The risk was heavily sold into Friday’s Asian trading, as investors flocked to safety amid growing risks of a coronavirus pandemic and the resultant global recession. South Korea saw the largest virus outbreak outside China while the number of new cases rose across the globe.
The rout on the global equities extended, as the regional stock markets saw a blood bath alongside the US Treasury yields. The yields on the US bonds slumped on about 99% chances of a March rate cut by the US Federal Reserve (Fed). Meanwhile, the US equity futures shed nearly 1.50%.
The safe-haven yen rallied hard, as markets ran for cover, knocking-off USD/JPY to a three-week low below 109.00. Further, increased dovish Fed expectations weighed on the greenback and exacerbated the pain in the spot. Gold, on the other hand, traded modestly flat above $1640 levels while the Swiss franc traded better bid, having dragged USD/CHF to daily lows near 0.9670 region.
The Kiwi was the biggest loser across the fx board and reached the cheapest levels in four months near 0.6230 after New Zealand confirmed its first coronavirus case. AUD/USD refreshed an 11-year low at 0.6519 while USD/CAD hit the highest since June 2019 at 1.3448 amid a collapse in oil prices. Oil prices dived over 3% to a new 13-month low despite Saudi Arabia’s calls to push for 1m bpd oil output cut.
EUR/USD kept its range around 1.1000, having consolidated at three-week highs, with GBP/USD remained depressed below 1.2900 following the UK’s deadline for trade talks with the European Union (EU).
Main Topics in Asia
Tokyo area Feb core CPI+0.5% year/year – govt (Reuters poll: +0.6%)
Mainland China’s total number of coronavirus deaths reaches 2,788 as of end-Feb 27
Saudi Arabia is pushing to make a substantial cut in oil production when Opec meet – FT
US State Department: Very concerned about reported attack on Turkish soldiers in Syria – RTRS
South Korea confirms 256 more coronavirus cases, total 2022
New Zealand govt announces travel restrictions on Iran
US Vice President Pence: Risk coronavirus spread in the US remains low
Bears break $46.00 to refresh 13-month low, focus on $44.50
New Zealand confirms first coronavirus case, Kiwi slumps over 1%
Key Focus Ahead
The coronavirus outbreak-related headlines will continue to dominate the financial markets in the session ahead, as the economic releases will play second fiddle. From the EUR docket, the German Employment data and Preliminary Consumer Price Index (CPI) report hold relevance amid ongoing Brexit developments.
In the NA session, a fresh batch of US macro data will drop-in, including the Core PCE Price Index, Good Trade Balance and Michigan Consumer Sentiment among other minority reports. Also, in focus remains the Canadian Q4 GDP report and Baker Hughes US Oil Rig Count data due later in the American morning.
EUR/USD: Upside favored on rising Fed rate cut bets
With dovish Federal Reserve (Fed) expectations growing, the path of least resistance for EUR/USD appears to be on the higher side. German jobs and inflation data and the US Personal Spending number could influence the pair.
GBP/USD: On the back foot below 1.2900, Brexit talks in focus
GBP/USD registers three-day losing streak and trades below 1.2900 ahead of the London open. Tories ignore the EU’s “level playing field” by showing readiness for no-deal Brexit. Coronavirus risks continue to play out.
Chinese PMIs preview: Coronavirus-related plunge must be deep to push markets lower
Chinese PMIs are set to plunge in February amid coronavirus fears. A devastating drop in manufacturing figures may be needed to trigger another market downturn.
March Madness: 5 critical (mostly) coronavirus-linked events to rock markets in first week of March
Coronavirus news has been hogging the headlines and now crucial figures are coming. America’s “Super Tuesday” and the Non-Farm Payrolls are also eyed. All markets are set to rock in response to these events.