Sterling soars as BOE leaves rates unchanged

It was a sea of red in global stocks as the market continued to worry about the spreading coronavirus. The number of infected people has been increasing. Chinese authorities say that more than 7,711 people have been infected. More than 135 people have died. The disease has also spread in other countries including Germany and the United States. The market is worried that the disease will have a negative impact on the global economy. This is because many global organizations have exposure to China. Some of these companies will be forced to either shut down or reduce production. For example, Imax has most of its movie stores in China. These stores could suffer as most people avoid crowded spaces. In Europe, the DAX and CAC fell by 130 and 75 points respectively. In the United States, futures tied to the Dow, Nasdaq, and S&P500 also fell. Meanwhile, the offshore renminbi declined below Rmb7 against the USD for the first time this year.

The euro was relatively unchanged today as the market received unemployment numbers from Germany and confidence numbers from the EU. In January, the unemployment change declined by 2k. This was better than the consensus estimates of 5k. The unemployment rate remained unchanged at 5.0%. The rate has remained at the current level since April last year. The number of unemployed increased from 2.227 million to 2.425 million. In the European Union, data from Economic and Financial Affairs showed that industrial sentiment improved slightly from -9.3 to -7.3. Services sentiment declined from 11.3 to 11.0. The consumer confidence remained unchanged at -8.1. The unemployment rate improved slightly from 7.5% to 7.4%. These numbers came a week after the ECB started a complete review of the region’s monetary policy.

The sterling rose sharply today as the market reacted to the last rate decision by Mark Carney. As was widely expected, the bank left interest rates unchanged at 0.75%. The decision was not unanimous as 2 members of the committee voted to slash interest rates. The bank dropped guidance for limited and gradual tightening. It also cut its outlook on supply increases and projected that inflation will remain below target until 2021. In the press conference, Mark Carney said that the members had started to see a significant improvement in the economy after the December election. He also predicted that the country was entering a decade of “potentially profound structural change.”

EUR/CHF

The EUR/CHF pair declined slightly to an intraday low of 1.0690 from a high of 1.0740. The pair has been on a downward trend since December 12, when it was trading at 1.1030. The price is below the 14-day and 28-day exponential moving averages. It is also below the white trendline shown below. The signal line of the MACD is along the neutral centreline. The pair may continue moving lower as it attempts to retest the previous low of 1.0662.

EUR/USD

The EUR/USD pair rose slightly today as the market continued to reflect on the FOMC decision. The pair reached an intraday high of 1.1027. This was slightly higher than yesterday’s low of 1.0990. The price is slightly above the shorter and longer-term exponential moving averages. The RSI has emerged from the oversold level of 23 to the current level of 63. The same is the case with the Stochastic oscillator, which has crossed the overbought line. The pair may continue moving higher as we move into February.

GBP/USD

The GBP/USD pair jumped after the hawkish interest rates decision by the BOE. The pair rose from an intraday low of 1.2977 to an intraday high of 1.3100. This high was slightly above the 61.8% Fibonacci Retracement level. As the price rose, it broke past the upper line of the symmetrical triangle shown below. The price is slightly above the short and medium-term moving averages. The pair may continue moving higher during the American session. Alternatively, it may pare back these gains as long traders take profit.