The Pound has been, by a fair margin, the currency paying the most dividends for those with long-side exposure ahead of next week’s BoE policy meeting. Price action, which in the case of the Pound, has been rather constructive this week, goes a long way to decipher the true intentions of the market, diminishing the risk of marrying you to a bias just because the hype as of late it’s been that the BOE may lower rates next week. Well, it turns out, the market had clearly other intentions, aided by the highest quarterly business optimism among UK factories (UK CBI report) since April 2014. The Aussie is another currency flying high after a solid jobs report in Australia even if remains at the very tail of performing currencies in January. Again, such behavior, may have defied logic if one had been fixated in the US-China trade deal as the catalyst for higher prices as opposed to price action and the monitoring of the AUD index, which told us a different story. The Swissy, meanwhile, is a currency that just keeps on giving those those committed to buy the dips in what’s, together with the USD, the top performing currency this month. In stark contrast, the Canadian Dollar was completely annihilated by market forces as the BOC did a 180-degree turnaround on its monetary policy stance, openly recognizing that lower rates are back on the table for the next few months. In response, the CAD saw one-way transit flows. The Euro is the currency to shift the focus towards in the next 24h, as the ECB is up next. As I argue in today’s report, watch out for some type of hawkish surprise by the CB, even if just at the margin. The Yen, amid a mixed-bag of risk dynamics, with US equities and global bonds in stand-by, also portrays choppy price action amid a short-term correction of its bear tendencies. China’s efforts to contain the coronavirus has also contributed to appease market fears even if the situation is still fluid, with the WHO to decide today if the crisis is declared an international emergency. Lastly, the Kiwi is going nowhere fast, with an absence of fundamental drivers as of late.
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