By Peter Nurse
The us dollar remains sought-after on Thursday when the propagation of the coronavirus is deadly in China raises concerns. However, the pound sterling could be the currency to watch for when the Bank of England meets to decide its monetary policy.
At 10: 15 am, the future of the US Dollar Index, which tracks the greenback against a basket of other currencies, rose 0.04% to 97,857, trading near a two-month peak.
The greenback is the currency the best performing among the currencies of the G10 in January, the dollar index has risen 1.6% so far this month.
During the night, the National Commission of Health of China said that the total number of deaths confirmed had reached 170 on Wednesday evening, the number of patients infected approaching 8 000. Infections have been reported in at least 15 other countries, and in every province of mainland China.
This virus outbreak has led to the weakness of many emerging currencies as investors sought the safe-haven status of the dollar.
The british pound could be volatile Thursday, with some uncertainty surrounding the meeting of the Monetary Policy Committee of the Bank of England.
At 10.20 am, the GBP/USD fell 0.2% to 1,2997, and the EUR/GBP gained 0.3% to 0,8478.
At the beginning of the year, markets expected widely that the Bank of England to reduce interest rates at this meeting. A number of MPC members, including governor Mark Carney, have spoken publicly about the weakness of the Uk economy given the uncertainty surrounding the release of the highly controversial country of the European Union.
However, the economic data have since been generally more positive than expected. For example, the purchasing managers index of services – a measure of the health of the dominant sector of the country – is established to 50 in December, exceeding the expectations of 49.2.
“Despite a few publications of economic data that came out stronger than expected, we still expect that the BoE will reduce the discount rate by 25 bp,” said analysts from Danske Bank, in a research note.
“However, it is likely that this is tight, and this is also reflected in the market price, as investors assess a probability of 45% lower, leaving a certain amount of increase of EUR/GBP if we are right,” added the bank.