Forex news for New York trade on January 31, 2020:
- U Mich January final consumer sentiment 99.8 vs 99.1 expected
- Canada November GDP +0.1% m/m vs 0.0% expected
- US personal spending for December 0.3% versus 0.3% estimate
- China-US flights to be restricted to 7 airports starting Sunday
- Trump puts visa restrictions on six countries
- Trump to hold State of the Union on Feb 4, will urge action on health care
- Panama canal authority says vessels arriving via infected countries must report
- Baker Hughes oil rig count 675 verse 676 last week
- Fed's Clarida: US economy is in a good place, inflation is stable
- Lancet study says Wuhan coronavirus cases were at 75,800 as of Jan 25
- CFTC commitments of traders: EUR shorts increase.
Markets:
- Gold up $13.50 to $1587
- WTI crude down 53-cents to $51.61
- S&P 500 down 58 points to 3225
- US 10-year yields down 7.7 bps to 1.51%
- JPY leads, AUD lags
The ebb and flow of the risk trade is tough to predict at the moment. There wasn't anything particularly new or troubling in the coronavirus story today but we hit some kind of tipping point and risk trades wilted.
It didn't start out that way with the S&P 500 opening down 7 points and economic data having little effect. From there it slowly fell apart, perhaps on fear about what might come out over the weekend.
Part of the reason is that bonds continue to send a negative signal. All the dips in bonds have been bought aggressively this week and US 10-year yields are now below Fed funds at just 1.50%. The 30-year also dipped below 2% on Friday.
USD/JPY is the loser as yield fall and the pair sank 60 pips. The low was at the London fix but we barely bounced at any point afterwards.
EUR/USD was the beneficiary of some month-end flows, especially around the fixing but there's also a case for unwinds of euro-funded carry trades, similar to the yen. It posted an impressive day, climbing 63 pips against the dollar and matching the yen.
Today was Brexit day in the UK and while that was priced in a long time ago, it was a politically significant event. The pound was higher and that will surely lead to some saying the exit was the reason but the BOE's surprisingly hawkish stance is a bigger part of the equation.
Commodity currencies struggled once again but AUD and NZD held the Asian lows against the dollar. However there were marginal new lows (which are three-month lows) against the yen. The Canadian dollar was under more pressure despite a better GDP print. Some of that was the continued fall in oil, which touched the lowest since early October.
Have a great weekend and thanks to everyone who sent us tips and news this week, especially our friends in China. Next week should be a rollercoaster with Chinese markets set to reopen.
