Vaccine news pushes equities higher, dollar higher
News that China is testing an antiviral vaccine fueled a risk-on rally in financial markets. Global equities are higher, and bond yields and safe-haven currencies are trading lower. The US dollar is higher against most of its peer currencies, following this morning’s unexpectedly strong ADP Employment data.
February 5, 2020
EUR/USD 1.1004 GBP/USD 1.2979 USD/CAD 1.3297 AUD/USD 0.6758 USD/JPY 109.7700 USD/CNH 6.9706 USD/ILS 3.4437 USD/MXN 18.6042 USD/CHF 0.9737 USD/INR 71.2150
The dollar is higher with an overall risk-on sentiment in the markets. Higher US equities combined with upbeat ADP Employment data and a narrowing annual trade deficit increased demand for the dollar, pushing the dollar index to fresh YTD highs.GBP
Better-than-expected UK services PMI led traders to reduce odds of a Bank of England rate cut. The UK pound initially edged higher, but then dropped to $1.30 on news that the EU may enforce rules which would negatively impact London’s key banking sector.EUR
The euro is trading lower, approaching $1.10 once again. Traders are focused on the YTD low of $1.0993. Eurozone PMI’s came in mixed today: better-than-expected in Italy and the Eurozone Composite, worse than expected in Spain, and as expected in Germany.CAD
The USD/CAD reached 1.33 again, but then traded lower as oil prices rose back above $51 per barrel. Canada’s trade deficit narrowed in December, due mostly to higher oil exports.ASIA/PACIFIC
The People’s Bank of China set the USD/CNY reference rate lower and below the psychologically important 7 per dollar. Analysts are attempting to determine the negative impact of the coronavirus on China’s economic growth. The latest reports expect GDP Q1 growth to drop to 4.5% y/o/y, down from 6% in Q4 2019.