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Fundamental Forex Analysis

Yen gains despite positive equities, coronavirus risks loom

Forex today in Asia was a quiet affair this Thursday, as markets were relatively calmer, with the risk-off action in the region’s equities following a bounce in the US stocks overnight.

Former US Vice President Biden’s strong win in the Democratic nomination campaign and Congress’s approval of an $8.3 billion coronavirus response package lifted the sentiment on Wall Street.

However, the sentiment remained tepid amid a rising number of coronavirus cases in China and internationally, as markets assessed the effectiveness of the global monetary and fiscal easing to battle the negative economic impact of the virus outbreak.

Within the G10 currency markets, the anti-risk yen gained amid a drop in the US equity futures, as USD/JPY dropped to near the 107.25 region. However, the losses were cushioned by the recovery in the US Treasury yields and positive Asian equities.

The Aussie, on the other hand, attempted a tepid bounce on the 0.66 handle following upbeat Australian Trade data. The Kiwi advanced and briefly regained the 0.6300 level despite the increased RBNZ rate cut calls. The USD/CAD pair posted small gains and flirted around 1.3400, as the Canadian dollar ignored the rebound in oil prices amid the Bank of Canada (BOC) 50bps rate cut.

Among the European currencies, EUR/USD stuck to tight trading ranges below 1.1150 while the cable consolidated below 1.2900. The Swiss franc gained slightly vs. the greenback but USD/CHF managed to hold above 0.9550.  Meanwhile, the safe-haven, gold, tried hard to rise above the 1640 barrier.

Main topics in Asia

Australia Treasury Secretary Kennedy: Coronavirus to cost Australian GDP “at least” 0.5% – The Guardian

Fed’s Bullard: A barrier to cutting rates again in March is the action just taken

US Senate Grassley says sees a chance of ‘getting some results’ in trade talks with EU

California governor declares state of emergency over coronavirus

China reports 139 additional coronavirus cases March 4

Australia Jan balance goods/svcs A$+5,210 mln, s/adj (Reuters poll: A$+4,800 mln)

US lawmakers seek to step up pressure on UK to reverse huawei 5G decisions – Reuters

South Korea confirms 438 new coronavirus cases, 3 new deaths

Australian PM Morrison extends travel ban on China, Iran and South Korea

US Pres. Trump: Congress has agreed to provide $8 bn to fight Coronavirus, great news

S. Korea’s FinMin calls for global policy coordination to counter coronavirus risks

Three-month HIBOR hits two-year low

Key focus ahead        

There is nothing of note, in terms of the economic news, from the EUR calendar today. Therefore, the broader market sentiment will be closely followed amid incoming coronavirus-related updated globally.

Data-wise, attention turns towards the US docket, with the weekly Jobless Claims, Unit Labor Cost and Factory Orders up for grabs. In the American afternoon, the speeches by the Bank of England (BOE) outgoing Governor Carney and BOC Chief Poloz will hog the limelight at 1700 GMT and 1745 GMT respectively.

Also, in focus remains OPEC Vienna meeting, starting today, to discuss the deepening of the oil output cuts, in order to stabilize the oil markets amid the virus crisis.

EUR/USD snaps four-day winning run, remains vulnerable to risk reset

EUR/USD fell by 0.32% on Wednesday, ending the four-day winning streak and could suffer losses for the second day if the risk recovery in the financial markets gathers steam. The focus shifts to the US labor market data due later in the NA session.

GBP/USD: Buyers aim for 1.2900 with eyes on BOE Governor Mark Carney Speech

GBP/USD remains positive for the third day in a row. BOE’s incoming Governor Bailey raised doubts on further rate cuts, Carney showed readiness to avail all options earlier. Speech from BOE Governor Carney, Brexit/Coronavirus headlines will be the key.

Biden, Equities, the Fed, Treasuries and the Virus: Is anything missing?

Biden primary victory boosts equities and longer Treasury rates. US economic data proves hardy and better than expected. Federal Reserve rate cut aids stock rally.

3 Reasons Why Risk is Back but its Not Time to Buy

The volatility in the market is a reflection of sentiment flipping between hope and fear. More specifically the hope that the virus can be contained quickly and the fear that it won’t. 

 

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