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Fundamental Forex Analysis

Kiwi flies on hawkish RBNZ; slowdown in new China coronavirus cases boosts risk

The risk-on sentiment extended into Asia this Wednesday, as fears over China coronavirus receded after the country’s National Health Commission (NHC) reported a slowdown in the number of new virus cases. Meanwhile, China’s aviation regulator hoped that countries lift the virus-related travel restrictions at the earliest.

The star-performer across the G10 fx space was the Kiwi dollar, as it took a flight on the Reserve Bank of New Zealand’s (RBNZ) hawkish rates on-hold decision. The central bank forecasted no rate cut this year unless the virus outbreak negatively affects the economy. The NZD/USD pair jumped over 1% to hit a four-day high at 0.6478 following the RBNZ events. The Aussie caught a fresh bid-wave in tandem with its OZ neighbour and rose to 0.6738 highs. The USD/JPY pair remained underpinned by the gains in S&P 500 futures and Asian equities while a rebound in the US Treasury yields also helped the spot head back towards the 110 handle.

Among the European currencies, the EUR/USD pair held steady above the 1.0900 levels, having found some respite from Fed Chair Powell’s induced retreat in the US dollar across the board. Meanwhile, the cable traded better bid above 1.2950 ahead of the UK Autumn Budget statement.

On commodity markets, oil prices rallied over 1.5% amid risk-on while gold futures on Comex remained pressured near $1570.

Main Topics in Asia

S&P: Coronavirus will trim a 0.3 percentage point from global GDP growth in 2020

US Pres. Trump: Would sign Indian trade pact if it was right

Coronavirus update: New cases from Hubei linger, death toll crosses 1,110

A ‘hawkish’ RBNZ leaves OCR on hold at 1.0%, NZD jumps

RBNZ’s Orr: Confident around fiscal spending will shift burden of monetary policy

Senior IMF Official: Too premature to make assessment on quantitative impact of coronavirus outbreak on Asian economies

WH Adviser O’Brien: China purchases of US agricultural products to be impacted by coronavirus

RBNZ’s Hawkesby: “Take comfort” from rise in inflation expectations

China should strive to stabilize 2020 growth at about 5% by raising deficit-to-GDP ratio above 3% – China Press

Indonesia-Australia partnership pact a strategic move – The Star

China’s think tank economist: GDP goal on track despite virus impact

Key Focus Ahead       

After an eventful Tuesday’s economic calendar, Wednesday’s docket remains relatively light, in absence of first-tier macro data releases on both sides of Atlantic. The EUR, GBP traders look forward to the European Central Bank (ECB) Chief Economist Lane’s speech, at 0950 GMT, and Eurozone Industrial Production data lined up for release at 1000 GMT.

The UK docket remains data-empty and hence, the Brexit-related headlines will continue to play out ahead of the UK Autumn Forecast Statement.

The NA session sees the day 2 of the US Federal Reserve (US) Chairman Powell’s testimony, today before the Senate Banking Committee. Also, in focus will be the Fed Official Harker’s speech and EIA weekly US Crude Stocks Change data due at 1530 GMT.  

EUR/USD holds above 1.09, focus on risk assets

EUR/USD is holding above 1.0900, having found takers below the psychological support on Tuesday. Fed Chair Powell’s upbeat comments likely weakened the haven demand for US dollar. Notable bounce may remain elusive if the Eurozone data prints below estimates. 

GBP/USD awaits UK Autumn Budget to regain 1.3000

GBP/USD buyers await fresh clues to extend the two-day winning streak. The EU keeps threatening, UK responds but the coronavirus improves risk-tone. Fed Chair Powell’s testimony, Brexit headlines will also have their impact on the pair.

When forex volatility is low, carry is king – four currency pairs to consider

Volatility in forex markets remains depressed amid ample liquidity. The carry trade provides opportunities for those with patience. CAD/CHF, USD/CHF, EUR/CAD, and even EUR/USD serve as potential positions.

 

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