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Month end washout

Month end washout


The outgoing Bank of England Governor, Mark Carney warned that coronavirus would negatively impact the economy but that it was too early to judge the impact. Sterling support was curbed by the comments but weaker global risk appetite had greater negative impact as confidence in the economic outlook continued to weaken. Given the open UK economy and current account deficit vulnerabilities, the Pound ceded ground. 

Month-end Euro demand undermined Sterling throughout the day and selling pressure peaked around the 4pm fix. The Euro strengthened sharply to peak near 1.1560 and the Dollar dipped below 1.2750. Trade talk concerns were actually overshadowed by the increase in UK coronavirus cases. As global risk appetite recovered, the Euro retreated back to 1.1630 and the Dollar back up above 1.2800.




The US Chicago PMI index recovered to 49.0 for February from 42.9 as production increased to an 8-month high. Orders remained in contraction, however, and employment also declined with important national ISM data due today.

St Louis Federal Reserve (Fed) President Bullard stated that it was too early to make a judgement, but that the Fed would be willing to act if there was a major US hit. Chair Powell also stated that the coronavirus poses evolving risks and that the Fed will use its tools and act as appropriate to support the economy. Futures markets priced in a 95% chance that the Fed would cut interest rates by 0.50% at the March policy meeting. Powell’s comments triggered further US selling with the Euro back near 1.1050 as US yields dropped. 

Expectations of an imminent Fed rate cut pushed the Euro to highs around 1.1075 this morning.




Friday’s German data releases had little overall impact with coronavirus and degrees of risk aversion continuing to dominate. Euro-zone equity markets continued to decline sharply and German yields declined to fresh 4-month lows. The Euro pushed to fresh 3-week highs near 1.1050 before retreating again ahead of the New York open as overall volatility increased

Expectations of an imminent Fed rate cut has pushed the Euro higher this morning and as of writing, currently trades at the 1.1080 against the Dollar. 



Data to watch

09:30 – GBP – Final Manufacturing PMI

15:00 – USD – ISM Manufacturing PMI


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