News of the deadly coronavirus spread had the strongest impact on bidding
Meeting of the Bank of Japan
The spread of the deadly coronavirus strain
Contrary to expectations of many investors, last week the strongest influence on trading was not the results of central banks from G7 meetings, but the news about the spread of a new deadly strain of coronavirus. The information about people infected with the virus in China, USA, Japan, Thailand and South Korea seriously left the investors worried. Experts remembered the damage caused to the world economy by the SARS outbreak in 2003. Investors were cautious, so the trading on the main instruments were held in a fairly limited range.
The main event of the week for the foreign exchange market was the ECB meeting. The regulator left the interest rates unchanged, as expected. In her final statement, Christine Lagarde said that in order to achieve the inflation targets and further support the economy, the ECB will keep interest rates at the current or lower level throughout 2020. These statements by Lagarde weakened the position of the European currency. Many investors hoped for a tightening of monetary policy amid the publication of more optimistic macroeconomic statistics from the EU in recent months.
There were no surprises at the Bank of Japan meeting. The regulator kept the rates unchanged and once again confirmed its commitment to the implementation of ultra-soft monetary policy. USD/JPY reacted quite calmly to the meeting results. The situation at the stock exchanges and news about the coronavirus spread had a stronger impact on the yen.
Among the G7 currencies, the British pound looked the most confident against the dollar this week. GBP was able to strengthen on back of the positive data publication on the labor market and the ratification of the agreement on UK's exit from the EU by both houses of parliament.
Precious metals market
Gold was traded in a very narrow horizontal range all week. The quotes were supported by reports of the deadly coronavirus spreading beyond China. The US dollar was the deterrent for precious metals. A series of strong macroeconomic reports from the US contributed to strengthening the dollar index to 5-week highs.
The oil market ended the trading week with a decline of more than 5%. Investors reacted negatively to the news that a new strain of deadly coronavirus was spreading. Additional pressure on the price was exerted by IEA oversupply on the market statements and weak weekly industry statistics from the US.
The stock indices ended the trading week moving in different directions. Investors were cautious about an outbreak of the epidemic amid the lunar New Year celebrations in China and other countries in the Asian region.