Daily Currency Update

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The Greenback falls slightly amid bets that the Fed will send easing signals this week.

USD - United States Dollar

Fed Chair Jerome Powell testifies on Capitol Hill tomorrow and Wednesday to deliver his semi-annual policy report. Market participants will be eager to hear what he has to say and if he provides any hints of change in the so-far robust American economy (such as an easing signal in the next FOMC). What the U.S. dollar has not priced in until now is a probable economic disruption from the coronavirus, which for now seems to be helping the U.S. dollar. Still, today it showed some weakness, probably due to profit-taking action by market participants. Inflation numbers and the University of Michigan Sentiment will be released on Thursday and Friday, respectively, and both can either continue to fuel the rally in the U.S. dollar or the contrary.

According to the Commodity Futures Trading Commission, in the futures markets, there were more flows buying U.S. dollars and Japanese Yen, which reflects up to last Tuesday even though it was released last Friday. This indicates a clear tilt towards risk aversion.

Key Movers

The Euro increased slightly against the U.S. dollar by 0.04 percent after five sessions of losing. So far, the uncertainty of the coronavirus has lifted Asian currency volatility to its highest level in six months and the Greenback to a two-month high.

For now, it will be interesting to follow the AUD/JPY and NZD/JPY pairs to know about how risk is increasing or decreasing. Both pairs can be used as proxies for capturing potential volatility in the global currency market.

In Canada, housing starts increased to 213.2k in January versus an estimated number of 205k. The previous number last month was 196k. Month to month represented an increase of 8.8 percent. However, the Loonie is ignoring the good news and it is falling versus the U.S. dollar 0.11 percent. The reason for the Loonie’s weakness is crude oil’s price pointing towards more losses. Furthermore, significant speculative net-long Canadian currency futures positions fell to 18,563, the lowest since the week ending on January 3rd, according to the latest CFTC data.

Expected Ranges

USD/CAD: 1.3300 - 1.3340 ▲

EUR/USD: 1.0881 - 1.0943 ▼

GBP/USD: 1.2913 - 1.2953 ▲

AUD/USD: 0.6650 - 0.6690 ▼

NZD/USD: 0.6375 - 0.6445 ▼