Sterling rises as private sector activity increases in January

It was a sea of green for stocks as the world economies moved past the threat presented by the coronavirus. In Asia-Pacific, the Shanghai, Nikkei, and ASX rose by 34, 234, and 28 points respectively. In Europe, the DAX, CAC, and Stoxx 50 index rose by 152, 50, and 35 points respectively. In the United States, futures tied to the Dow and S&P500 rose by 235 and 25 points respectively. This happened even as the disease continued to spread. The disease has infected more than 5,000 people and killed more than 500. Today, Hong Kong announced that it would quarantine all people from China. Cathay Pacific, the city’s flagship carrier, asked its employees to take unpaid leave. This is after the company slashed 90% of its flights to mainland China.

The sterling rose today after data from the Chartered Institute of Purchasing Managers showed an uptick in private sector activity. The composite manufacturing PMI rose to 53.3 from the previous 49.3. This was the fastest rate of growth in 16 months. It was the first time since August that the PMI number has been above 50. This growth was driven by an uptick in the services sector. Service PMI rose to 53.9 in January after rising to 50.0 in December. Growth was attributed to reduced uncertainties over Brexit. This number came a week after the BOE left rates unchanged and indicated that business activity had improved.

The EUR/USD pair declined after weak retail sales from the European Union. Data from Eurostat showed that the volume of retail trade declined by 1.6% in the euro area in December. It dropped by 1.3% in EU27, which was lower than the consensus estimates of 2.4%. On an MoM basis, retail sales declined by -1.6% after rising by 0.8% in the previous month. On a positive side, the composite PMI data rose from 50.9 to 51.3. The PMI has been rising after reaching a low of 50.9 in October last year. The services PMI declined slightly from 52.8 to 52.5. This was slightly better than the expected 52.2.

XAU/USD

The XAU/USD pair declined today as the market reacted to the rally in stocks. The VIX index, often known as the fear index, also declined by more than 2.5%. The pair dropped to a low of 1547, which is lower than this week’s high of 1595. The price is between the middle and the lower line of the Bollinger Bands. It is also below the 14-day and 28-day exponential moving averages. The RSI has been moving downwards. The pair may continue moving lower as tensions on coronavirus ease.

EUR/GBP

The EUR/GBP pair declined by almost 50 basis points to an intraday low of 0.8433. This was the lowest level since Monday. The price is along the lower line of the Bollinger Bands. The price is below the 14-day and 28-day exponential moving averages. The RSI, which has been declining, reached an oversold level of below 30. The pair’s downward momentum may continue. 

EUR/USD

The EUR/USD pair declined to an intraday low of 1.1013. This was the lowest level since Friday last week. The pair has been declining since Monday when it reached a high of 1.1097. The price is below the 14-day and 28-day Fractal Adaptive Moving Average. The RSI, on the other hand, reached the overbought level of 30. The signal and main line of the MACD have been declining. The pair may continue moving lower.