Pound (GBP) Benefits from Coronavirus Fears
The Pound (GBP) ticked higher on Tuesday, with the currency propelled higher by the weakness of some of its peers amid widespread panic over the coronavirus crisis.
However, this upside in Sterling was capped somewhat as the EU published its mandate on trade talks with the UK, once again urging the UK to maintain a level playing field with the EU.
In the absence of any notable UK economic data Brexit will remain in focus today, potentially continuing to limit any upside in GBP exchange rates.
Euro (EUR) Dented by Talk of Potential Recession in Italy
The Euro (EUR) fell yesterday, sliding in response to growing fears that Italy could slip into a recession this year as it wrestles with one of the largest outbreaks of coronavirus outside of China.
Italian Prime Minister Giuseppe Conte warned that the impact of the outbreak could be felt ‘very strongly’ on Italy’s economy.
Coming up, the focus for EUR investors today will be on a speech by European Central Bank (ECB) President Christine Lagarde.
Markets will be looking for any mention of coronavirus and whether it could impact the ECB’s outlook on monetary policy.
US Dollar (USD) Slips on Fed Rate Cut Speculation
The US Dollar (USD) trended lower on Tuesday, retreating from its recent highs as the odds that the Federal Reserve will cut interest rates in the first half of 2020 rose.
Markets are now pricing in a 50% chance of a rate cut by April as it’s thought the Fed will try and limit the impact on the US economy if it becomes a global pandemic.
Looking ahead, USD investors will be hoping the Fed policy makers speaking today will be able to offer more insight into the policy plans of the US central bank.
Canadian Dollar (CAD) Steady as Oil Prices Stabilise
The Canadian Dollar (CAD) traded in a narrow range through yesterday’s session, with the oil-sensitive ‘Loonie’ holding its ground as WTI crude stabilised at $51 a barrel after a near 5% slump at the start of the week.
Australian Dollar (AUD) Undermined by Poor Construction Figures
The Australian Dollar (AUD) continued to retreat overnight on Tuesday, pressured by coronavirus fears as well as some disappointing data pointing to a sharp decline in domestic construction activity in the last quarter of 2019.
New Zealand Dollar (NZD) Slips in Risk-Off Trade
The New Zealand Dollar (NZD) also remained on the defensive overnight, with investors steering clear of the risk-sensitive currency amid growing fears of a coronavirus pandemic.