The epidemic continues, Carney's last word, Brexit day

31 янв. 2020 г.

As we warned in our two previous reviews, investors relaxed clearly prematurely. Actually, the dynamics of underlying assets on Wednesday confirmed this. And the front pages of publications clearly indicate what investors should think and worry about now - the coronavirus epidemic.

Yesterday we wrote that its scale has already exceeded SARS, and the epidemic is still in full swing. The number of deaths has already approached two hundred, and the number of cases is clearly aimed at overcoming the 10,000 mark. Meanwhile, analysts are accelerating the theme of global recession and coronavirus as a trigger. We already wrote earlier that there are prerequisites for this and current events are really great for the role of a catalyst.

In general, our recommendations on buying safe-haven assets are still working and their decline on Tuesday was only a great opportunity for cheaper purchases.

But back to the events of yesterday. The Bank of England left the bet unchanged. Since the price of the pound at the start of the day partially took into account a possible decrease in the rate, its increase upon the announcement of the decision by the Central Bank was an attempt to exclude this component from the price equation. Actually, our recommendation to buy the pound worked at 100%.

For the current head of the Bank of England, Mark Carney, this was the last meeting. Already in March, he will be replaced by Andrew Bailey, who previously served as Executive Director of the British Financial Supervisory Authority.

Well, do not forget that today is Brexit day. On January 31, 2020, Great Britain leaves the European Union. Note that Brexit was and remains the main driver of pound movements. Moreover, it is precisely the “soft” scenario that is being implemented. Recall that when the markets were just thinking about the possibility of a “soft” Brexit, the pound was worth 1.41-1.43. From this position, its current prices look like great opportunities for medium-term purchases with very ambitious goals.

The US GDP for the fourth quarter was 2.1%. Overall expected as it was the final reading.