the positive market reaction as his replacement is expected to be a better medium for stimulating the economy.
Data-wise, we saw Consumer Price Index figures for the U.S. show an ongoing slow pace of inflationary expansion at just 0.1% for the month of January. None of this will have as much effect as headlines over the virus and its potential for causing contractions around the world.
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The Euro is moving around its worst level since April of 2017 as traders and economists are concerned that the end of 2019 gave recessionary signals prior to the coronavirus crisis. If the globe is to suffer throughout the year because we will gauge the damage by the inactivity from the spread scare, imagine how numbers will look for the Euro-bloc with already established contractions in Industrial Production and most measures, except Economic Confidence.
Along with the fact that Euro’s use as a carry-trade currency because of its non-existent interest rates has been lowering its value, some statements from European Central Bank officials indicated a willingness to look into adding further easing via any way necessary. Things are looking gloomy for the shared tender.
The Pound once again is moving the opposite way, gaining after initially losing this week after a surprise move in Prime Minister Boris Johnson’s cabinet. After days of banks wondering if London can achieve equivalence with European financial regulations in order to have an open market, it seems like pressure mounted against Javid, Chancellor of the Exchequer, who tried his best to defend the government’s position in various op-eds.
Additionally, Johnson is gearing a shake-up in staff and is expected to see some other changes. The PM is looking to add stimulus and be aggressive with spending in order to guarantee the country can grow in the midst of Brexit transitional uncertainty after he showed a tougher stance on EU negotiations. For now, it is perceived and treated as a Sterling positive.