Last Week’s FX and Economy Summary Feb 10, 2020

Coronavirus fears remain important

Global equity markets made net headway during the week amid hopes that the global coronavirus impact would be limited, especially with some reports that progress was being made in finding effective treatment and a vaccine.

There were, however, still important reservations over the outlook, especially as the number of deaths moved sharply higher to above 800.

There were further concerns over the impact on Asian economies given a slide in Chinese demand.  Inevitably, there will be an impact, but still a high degree of uncertainty.

Commodity currencies remained under pressure with notable losses for the Australian dollar which declined to a 10-year low against the US dollar.


Overall US data releases offered some encouragement over the US outlook. The ISM business confidence data for manufacturing returned to expansion with a 6-month high and the services sector also registered a net improvement.

The latest monthly jobs report recorded an increase in non-farm payrolls of 225,000 for January compared with census forecasts of around 160,000, although the total was boosted by weather conditions during the month.

What were the seasonal adjustment influences?

The Bureau of Labor Statisics (BLS) adjusts the jobs data every month for seasonal factors. In January many construction workers are usually unable to work because of adverse weather conditions and the BLS adjusts the total by adding in workers. This January was mild and fewer workers were laid off. The normal seasonal adjustment applied which artificially pushed up the total by around 40,000.

The underlying components were less favourable with unemployment increasing to 3.6% from 3.5% while the number of Americans saying they were in work declined on the month. Average hourly earnings increased 3.1% in the year. 

There was no change in interest rate expectations following the jobs data and the overall impact was limited.

Nevertheless, the data flow for the overall week, maintained expectations that the US would out-perform other major economies during 2020 which underpinned the dollar.


There was a significant upward revision to UK services-sector business confidence data for January and other surveys were also generally positive. Sterling was unable to make net headway given doubts whether the improvement would be sustained and be translated into stronger growth for the year.

Sterling was also undermined by unease over the outlook for UK/EU trade negotiations and concerns that the UK decision to allow limited Huawei access to 5G development could undermine attempts to forge a UK-US trade deal. GBP/USD traded at 3-month lows just below 1.2900.


The latest business confidence data recorded an upward revision for January. There were, however, concerns that the coronavirus would have an adverse impact on Euro-zone exports given the importance of Chinese demand.

The latest German industrial data was also much weaker than expected, further undermining confidence in the outlook as EUR/USD dipped below 1.1000. 


The Reserve Bank of Australia held interest rates at 0.75%, in line with consensus forecasts. The bank stated that it could cut rates again, but was wary over keep rates very low for a prolonged period with AUD/USD at 10-year lows. 

New Zealand labour-market data was mixed with wider concerns over the global outlook undermining the New Zealand dollar.

Canadian labour-market data was above market expectations with a January employment increase of over 30,000, but the Canadian dollar was undermined by a further slide in oil prices.

The Singapore dollar weakened sharply after the Monetary Authority of Singapore stated that there is room to ease policy through a currency decline given coronavirus concerns.

Tim Clayton

Tim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics.

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