Ben Robson – The week of 3rd-7th February 2020

Last week, the Bank of England and the US FOMC both left interest rates unchanged. The caveat being that the developing scenario with respect to coronavirus and its impact on world growth may be a future factor in determining rates(downwards).

The first death from coronavirus outside of China was reported in The Philippines. Coronavirus cases have exceeded those of the previous SARS epidemic, albeit deaths from the virus are so far fewer. Markets across the world have suffered, encompassing worldwide equities (in particular- airline stocks) to certain commodities such as oil, and freight carrying charges. The virus and its progress will be front and centre of this week’s news.

As far as data is concerned, we have timely announcements on manufacturing from Canada and the US, services data from the US, an interest rate announcement from the Reserve Bank of Australia, and employment figures from New Zealand, the US and Canada. ECB president Lagarde is active and speaking in Frankfurt, Paris and Brussels, and RBA governor Lowe will a give his semi-annual testimony to a parliamentary committee.

On Monday, Canadian Manufacturing PMI for January is set to drop to 49.6 from last month’s 50.4. Conversely, US ISM manufacturing for January PMI is expected to rise to 48.5 from last month’s 47.2. On a relative basis, we might conclude that this may be positive for USD versus the Canadian dollar, and indeed the Canadian dollar spent much of last week on the back foot. Be mindful that Canadian GDP beat expectations last week, that oil prices are correlated with the Canadian dollar’s fortune and we have employment numbers from both the US and Canada on Friday.

On Tuesday, the focus turns to Australia and New Zealand. Australian interest rates are expected to remain unchanged at 0.75%. It’s probably too early for Coronavirus to have much bearing on the RBA panel’s thinking. Keep in mind that Australia is still coming to terms with the dreadful bush fires that have so affected the country. RBA governor Lowe will speak on Wednesday. I expect his speech to be quite dovish and also when he testifies to a parliamentary committee on Thursday.

The New Zealand employment situation is expected to have improved but unemployment is still expected to remain at 4.2%. There may be some trading opportunities in AUDNZD. For technical traders, support levels below 1.03 in AUDNZD seem to be in sight.

Also, on Tuesday, US President Trump will give his State of the Union address to the House of Representatives.
Aside from Governor Lowe’s speech on Wednesday, ECB president Lagarde will speak in Paris. She will speak in Brussels on Thursday. The main data event is US ISM services for January expected to creep up to 55.1 from December’s reading of 55.

The Senate will vote on several impeachment related matters. The likelihood is that no witnesses will be called, with the inevitable conclusion that the president will be acquitted.

On Friday, the US is expected to have added 160,000 new jobs, with the unemployment rate flat at 3.5%. Canada too is expected to add 20,000 new jobs, with the unemployment rate likely to increase to 5.7%.

Good Luck and Good Trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You Can Too.

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