What will the market do on this weekend leading up to the Lunar New Year? “Key Points on January 31 and Event Schedule”
Yesterday, the BOE policy rate announcement "Super Thursday" was in the spotlight, but unexpectedly it remained unchanged at 2–7.
The consensus was for a hold at 3–6, or a less than 50% chance of a cut.
Despite the unexpected result, the pound’s rise was limited, likely because the inflation report released simultaneously downgraded the economic outlook and the focus for the pound shifted from a rate cut to negotiations on the exit.
Additionally, the other focus was the WHO Emergency Committee meeting, which was postponed and announced a little after 4:30 a.m.
At the press conference, although a state of emergency was declared, it was a somewhat odd remarks that limits on trade and exchanges would not be imposed in response to this declaration.
There are criticisms that the remarks were somewhat protective of China.
Today is the end of the month, after the Spring Festival, the Shanghai market will reopen next week.
I expect position adjustments toward the weekend, so I want to be cautious.
◎ Today’s Highlights
1) Coronavirus Emergency Declaration
Yesterday, amid concerns about the spread of coronavirus, its economic impact, and the emergency declaration, global stock prices fell while the yen, franc, and emerging market currencies strengthened.
However, before the NY close, WHO announced an emergency declaration regarding coronavirus, and currencies and stocks rebounded.
Today, attention is whether this momentum will be carried forward or whether the rebound will be a correction and fall again.
Also, if actual damages (infections, deaths, etc.) appear, there is a risk of another risk-off move, so stay vigilant.
In addition, soon after concerns about the coronavirus arose, the Chinese market was closed for the Spring Festival.
Hong Kong, which reopened earlier, started with a sharp decline.
China will delay the closing and resume on the 3rd of the new week, and until then, we will watch how far the coronavirus is priced in, whether there will be further spread over the weekend, and the impact of the resumption on the market on Monday on a large fall.
There is information that China is considering providing liquidity to minimize the impact.
I want to ensure proper position adjustments over the weekend.
2) Economic Indicators
In Europe, the HICP (consumer price index) and GDP will be announced.
Germany’s HICP released yesterday slightly underperformed expectations but improved compared with the previous release, so the euro’s reaction was limited.
If today’s results come in below expectations, the euro may face downward pressure.
We should pay close attention to the releases.
Canada’s GDP will also be released.
The Canadian dollar has been edged lower by the drop in crude oil and risk-off selling of commodity currencies.
If results come in below expectations, the Canadian dollar could accelerate its decline.
Conversely, if results beat expectations, a rebound is possible.
3) Brexit Deadline
Today, the United Kingdom will exit the EU.
The separation has been approved by both the UK and the EU.
However, even after the exit, the transition period will begin and not much will change immediately, so the impact is expected to be limited.
From now on, negotiations on FTAs with various countries will receive attention.
In particular, recent attention is likely to be on US-UK talks.
President Obama said that if the UK leaves the EU, FTA negotiations would be left to the UK, but under President Trump, Secretary of State Pompeo said that trade talks with the UK would be at the front of the line.
However, the United States is asking to exclude Huawei from 5G related matters.
We are watching how this Huawei-related decision will affect the talks and whether the US-UK negotiations will progress.
If the US-UK trade talks reach an agreement, negotiations between the UK and EU could proceed more favorably for the UK.
That is why the US and Huawei are in focus.
◎ Today’s Event Schedule
Friday, January 31
Brexit Deadline
10:00 CNY China Manufacturing PMI
15:30 EUR France GDP
16:45 EUR France HICP (Consumer Price Index)
17:00 EUR Spain HICP (CPI)・GDP
19:00 EUR Euro Area HICP (CPI)・GDP
19:00 EURPado de Panetta, ECB Executive Board Member; Schnabel, ECB Executive Board Member; Mersch, ECB Executive Board Member speak
22:30 USD PCE deflator
22:30 CADCanada GDP
Saturday, February 1
Brexit Transition Period Begins
00:00 USD University of Michigan Consumer Confidence Index
03:00 USD Baker Hughes Rig Count
