Pound (GBP) Nosedives as BoE Pledges to Ease Economic Impact of Coronavirus
The Pound (GBP) got off to a poor start this week, with GBP/EUR plummeting to a four-month low after the Bank of England (BoE) vowed take ‘all necessary steps’ to limit the economic impact of the coronavirus.
This was widely interpreted as a clear signal for some immediate monetary easing, with the odds of a rate cut in March subsequently jumping to over 60% according to CME’s BoEWatch tool.
Coming up, the UK’s construction PMI could offer some modest relief for the Pound today on hopes the recent slowdown in the construction sector will have shown signs of abating in February.
Euro (EUR) Surges on USD Weakness
The Euro (EUR) rallied sharply on Monday, propelled higher largely on the back of widespread weakness in the US Dollar (USD).
Also supporting the single currency were comments from European Central Bank (ECB) policymaker Pierre Wunsch who suggested the bank ‘should not rush to fire our remaining fiscal ammunition’.
However, the single currency may run out steam today as economists forecast the Eurozone’s consumer price index will report that inflation within the bloc slowed last month.
US Dollar (USD) Undermined by Fed Rate Cut Speculation
The US Dollar (USD) trended lower on Monday, coming under pressure as markets began pricing in expectations for rate cut of 50 basis point from the Federal Reserve this month.
Further limiting the appeal of the ‘Greenback’ was the publication of the ISM manufacturing PMI, which revealed the US factory sector only narrowly avoided contraction last month.
While Fed rate expectations may dominate market attention today, USD investors will keep one eye on the Democratic primaries, where a strong showing by Bernie Sanders on Super Tuesday could infuse some volatility into the US Dollar.
Canadian Dollar (CAD) Buoyed by Modest Oil Rally
The Canadian Dollar (CAD) ticked higher yesterday, with the oil-sensitive currency climbing in line with a modest rise in WIT crude prices on hopes for a supportive announcement from OPEC later this week.
Australian Dollar (AUD) Rallies Following RBA Rate Cut
The Australian Dollar (AUD) ticked higher overnight on Monday in the wake of the Reserve Bank of Australia’s (RBA) decision to cut interest rates to a new record low.
While the move caught markets by surprise it appeared to support the ‘Aussie’.
Looking ahead, the Australian Dollar could come under pressure later tonight if Australia’s latest GDP figures report a slowing of domestic growth in the last quarter of 2019.
New Zealand Dollar (NZD) Buoyed by RBA Decision
The New Zealand Dollar (NZD) also strengthened overnight, with the ‘Kiwi’ riding the ‘Aussie’s coattails higher following the RBA decision.
Data Releases
09:30 GBP Construction PMI (Feb)
10:00 EUR Unemployment Rate (Jan)
10:00 EUR Inflation Rate (Feb)
13:00 USD Super Tuesday
15:30 NZD Global Dairy Auction
00:30 AUD GDP (Q4)