Morning Market Review

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02/21/2020

EUR/USD

EUR shows a slight increase against USD during today's Asian session, consolidating near three-year lows, once again updated on Thursday. Market problems dominate over EUR, which has been showing the worst results since 2015. Negative macroeconomic statistics, the threat of a recession in the German economy, as well as the uncertain prospects for trade negotiations with the UK negatively affect the dynamics of the instrument. At the end of the week, investors expect the publication of statistics on business activity from Europe, but the forecasts again do not promise anything good for EUR. Manufacturing PMI in Germany may fall in February from 45.3 to 44.8 points; Markit Composite PMI may decline from 51.2 to 50.8 points. In addition, on Friday, traders expect the publication of January statistics on consumer inflation in the euro area.

GBP/USD

GBP demonstrates the development of a technical correction against USD during today's Asian session. The instrument adds about 0.08%, testing the level of 1.2890 for a breakout. The decline in the instrument is due to the growth of USD across the entire market, while optimism regarding the appointment of a new finance minister in the UK is gradually fading into the background. Moreover, GBP ignores quite good macroeconomic statistics coming out of the UK recently. On February 19, the market ignored strong data on consumer inflation. Yesterday's Retail Sales data only briefly hindered the decline in GBP. In January, Retail Sales grew by 0.9% MoM after a decline of 0.5% MoM in the previous month. Analysts had expected growth rate at 0.7% MoM. Today, investors are focused on statistics on business activity from Markit in the UK in February.

AUD/USD

AUD declines against USD during today's Asian session, updating record lows of March 2009. The decline in the instrument proceeds against the backdrop of the steady growth of USD, which looks more profitable against the backdrop of European problems and the uncertainty surrounding the pace of development of the world economy. Additional pressure on AUD is still exerted by the Australian labor market report for January published on Thursday. Employment Change in the country grew by 13.5K jobs after an increase of 28.7K over the past period. At the same time, the Unemployment Rate in January unexpectedly increased significantly from 5.1% to 5.3% with a forecast of 5.2%. Friday's data from Australia also cannot help the instrument recover. Commonwealth Bank’s Services PMI fell in February from 50.6 to 48.4 points, with growth forecast to 52.4 points. Composite PMI in February fell from 50.2 to 48.3 points.

USD/JPY

USD shows a correctional trend against JPY during today's Asian session, consolidating near the local highs of April 2019, which the instrument managed to update due to the steady growth of USD over the past two days. JPY remains under pressure amid talk of a possible recession in the Japanese economy. In addition, there is a marked increase in investor interest in risk in the market amid some stabilization of the situation with the spread of coronavirus. Japanese macroeconomic statistics released on Friday also do not provide any support for JPY. The National Consumer Price Index excluding Food and Energy rose by 0.8% YoY in January, slowing down from the previous value of 0.9% YoY. Jibun Bank's Manufacturing PMI fell from 48.8 to 47.6 points in February, with a positive forecast for growth to 49 points.

XAU/USD

Gold prices show steady growth during today's Asian session, updating record highs of February 2013. The quotes are supported by the continuing uncertainty surrounding the further spread of the coronavirus. Despite all the efforts of the Chinese authorities, as well as the relatively stable statistics of cases, investors are extremely sensitive to any new cases recorded outside of China. Additional support for gold is provided by a significant decrease in JPY, as some investors looking for a safe haven in Japanese currency are now more willing to invest in gold. Today investors are focused on the publication of American statistics on business activity from Markit for February. In addition, the markets expect the Fed representatives, such as Lael Brainard, Loretta Mester, and Richard Clarida to speak today.

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