2020 has started with a few bumpy patches, but there seems to be a genuine desire to move on and get back to business. Unfortunately, there are a host of distractions that prevent a more constructive agenda. Some distractions originate from the ‘Tweeter in Chief’, Donald Trump, like the whirlwind tour of the Davos Economic Summit, where he attacked environmental poster girl, Greta Thunberg. Or the ludicrous side-show impeachment trial which is setting a new low watermark for US political discourse and almost certainly undermining ring leader Mitch McConnell’s credibility.
Some distractions, however, aren’t originating from the President. China’s most recent health crisis, in the guise of the SARS-like Coronavirus, is causing increasing concern as cases spread heading into this week’s travel-heavy Chinese Lunar New Year. There is also the latest James Bond-esque scandal involving the Saudi Royal Prince, Mohamed Bin Salman, who reportedly hacked the phone of Amazon founder and Washington Post owner, Jeff Bezos, in retaliation for critical coverage of the Saudi government. Despite all of this, markets are trading pretty steadily sideways while we await this afternoon’s European Central Bank press conference, where the bank’s governing body is expected to begin its year-long policy review.
Bottom line: The verdict is still out on a bottoming of global growth, but we’ve recently seen a few positive signs. German ZEW Surveys displayed a dramatic uptick, the Bank of Japan revised its growth forecasts higher, and Brexit looks likely to happen as planned on the 31st of January. Tomorrow will be a busy day for economic data which will have the potential to truly turn the narrative in a more positive direction.
Yesterday, Sterling traded higher against the US Dollar following a study by the CBI that UK manufacturers have become much more optimistic about the outlook since October. This led to a reduction in the probability of a Bank of England interest rate cut next week. The UK’s House of Lords also gave its seal of approval to Boris Johnson’s Brexit deal. The Pound’s rally against the Greenback faltered at a key retracement level around 1.3147, but a fundamental level of support remains at the 50-day moving average of 1.3052.
Sterling also extended gains against the common currency throughout yesterday’s trading session as the pair broke significantly above the 50-day moving average of 1.1756. Today is light in terms of UK data, so any meaningful price action could stem from news around the European Central Bank’s monetary policy meeting.
The pair traded in a tight range through yesterday’s session as markets feared the spread of China’s coronavirus would begin to affect the economic environment. Today, participants await the ECB’s interest rate decision and details on the strategic review – the first assessment of the central bank’s monetary policy in two decades.