US Dollar Accelerates as Coronavirus Fears Grip Markets

The US dollar trended higher through Monday’s trading session in response to growing concerns about the possible impact of the coronavirus outbreak in China.

Turning to the pound this morning, Sterling is trading slightly lower, with GBP/EUR drifting to €1.1818 and GBP/USD edging down to $1.3018. GBP/CAD has slipped to C$1.7177 while GBP/AUD and GBP/NZD have drifted to AU$1.9276 and NZ$1.9929 respectively.

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The US dollar will remain in focus today with the release of the latest US durable goods report.

What’s been happening?

The US dollar kicked off this week on the front foot, with demand for the safe-haven currency surging as markets were rocked by coronavirus fears.

Investors have grown increasingly alarmed as the death toll in China continues to climb and the virus spreads to other parts of the world, with markets fearing the impact it could have on the global economy.

Russ Mould, investment director at the stockbroker AJ Bell, commented on the mood in markets: ‘The market is back in panic mode about China’s coronavirus. Until there are signs the virus has been contained equities look set to be dogged by uncertainty.’

Meanwhile, the pound traded in a wide range on Monday as GBP investors remain split on whether or not the Bank of England (BoE) will go ahead with an interest rate cut this week.

Whilst some point to recent comments from Governor Mark Carney and other members of the BoE’s Monetary Policy Committee (MPC) as signs of an easing bias, some analysts remain unconvinced the bank will press the button given last week’s upbeat economic data.

Finally, the euro came under pressure yesterday as the single currency was undermined by the publication of an unexpected deterioration of German business confidence this month.

What’s coming up?

The latest US durable goods data will be in the spotlight today.

Economists forecast that this afternoon’s data will reveal a modest acceleration in goods orders last month, rebounding from a shock contraction in November and potentially allowing the US dollar to extend its recent gains.

In the UK, the only data of note is the Confederation of British Industry’s (CBI) latest distributive goods index, which is expected to show a slight improvement in retail activity this month.

However, given the focus on the BoE rate decision and Brexit at the end of the week, the CBI data may only have a limited impact on the pound.

In the absence of any notable Eurozone data to provide it with fresh impetus, the euro may continue to struggle today, particularly if USD exchange rates strengthen further.

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