Forex Today: Aussie – strongest amid Asia risk-on; UK GDP, Powell’s speech in spotlight
The Asian equity markets tracked the record-run on Wall Street overnight while the sentiment remained upbeat amid fading China coronavirus fears and hopes of further fiscal and monetary stimulus from Beijing. A slowdown in new coronavirus cases and the factories resuming work in the world’s second-largest economy lifted the market mood.
Amongst the G10 currencies, the Australian dollar emerged as the strongest for the second straight session in Asia. The AUD/USD pair sustained the bounce above 0.6700, helped by stable Australian Business Conditions and risk-on. The safe-haven yen lost ground and sent USD/JPY closer to the 110 handle. The USD/JPY bulls cheered broad US dollar strength and gains in S&P 500 futures. Meanwhile, the traditional safe-haven, gold, snapped four-day winning streak and corrected below $1570.
The USD/CAD pair fell back below the 1.3300 level amid a risk-on rally in oil prices. The black jumped over 1% on short-covering. The EUR/USD pair meandered near a new four-month low reached in early trades at 1.0907 while the cable held on to the recovery mode above 1.2900 ahead of key event risks.
Main Topics in Asia
Coronavirus update: Death toll tops 1000
UK’s Javid to push for ‘permanent equivalence’ for City in Brexit talks – FT
US yield curve flirts with inversion on haven demand
US Pres. Trump: We should have a lower Fed rate right now
Australia: NAB business conditions weak but stable in January
White House: US Pres. Trump to visit India on Feb. 24-25 - Reuters
China’s HR Ministry: Overall jobs situation stable amid coronavirus outbreak
Coronavirus could trim 1 percentage point from China GDP growth – Govt think tank
Indonesia's Retail Sales drop 0.5% YoY in Dec, Rupiah keeps highs
UK shoppers still wary about spending in January - BRC
Officials: ECB review could be rushed to set an inflation goal by July – Bloomberg
Key Focus Ahead
Markets gear up for a busy economic calendar this Tuesday, as the UK Preliminary Q4 GDP and US Federal Reserve (Fed) Chairman Powell’s testimony will likely hog the limelight. The UK growth numbers are likely to hint towards a Bank of England (BOE) rate cut while investors will closely hear Powell’s take on the China coronavirus outbreak.
The UK data dump will drop in at 0930 GMT while at 1000 GMT, the European Commission will release its Economic Growth Forecasts.
The NA session lacks relevant macro data and therefore, the focus will remain on the European Central Bank (ECB) President Lagarde’s speech at 1400 GMT, which will be soon followed by Powell’s testimony before the Congress at 1500 GMT. The outgoing BOE Governor Carney’s address in the UK parliament will be also eyed at 1535 GMT.
Later in the American mid-morning, the speeches by BOE’s Haskel, Fed’s Quarles and Kashkari will also keep the traders busy amid incoming coronavirus updates.
EUR/USD: On a downward trajectory, Powell's testimony eyed
EUR/USD's recent slide from 1.1095 to 1.09 has put the bears in a commanding position. The pair formed a red "marubozu" candle last week, indicating a strong bearish sentiment. The focus will be on Fed Chairman Powell's take on coronavirus fallout.
GBP/USD: Modestly positive above 1.2900 ahead of UK GDP
GBP/USD holds the recovery above 1.2900 while heading into the London open. The UK data dump, Carney’s speech and Fed Chair Powell’s Testimony will be the key while coronavirus updates could keep filing the gaps.
UK GDP Preview: Stagnation may be good enough for pound bulls, three GBP/USD scenarios
Economists expect the UK to report stagnation in the fourth quarter of 2019. After several days under pressure, sterling may recover, especially if the economy ticks up. Outright recession risk may push the pound lower.
Federal Reserve Chairman Powell Testifies before Congress Preview: Pleased but wary
Federal Reserve Chairman Jerome Powell will testify before the House Committee on Financial Services in the Fed’s Semiannual Monetary Policy Report to Congress on Tuesday.
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