(24 February 2020)DAILY MARKET BRIEF 2:gold rallies on coronavirus anxieties
Gold rallied to a fresh seven-year high as risk-off capital poured into the yellow metal. The price of an ounce surged to $1680 for the first time
since January 2013. Technical indicators point that gold is overbought for at least three weeks now, but the risk appetite is so fragile that
even sky-high prices don’t discourage capital from feeding into the precious metal.
The US dollar eased on Friday, following an
unexpected and sharp fall in February flash PMI figures. The data pointed that activity among US businesses shrank this month, as the
coronavirus outbreak disrupted supply chains. But the greenback was better bid in Asia, as risk-off sentiment pushed investors to find
refuge in US dollar.
In Europe, however, the Eurozone PMI figures were mixed. French services surprised on the upside, while the
manufacturing unexpectedly slipped in the contraction territory. Shrinkage in German manufacturing surprisingly slowed, however. As
such the Eurozone flash manufacturing and services PMI both pointed at a surprise improvement in February, reviving hopes that the impact
of the coronavirus outbreak may not be as bad as many feared. Due later this morning, the Ifo report from Germany could hint that the business
climate further deteriorated in the Eurozone’s growth engine, and dash hopes.
The euro was better bid against the US dollar, but
sellers are tempted to jump in at 1.0830/1.0850 to strengthen their downside bets.
Cable met solid offers before the 1.30 mark, as the pound
made a positive attempt after the British manufacturing PMI advanced to a 10-month high on Friday. Meanwhile services PMI readjusted to the
downside, slightly but not alarmingly lower than expected, hinting that the post-election optimism eased on new Brexit challenges, but
the sentiment change has not been dramatic.
We have a slow day in terms of data flow. The risk-off trades will likely determine the mood
in Monday trading session.
By Ipek Ozkardeskaya
