A flight to safety theme emerged in Asia this Thursday after the appetite for risk assets was killed by a surge in new coronavirus cases in China’s Hubei province. The epicenter reported 14,840 new cases after implementing a change to the counting method, as to account for the number of "clinically diagnosed" patients. The province also reported 242 new deaths, bringing their total number to 1,310.
Amid renewed coronavirus fears, the Asian stocks dropped in tandem with the US equity futures and Treasury yields while the safe-havens such as gold and the yen benefited the most.
Within the G10 currency basket, the Japanese yen bounced-off a three-week low vs. the greenback, having dragging USD/JPY back below the 110 mark. AUD/USD witnessed a sharp drop to 0.6708 lows, as markets overlooked the comments from the Reserve Bank of Australia (RBA) Governor Lowe, amid virus concerns. However, the spot managed to recover some ground, although the move lacked follow-through. The Kiwi also piggy-backed its OZ counterpart and traded with moderate losses around 0.6450 region. Meanwhile, USD/CAD traded modestly flat around 1.3250 amid a steady decline in oil prices.
Among the European currencies, the EUR/USD pair remained vulnerable near a 33-month low of 1.0865 reached a day before. The cable traded on the back foot near 1.2950 amid persistent broad US dollar strength, with the DXY stuck near a four-month high of 99.05.
Main topics in Asia
UK’s Javid: Frictionless trade with the EU would be ‘over’ – BBC
UK house prices jump by most since 2017 in post-election bounce - RICS
RBNZ’s Hawkesby: Have 'genuine neutral bias' on interest rates
S&P: Australia credit rating unlikely to be hit by coronavirus
RBA and BoC governors speaking: Mixed outlooks on economy and coronavirus
Coronavirus update killing risk assets, AUD/JPY -0.66% in a heartbeat
China should increase fiscal input to safeguard funds for epidemic prevention
Key focus ahead
There is nothing of note in terms of the economic events in the EUR calendar today, except for the final print of the German Consumer Price Index (CPI) due for release at 0700 GMT.
The revival of the coronavirus scare will continue to drive the broader market sentiment amid the lack of fundamentals from the UK docket as well.
The USD traders will eagerly await the US CPI report, due at 1330 GMT, for the next direction in light of the recent upsurge. Also, the second-tier US weekly Jobless Claims data will drop at the same time. Next of note remains the speech by the European Central Bank (ECB) policymaker Panetta for some near-term trading impulse.
EUR/USD: At 33-month low as traders dial up ECB rate cut bets
EUR/USD trades near 1.0865, the lowest level since May 2017, on dovish ECB expectations. The US dollar is attracting haven flows amid coronavirus fears. The downside may gather pace if the US Consumer Price Index (CPI) for January beats estimates by a big margin.
GBP/USD keeps it below 1.3000 amid UK politics, Brexit and coronavirus
GBP/USD justifies Wednesday’s bearish Doji while snapping the earlier rise. While pessimism surrounding Brexit and UK’s political drama have recently weighed on the quote, fresh risk of coronavirus seems to be the latest one to drag the pair to the south.
US Consumer Price Index January Preview: Inflation’s academic exercise
Monthly CPI rate expected to be unchanged, core to rise. Annual core and headline rates to climb slightly. Inflation is a sidelight to Fed policy focused on economic growth.
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