- China reports better-than-expected January non-manufacturing PMI.
- Epidemic’s economic impact expected may be short-lived.
- Pound could rise further as BOE rate cut expectations wane.
Asian stocks are set to break a run of six consecutive days of declines, having been buffeted by coronavirus outbreak concerns in recent weeks. China’s better-than-expected expansion in its January non-manufacturing PMI, along with the concerted efforts by the authorities to contain the viral outbreak could help push back against some of the fears surrounding the epidemic’s impact on the world’s second largest economy.
However, considering the expected decline in production, dampened retail activities, as well as travel restrictions, the cautionary mood over the economic outlook appears warranted for the time being. Recent gains in risky assets could prove fleeting and investors would do well to remain vigilant in light of the epidemic. With the World Health Organization having declared the outbreak a global health emergency, along with headlines about the rising death toll and more confirmed cases around the world, the risk environment across Asia and in the emerging-markets universe is expected to fluctuate in the near-term.
GBP/USD surges after BOE refrains from rate cut
The Pound is now testing the 1.31 resistance level against the US Dollar, after the Bank of England chose to keep its benchmark interest rate at 0.75 percent at Mark Carney’s final rate decision as BOE Governor. Policymakers shattered expectations of a rate cut, highlighting the sharp rebound in the post-election economic data, including PMI prints and rising business sentiment.
Following the BOE’s latest decision, markets are now expecting UK interest rates to be maintained at the current level at least through the first quarter. Such expectations may serve as a steadier platform for the Pound to move higher against the US Dollar, aided by further signs of a turnaround in the UK economy and the diminished Brexit risks over the near-term.
