Chance of UK rate cut dips
The Pound remained firm, gaining support from speculation that the Bank of England would avoid an emergency cut in interest rates. The UK currency moved above 1.2900 on the Dollar, mainly on wider US losses, but failed to sustain an advance against the Euro.
Soon departing Bank of England Governor Mark Carney reiterated the BoE will take all necessary steps to support the economy and financial system. Monetary policy action would be co-ordinated with the Treasury.
EU Chief Negotiator Michel Barnier stated that difficulties surrounding the end of transition were being under-estimated, but an agreement was still possible despite strong disagreements. Sterling pushed above 1.2950 against the Dollar and is holding firm at market open and the Euro hovers near 1.1534 as risk conditions dominated.
US jobless claims declined slightly to 216,000 in the latest week from 219,000 previously. Challenger job cuts declined to below 57,000 for February and declined 4% for the first 2 months of 2020, although job cuts in the technology sector increased sharply.
The data releases overall showed no impact from the coronavirus outbreak. Interest rate expectations, however, continued to move sharply as fears over the US impact intensified. Futures markets shifted rapidly to indicate a 100% chance that the Federal Reserve (Fed) would cut rates again by a further 0.50% at the March 18th policy meeting. Lower yields and expectations of further rate cuts continued to sap dollar support with the currency index at fresh 8- week lows. The Euro against the Dollar strengthened to 2020 highs around 1.1225 and held a firm tone on Friday as a lack of yield continued to undermine the dollar.
The buying interest around the Euro remains strong as we start Fridays trading session with investors selling risk in favor of safe havens on reports the coronavirus is looking like a global pandemic. As of writing, the common currency is trading near 1.1233 against the Dollar, having hit a seven-month high of 1.1249.
The Euro has also been benefiting from risk-off and flight to safety, which isn’t surprising, given the ECB is running a negative interest rate policy and the single currency is backed by Eurozone’s large current account surplus. Looking further forward, market volatility is likely to remain high as the coronavirus pandemic is showing no signs of slowing down.
On the data front, German Factory Orders are scheduled for release.
Data to watch
13.30 – USD – Average Hourly Earnings
13.30 – USD – Non-Farm Payroll
13.30 – USD – Unemployment Rate