China Virus fears and BoE under the spotlight

Demand spikes for safe-haven assets as investors growing anxious about the widening crisis related to China virus.

A key Bank of England interest-rate decision later this week follows a few fairly weak economic data over the last few weeks. But promising numbers such as UK PMI readings in recent days have cast doubt on the possibility of a rate cut by the BoE.

Britain will formally leave the European Union on Friday. Last week, the European Central Bank left its policy unchanged and launched a “strategic review” of its inflation goal and tools.

Further, Trump said he expects to be able to make a trade deal with Europe at the World Economic Forum in Davos. However, he threatened to impose high tariffs on imports of cars from the EU if the bloc doesn’t agree to a trade deal.

The EUR/USD posted slight losses for a fourth consecutive week. The pair ended the week, falling close to the symbolic 1.10 level.

GBP/USD showed slight gains last week. US-EU Taxation were at the heart of the debate at the World Economic Forum in Davos.

The AUD/USD lost ground for a fourth successive week and the pair closed below the 0.69 level close to 0.68 level. The Aussie continues to lose ground in January. The China virus outbreak pushed investors into safe-haven assets, while staying away from commodity-linked currencies such as the Australian dollar.

The Dollar/yen reversed directions last week, as the yen improved and dropped below the key 110 line. The Bank of Japan held its monetary policy meeting last week.

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LQDFXperts – The week ahead – China Virus fears and BoE under the spotlight

With some 35 million people locked down in the world’s second-largest economy, fears for global growth have hit markets worldwide and boosted safe-haven assets. A busy week with rate decisions in the US and in the UK is in store.

On Monday (27.01) the Ifo Institute for Economic Research will release German Ifo Business Climate. Business confidence has been improving and reached 96.3 in December, up from 95.0 a month earlier and expectations are positive.
On Tuesday (28.01) focus shifts on CB Consumer Confidence. After scoring 126.5 points in December, a rise to 128.2 is expected for January.
On Wednesday (29.01) investors will focus on the Fed Rate Decision. After three consecutive rate cuts, the world’s most powerful central bank signaled it would take a long pause.
On Thursday (30.01) all eyes are on the BoE rate decision which is due at 12:30. Weak data and dovish comments from members of the UK’s central bank hinted that a rate cut was unstoppable. But then a strong jobs report and optimistic PMI readings see the odds of a cut as 50-50.
Friday (31.01) brings November GDP figures for Canada. October figures disappointed traders with a squeeze of 0.1% and were one of the reasons for the Bank of Canada to open the door to cutting interest rates.

Follow this week’s economic calendar.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, CNBC, FX street