The rebound in the Chinese stocks helped its Asian peers recover some ground, as investors resorted to bargain-hunting after the previous day’s rout but markets remained cautious as China’s deadly coronavirus claimed more lives outside the mainland as well.
Further, Beijing’s containment efforts combined with the policy support also reassured the markets, as the Chinese yuan reversed losses and looked to stabilize just under 7.00 vs. the US dollar. The improved risk sentiment was also reflected by a sharp uptick in the US equity futures and Treasury yields, which kept the greenback broadly underpinned near Monday’s high.
Meanwhile, the Aussie dollar emerged as the top performer across the G10 currencies, with AUD/USD having bounced to 0.6725 on Reserve Bank of Australia’s expected rates on hold decision. What lifted the Aussie was the fact that the RBA did not show a sense of urgency about bringing rates lower while it sounded relatively upbeat on the state of the domestic economy. The Kiwi benefited from the Aussie rally and flirted with daily highs near 0.6470.
The yen, on the other hand, saw a fresh round of selling that drove the USD/JPY pair closer towards the 109 handle amid risk-recovery. GBP/USD looked to stabilize above 1.3000 after almost 200-pips drop seen a day before after the UK PM Johnson laid out a hard-line approach to Brexit negotiations with the EU and re-ignited Hard Brexit fears. Meanwhile, the EUR/USD pair held steady above 1.1050.
On the commodities market, gold prices came under pressure below $1580 while oil prices jumped 1% amid a risk-on market profile.
Main Topics in Asia
Moody’s: Coronavirus outbreak will curb China's consumption
China's total number of confirmed coronavirus cases hits 20,438 as of end-Feb 3
China's Foreign Ministry: Hope US provides aid it has promised coronavirus outbreak soon
China Press urges investors not to panic over market slide on coronavirus outbreak
Hong Kong reports its first China coronavirus death, risk sentiment remains tepid
RBA leaves interest rate unchanged at 0.75%
RBA: Bushfires, coronavirus will temporarily weigh on growth
China’s Pres. Xi: The coronavirus is a “major test” for China - Xinhua
Key Focus Ahead
Markets look to a relatively quiet EUR calendar this Tuesday, in absence of any first-tier macro releases. Therefore, the UK Construction PMI data and Eurozone Producer Price Index (PPI) will be closely watched at 0930 GMT and 1000 GMT respectively for fresh trading incentives.
Meanwhile, the broader market sentiment and USD dynamics will continue to play a key role across the financial markets amid China’s coronavirus outbreak and its likely implications.
Moving on, the NA docket sees a slew of US economic data lined up for release. However, the US Factory Orders due at 1500 GMT will grab more market attention. Also, of note remains New Zealand’s (NZ) GDT Price Index and American Petroleum Institute’s (API) weekly Crude Oil Stock data ahead of the key NZ Employment data, dropping in at 2145 GMT.
EUR/USD holds below 100-day MA, focus on T-yields
EUR/USD is on the defensive below the 100-day average. With oil regaining poise, treasury yields are looking to resume the post-US ISM PMI rise. The uptick in US yields will likely keep the pair under pressure.
GBP/USD regains footing above 1.3000 with eyes on UK PMI
GBP/USD holds onto recovery gains above 1.3000 while heading into the London open on Tuesday. The pair recently benefited from the market’s risk reset as well as an absence of any negative catalysts concerning the UK.
WTI Probes 1-Year Low at $50.00 – Time for a Dead Cat Bounce?
Until authorities can provably contain the spread of coronavirus, oil traders may look at any near-term rally as a “dead cat bounce” and look to re-enter short positions on any bounce toward the $53.00-54.00 area.
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