Forex news for North American trade on February 4, 2020:
- Gold down $24 to $1553
- WTI crude down 66-cents to $49.45
- US 10-year yields up 7.2 bps to 1.59%
- S&P 500 up 48 points to 3297
- AUD leads, JPY lags
It wasn’t the news in North America that drove the rally in risk on Tuesday as much as it was about what happened earlier in the day elsewhere.
China remains the dominant factor and a huge liquidity injection from the PBOC helped to improve sentiment there and Chinese stock markets gained 1.3%. In addition, the coronavirus numbers aren’t accelerating at a geometric pace and there are still no signs of local outbreaks outside of China.
In politics, the fiasco for the Democrats in Iowa along with low turnout bolstered Trump’s chances for re-election and his market-friendly policies.
The shape of the improvement in risk was a steady bid in equities and USD/JPY. The pair started at 109.00 and grinded up to 109.50 with most of the move while Europe was stiill open.
Cable dipped in Europe but recovered later and slowly climbed to 1.3031 as it recouped a small part of Monday’s beating.
The euro remained near the lows of the week and slumped below 1.1040 on selling into the fix with hardly a bounce later.
There was some divergence in commodity currencies as AUD and NZD strengthened while CAD muddled along on the total lack of a bounce in oil, in part due to speculation that OPEC+ won’t deliver on the rumored 500kbpd cut.