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Market dynamics: Global markets: virus fears outweigh strong US data

February 12, 2020

The US dollar surged against a basket of major currencies on Friday. The catalysts driving the greenback higher were concerns over the economic impact of the coronavirus, weaker-than-expected German industrial production and a better-than-expected US jobs report. The US dollar index gained 0.2% on Friday to finish at 98.70. For the week, it advanced by 0.8%. The dollar advanced after the report showed US nonfarm payrolls increased by 225,000 jobs in January. Meanwhile, economists had forecast payrolls would rise by 160,000 jobs. Meanwhile, the British pound fell dramatically against the US dollar after it was reported that EU officials are looking to amend MFID II, the set of regulations governing financial markets in Europe to remove concessions made to the UK. Sterling fell by almost 0.3% to close at 1.2893. However, following the sell-off, the pound was higher after the UK Markit Services PMI saw a surprise rise to 53.9 versus expectations for it to hold steady at 52.9 printed in December. Still, it failed to erase the weekly losses with a %1.5 decline week-on-week. Meanwhile, the euro fell to its lowest since October after German industrial production showed its biggest decline in a decade in December. The euro ended Friday’s session at 1.0945, posting an intraday 0.3% fall and a weekly decline of 0.7% The Federal Statistics Office said on Friday that Germany’s total industrial output fell by 3.5% in December, while economists had forecast a 0.1% increase in December. Compared with December 2018, industrial production contracted by 6.8%. Elsewhere in the crypto market, Bitcoin rallied to a five-month high on Friday and closed at 9,805.2. The number one cryptocurrency posted an intraday 0.6% rise. This was a 3.1% advance from previous Friday’s close. At current values, bitcoin has a total market capitalization of $178 billion. That’s an increase of nearly $50 billion since the start of 2020. Investors have maintained their bullish stance on Bitcoin. According to analysts, bitcoin’s eventual
return to $10,000 and beyond appears highly likely. Meanwhile, in commodities, oil closed out the fifth consecutive week of losses on Friday after Russia said it needed more time to decide whether to join any additional oil output cuts by OPEC. International-benchmark Brent crude oil settled down 0.84%, at $54.47 on Friday. Meanwhile, New York-traded West Texas Intermediate, US crude benchmark, closed down 1.2% at $50.32 a barrel. For the week, Brent fell by 6.3% and WTI lost 2.4%. Combined losses over five weeks stood at more than 22% for both benchmarks, leaving them in the bear market territory. Producers in OPEC+ are scheduled to meet in Vienna on March 5-6. We could see a sideways to lower trade until Russia makes its decision about making larger production cuts along with OPEC and its other allies. If Russia decides not to cut production, prices
could plummet. In the meantime, Gold prices held rock-steady
above the $1,500 level. Gold futures settled up 0.2%, at 1,568.60
per ounce, gaining for a third day in a row. But on a weekly basis, gold fell by 0.9%,
the first time since mid-December. According to market experts, gold is still
in demand as investors initially pile into the yellow metal for a hedge against the weakness
in global markets. Analysts forecast the $1,550-1,600 trading
range in gold to continue.

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