Risk-recovery emerged as the main underlying theme in Asia this Wednesday, reflective of a rebound in the Asian stocks, Wall Street futures and Treasury yields. A slowdown in the number of new coronavirus cases in China’s Hubei province, the epicenter, and China’s containment efforts help subside the fears over the economic fallout of the virus outbreak.
The safe-haven yen was the weakest across the fx board, as USD/JPY topped the 110 level for the first time in five days. The Aussie also staged a comeback and battled the 0.67 handle while NZD/USD cheered the upbeat comments from the Reserve Bank of New Zealand (RBNZ), Governor Orr, amid improved risk tones.
Meanwhile, USD/CAD kept its overnight range trade intact around mid-1.32s just as the cable held onto the 1.30 barrier. EUR/USD, however, attempted an anemic bounce above 1.0800 from multi-year lows amid broad US dollar retreat. Despite the upside attempts, the bearish bias remains in place for the shared currency.
On commodity markets, gold prices on Comex consolidated near a six-week high of $1608.15 while oil prices (on NYMEX) jumped nearly 1% ahead of the US weekly crude supply report.
Main Topics in Asia
RBNZ: Both the economy and monetary policy are in a good position
British prime minister again displays a cosiness with Beijing – SCMP
WHO urges calm as China virus death toll reaches 2,000 – AFP
China’s NHC reports 1,749 new confirmed cases of coronavirus, 136 new deaths - Xinhua
Moody's says credit conditions in Asia will turn negative in 2020
S. Korea confirms 15 new coronavirus cases, Hong Kong reports 2nd death
Singapore’s FinMin Heng: SGD exchange rate has sufficient band to move as appropriate
S&P: Coronavirus will deliver a short-term blow to China’s Q1 economic growth
Sources: Japan govt to maintain view that economy is recovering despite virus risks - Reuters
China dumps US Treasuries for the sixth straight month in December
US Pres. Trump casts doubts over India trade deal ahead of visit
Key Focus Ahead
The main highlight in Wednesday’s EUR macro calendar is likely to be the UK Consumer Price Index (CPI) for January, due at 0930 GMT, with both the annualized headline and core figures seen accelerating while on a monthly basis, the CPI is likely to report deflation.
Also, in focus will remain the Eurozone Current Account and Construction Output data due later in the European trading. The Brexit-related headlines will be also eyed for fresh trading incentives.
The NA session offers a slew of US macro releases, including the Building Permits, Housing Starts, Producer Price Index (PPI), all of which will drop in at 1330 GMT. At the same time, the Canadian CPI data will be released.
Apart from the data and coronavirus-related updates, the speeches by the US Federal Reserve (Fed) officials Mester, Kaplan and Kashkari will remain in focus ahead of the key FOMC January meeting’s minutes, slated for release at 1900 GMT. Later in the American afternoon, the American Petroleum Institute’s (API) weekly Crude Stocks data will be published at 2130 GMT, soon followed by New Zealand’s PPI data release.
EUR/USD: Investors add bets to position for weakness in the Euro
EUR/USD is looking south and investors are adding bets to position for deeper losses in the common currency. The spot printed its worst daily close in nearly three years on Tuesday. Broader market sentiment and Eurozone data are likely to guide EUR/USD pair.
GBP/USD awaits UK Consumer Price Index for fresh moves
GBP/USD clings to 1.3000 ahead of the London open on Wednesday. The cable has been in a 10-pip choppy range between 1.2995 and 1.3005 since the start of the Asian session. The reason to blame could be traced from the upcoming UK Consumer Price Index (CPI) data.
UK inflation preview: How CPI may finally break the pound's prowess
UK inflation figures for January are set to show a rebound to 1.6%. GBP/USD has shown resilience to weak wage figures and worrying Brexit headlines. Downbeat CPI figures may be a breaking point for the pound.
January FOMC Minutes Preview: The economic comparisons accumulate
Unanimous vote for stable policy at January 28-29 meeting. Powell testimony in Congress lauds economy, labor market. Dollar stronger on economic comparison European Union.
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