Forex news from the European morning session - 3 February 2020
Headlines:
- China reportedly considers lowering 2020 growth expectations due to coronavirus hit
- UK PM Johnson: We will not engage in cutthroat race to the bottom on trade
- Barnier: We don't want UK divergence from EU rules to result in unfair competition
- Barnier: We must agree on specific, effective guarantees to ensure level playing field
- European Commission unveils draft mandate for upcoming negotiations with the UK
- OPEC+ said to be considering additional 500k bpd oil output cut due to virus impact
- UK January final manufacturing PMI 50.0 vs 49.8 prelim
- ECB's de Guindos: Fiscal policy has to play a role
- Hong Kong announces suspension of 10 out of 13 border crossings with China
- Germany January final manufacturing PMI 45.3 vs 45.2 prelim
- ECB's de Guindos: Inflation will hover at present levels over the next 12 months
- Hong Kong records first annual GDP decline since 2009
- Indonesia reportedly to suspend imports of food, beverages from China
- China says that preventing people from entering borders is unreasonable
- China says that some countries, especially US, have overreacted to the virus outbreak
- PBOC says that stock market plunge today is due to some irrational factors
- China's Shanghai Composite index closes down by 7.7%
Markets:
- AUD leads, GBP lags on the day
- European equities mildly higher; E-minis up 0.4%
- US 10-year yields up 3.2 bps to 1.539%
- Gold down 0.6% to $1,579.56
- WTI up 0.3% to $51.72
- Bitcoin down 0.1% to $9,345
The European morning saw coronavirus and UK-EU trade headlines keeping markets busy with the pound being the notable mover in the major currencies space.
Cable is down by over 1% on the day, falling from 1.3150-60 to 1.3100 in early trades before accelerating losses over post-Brexit trade worries to 1.3046 before bouncing a little.
The UK continues to set out that it wants to pursue a Canada-style agreement with no need for a more level playing field than the EU has with other countries, something that both sides currently don't quite see eye-to-eye on.
Meanwhile, coronavirus fears continue to keep markets gripped with Chinese equities falling by their most since 2015. The main stock indices in China fell by nearly 8% upon returning from the extended break since 24 January.
But even that is considered a "win" as Chinese officials managed the situation with a plethora of measures and that kept European markets more calm with US futures also keeping slightly higher alongside Treasury yields as well.
As such, USD/JPY sits a little higher around 108.50 after hitting highs of 108.70 in early trades with the likes of the aussie and kiwi also keeping mild gains on the day.
The dollar is keeping more firm as it trades higher against the pound and also the euro, reversing some of the action from month-end flows on the latter last Friday.
Other than that, oil also got a bit of a nudge higher amid speculation that OPEC+ and Saudi Arabia may be considering more output cuts amid the drag in prices and demand due to the coronavirus outbreak situation.
