United States of America
USD is moderately weakening against EUR, is strengthening against GBP and has ambiguous dynamics against JPY.
Yesterday’s US Inflation Data was positive in general, since the consumer price index, excluding volatile indicators, rose from 0.1% to 0.2% for January, and on an annualized basis, contrary to market expectations, remained at the previous level of 2.3% without falling. Rental payments and the cost of clothing grew most of all.
Today investors are waiting for the publication of data on retail sales and industrial production in the United States. If the growth in retail sales is expected to remain the same – 0.3%, then industrial production may decline for the second time in a row, this time by another 0.2%, which may put pressure on the dollar.
EUR is strengthening against EUR and GBP but has ambiguous dynamics against JPY.
EUR is strengthening, despite poor data on Q4 2019 GDP of Germany and the EU. On a quarterly basis, the German economy stopped growing, the rate was 0.0%. The strengthening of the European economy slowed down from 0.3% to 0.1%. On an annualized basis, the German economy fell from 1.1% to 0.3% and the European – from 1.2% to 0.9%. Experts believe that the economy of the Eurozone countries did not fully recovered from the trade war between the United States and China and get under new pressure due to the outbreak of coronavirus in China. If the epidemic does not begin to subside in the near future, the European economy will continue to decline.
GBP is weakening today against its main competitors – JPY, EUR, and USD.
Probably, GBP is experiencing a technical pullback after a major strengthening the day before. The resignation of Chancellor Sajid Javid is still in the spotlight of investors. Experts believe that its true reason lies in the disagreement of Javid and Prime Minister Boris Johnson regarding the increase in government spending. The official who left the post advocated its every restriction. The new Chancellor is the former Chief Secretary to the Treasury Rishi Sunak. The market expects him to deviate from his predecessor's policies and increase budget spending, which should stimulate economic growth. The draft of the first UK budget after the country's exit from the EU should be submitted in March.
JPY has ambiguous dynamics against EUR and USD but is strengthening against GBP.
Investors are focused on the comments of Japanese officials. Bank of Japan spokesman Eiji Maeda said national Q4 2019 GDP could drop significantly due to poor overseas demand, as well as damage to consumption caused by higher sales taxes. Nevertheless, the official noted that the trend towards a moderate expansion of the Japanese economy continues but new risks should be monitored, including the outbreak of coronavirus in China. Economy Minister Yasutoshi Nishimura said the epidemic in China and unusually warm weather, which harms the sale of winter goods, are new factors that negatively affect the economy.
AUD today has ambiguous dynamics against its main competitors – JPY, EUR, GBP, and USD.
Due to a lack of significant economic releases, the movement of AUD is due to technical factors. Investors continue to monitor the situation in China, fearing that an outbreak of the virus will negatively affect the Australian economy. The ban on entry into Australian territory, which was extended until February 22 and is likely to be extended further, is more dangerous. If it operates until the end of March, then not only the tourism sector but also the education sector will suffer, since Chinese students will not be able to study in Australia.
Oil quotes are growing today.
Oil prices are supported by comments by US Secretary of Energy Dan Brouillette, who told Reuter that the coronavirus epidemic in China has little impact on energy markets and is unlikely to significantly affect black gold quotes, even if demand in China drops by 500K barrels per day. Meanwhile, Russia has not announced the decision upon the new reduction in oil production. According to Fitch, Russian companies are opposed to the reduction but a compromise may be to limit production not yet to 600K but to 300K barrels per day.