Virus a Global Emergency, BoE Stands Pat Ahead of Brexit

VIRUS A GLOBAL EMERGENCY, BUT WHO DIRECTOR SAYS MEASURES WILL “REVERSE THE TIDE”

The dollar traded mixed against the other G10 currencies on Thursday and during the Asian morning Friday. It gained against NZD, AUD, JPY and SEK in that order, while it lost a lot against GBP, and little versus CHF and EUR. The greenback was found virtually unchanged against CAD and NOK.

NZD/JPY — TECHNICAL OUTLOOK

NZD/JPY is trading below two short-term tentative downside lines: a slightly steeper one taken from the high of January 24th and a flatter one drawn from the high of January 17th. From the near-term perspective, as long as the rate stays below the steeper downside line, we will aim for lower areas straight away. But if the pair moves above that line, there could be a chance for a bit of a short-term correction before another leg of selling, hence why we will take a cautiously-bearish approach for now.

BOE DISAPPOINTS THOSE EXPECTING A CUT, UK LEAVES THE EU

The British pound was the main gainer among the G10s yesterday, coming under strong buying interest after the Bank of England decided to keep rates on hold. Remember that heading into the meeting, according to the CME MPC futures, there was a 45% chance for the Bank to deliver a rate cut. Even some of those who called for no action, said that it would be a close call, perhaps with more members joining the dissenters. The vote was again 7–2, with those voting for a decrease being the usual suspects: Haskel and Saunders.

GBP/CAD — TECHNICAL OUTLOOK

Yesterday, GBP/CAD had a strong uplift, which established a new high for January, at around 1.7334. From there, the pair made a small retracement back down, but still remains well above its short-term tentative upside support line drawn from the low January 20th. Although there is a possibility to see a bit more correction lower, if the rate continues to float above that upside line, we will stay positive, at least in the near term.

AS FOR THE REST OF TODAY’S EVENTS

During the European day, Eurozone’s preliminary CPIs for January and the preliminary GDP for Q4 are coming out. The headline CPI rate is expected to have ticked up to +1.4% yoy from +1.3%, bit the core rate is anticipated to have ticked down to +1.2% yoy from +1.3%. With regards to the 1st estimate of Q4 GDP, it is expected to show that the Eurozone economy grew 0.2% qoq, the same pace as in Q3.

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