By Peter Nurse
The us dollar continued to win over fans Wednesday, the coronavirus chinese continue to weigh on the economy in Asia, and Europe showing very few signs of growth while the u.s. economy shows a glimmer of light to be reasonably healthy.
At 10h05, EUR/USD was trading at 1,0804, after having pushed as low as 1,0786$ for the first time since April of 2017. The dollar index, which tracks the greenback against a basket of six other currencies, was $ 99,323, after having climbed up to 99,382, to highs not seen for more than two years. USD/JPY rose 0.3% to 110,19, GBP/USD was trading at 1,2985, while USD/CNY is trading around the level 7 physiologically important.
China, world’s second largest economy, is still struggling to revive its manufacturing sector, after having imposed severe travel restrictions to contain a virus that has emerged in the central province of Hubei at the end of last year.
Analysts polled by Reuters forecast that China’s economic growth could slow to 4.5% in the first quarter, against 6% in the previous quarter, but some forecasts have recently been revised downward in the range of 3%-4%.
At the same time, the growth of the GDP of Japan decreased the most rapidly in six years, according to data released on Monday, Hong Kong is heading toward its first recession consecutive annual ever recorded, and Singapore will post its biggest budget deficit since at least 1997, since it tries to sustain its economy.
The news in Europe are not much better. The sentiment index, German ZEW survey on Tuesday, the first read data after the coronavirus, has degenerated, while an important lobby for the industry said on Wednesday that the German economy, the largest in the euro zone, should not have to see a true real growth this year.
At the same time, the u.s. side, the investigation on the manufacturing sector of the Empire State was stronger than expected on Tuesday, reaching the highest level since the spring of last year, before the trade war US-China.
All of this indicates further gains for the greenback ahead, particularly against the euro.
“The bearish momentum of the pair thus remains intact so that the outperformance american growth and equity dominates in a context of possible declines in expectations for rate cuts, the Fed further strengthening the purchases of USD,” said analysts from Danske Bank, in a research note. “Technically, the movement opens the way for a possible test of 1.06 in the near future, which would exceed our goal to 6-12 months of 1.07.”
Wednesday will also feature the meeting of fixing the rate of the Turkish central bank. Since the governor Murat Uysal took up his duties in July, the monetary policy committee has agreed to a five-rate cuts in a row, bringing the benchmark rate of the Turkey to 11.25%, below zero when adjusted for inflation.
The majority of the analysts foresee a further decrease in between 25 basis points and 75 basis points, but some of the dissidents want to keep the key rate unchanged.
At 10.20 am, USD/TRY increasing by 0.1% more top 6,0657.