Forex Today: Coronavirus fears spread and weigh on markets, Aussie surges, all eyes on the ECB

Yohay Elam FXStreet

Here is what you need to know on Thursday, January 23:

Chinese authorities have shut down access links to Wuhan, the large provincial capital where the coronavirus originates from. The news, coming ahead of the Chinese Lunar New Year, is weighing on markets. USD/JPY is on the back foot, trading well below 110.

The Australian dollar is rising after the land down under reported an increase of 28,900 jobs and its Unemployment Rate fell to 5.1%. The chances that the Reserve Bank of Australia cuts rates have diminished.

The European Central Bank is set to leave its interest rate unchanged. President Christine Lagarde may reveal details of the ECB's strategic review. The bank may consider allowing inflation to run at higher levels in order to compensate for past low prices.

See ECB Preview: Glass half green or a Lagarde drag on EUR/USD? Three scenarios

The Bank of Canada sent the loonie plunging after it expressed concern about the economy and revealed that it had considered cutting rates already now. Governor Stephen Poloz sounded somewhat more optimistic, but USD/CAD continues trading above 1.31.

Brexit: Prime Minister Boris Johnson "got Brexit done" after the House of Lords gave its final seal to the UK's exit at the end of the month. Johnson remained optimistic about clinching a deal on future relations with the EU by year-end.

The pound jumped on Wednesday after the UK CBI Industrial Trends figure beat expectations with -22. The indicator rarely impacts the pound. The final word related to the Bank of England's rate cut comes on Friday with Markit's Purchasing Managers' Indexes.

The loonie was also hit with falling oil prices. WTI is trading below $55 ahead of the release of Crude Oil Inventories later on Thursday.

Cryptocurrencies are gradually retreating with Bitcoin trading below $8,500.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD advances to three-month peak beyond 1.3600

GBP/USD extends its daily rally and trades at its highest level since mid-May above 1.3600. The US Treasury Department decision to double the sice of liquidity support buyback operations for longer-dated nominal coupon securitiez weighs heavily on the US Dollar and helps the pair push higher. Earlier in the day, the data from the UK showed that annual Consumer Price Index (CPI) inflation picked up to 2.9% in July, meeting estimates, while core CPI rose by 2.6% YoY in July versus 2.5% expected.

EUR/USD surges to 11-week high above 1.1650 after US Treasury announcement

EUR/USD gathers bullish momentum and trades at its highest level since early June above 1.1650 on Wednesday. The US Dollar stays under heavy bearish pressure after the US Treasury announced that it will increase the size of liquidity support buyback operations for longer-dated nominal coupon securities. Later in the day, investors will scrutinize FOMC Minutes for fresh clues on policy outlook.

Gold climbs above $4,500 as US Dollar, yields fall

Gold price rises to around $4,520 during the early Asian session on Thursday. The precious metal surges to the highest since early June amid the weakening US Dollar after the US Treasury Department stepped in to provide relief to bond markets.

Australia unemployment rate expected to hold at 4.4% in July

Australia will release the July monthly employment report on Thursday at 01:30 GMT. Ahead of the announcement, analysts anticipate a modest 15K increase in job creation, while the Unemployment Rate is expected to remain steady at 4.4%.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.