UK Pound higher on BREXIT DAY
Today is Brexit day – at 11pm tonight London time the UK leaves the EU after 3 ½ years of negotiations and political uncertainty. The UK pound is trading higher, but traders now await EU/UK trade negotiations scheduled to begin on March 3. The dollar edged lower even as the coronavirus spreads. Global equities are lower -- the S&P is opening lower by 0.44% -- and rotation into bonds has brought the US Treasury 10-year yield down to 1.55%. US economic data released this morning basically met expectations.
January 31, 2020
EUR/USD 1.1056 GBP/USD 1.3148 USD/CAD 1.3230 AUD/USD 0.6694 USD/JPY 108.8000 USD/CNH 6.9946 USD/ILS 3.4475 USD/MXN 18.8745 USD/CHF 0.9660 USD/INR 71.3550
The dollar index is slightly lower even as the coronavirus spreads, more recently into the UK and Russia. The World Health Organization declared the outbreak a global health emergency – cases have soared to nearly 10,000 globally. US economic data released this morning basically met expectations. Traders are in risk-off mode as they digest a bombardment of information – corporate earnings, central-bank decisions, economic data and virus news.GBP
The UK pound is higher on Brexit Day, when the UK officially leaves the EU. Currency traders are reacting positively to yesterday’s BoE decision to hold rates steady. Reports show that corporate buying and month-end flows are supporting the currency.EUR
The euro edged higher despite news that more eurozone economies continue to struggle. The French economy, the second largest in the eurozone, contracted by 0.1% in Q4; and French consumer spending and inflation also continued to decline. The eurozone is much more vulnerable to reduced global trade than is the US.CAD
The Canadian dollar continues to weaken, reaching a seven-week low versus the US dollar. It did manage to move off its lows on this morning’s news that Canada’s economy unexpectedly grew by 0.1% in November. Traders must wait until March 4 for the next BoC meeting to see if a rate cut is in order.ASIA/PACIFIC
Asian equities and currencies are under fire. More than a dozen Chinese provinces announced that they will remain shut next week, and according to Bloomberg calculations, they represent almost 69% of China’s GDP. The disruption to regional and global trade has economists expecting the coronavirus will hurt China’s economy over the near term more than the effect of the SARS virus in 2003.