The Asian investors witnessed a shift in the risk perception after the Chinese central bank cut the Loan Prime Rate (LPR), as widely expected. They believed the rate cut was reflective of an impending Chinese economic slowdown. The US equity futures turned negative alongside the Treasury yields while the risk-off flows re-energized the US bulls, as the US dollar index re-tested a 33-month peak at 99.72.
Markets appeared to weigh in the cautiously optimistic FOMC minutes amid easing coronavirus concerns after a significant drop in the new cases in China, the lowest since January, 25th. The sentiment was also dented by the revival of the Reserve Bank of Australia’s (RBA) rate cut expectations after the country’s Unemployment Rate ticked higher to 5.3% last month.
The Aussie dollar was thrown under the bus and fell back into the red, as AUD/USD hit a new 11-year low at 0.6630. The Kiwi also refreshed a three-month low near 0.6352, tracking the steep declines in the Chinese yuan. The USD/JPY pair, on the other hand, witnessed good two-way price action and corrected to 111.11 lows in early Asia before bouncing to 111.50. The spot reached fresh nine-month highs at 111.60 on Wednesday.
Amongst the European currencies, EUR/USD remained under pressure below the 1.0800 level, having failed the corrective advances above the latter. The cable extended losses to test the 1.29 handle amid broad USD strength and EU-UK trade deal woes.
On commodity markets, gold prices on Comex eased off seven-year peaks and traded below $1610 while oil prices (on NYMEX) also corrected from a new three-week high amid cautious market mood.
Main Topics in Asia
Bearish Aussie Unemployment Rate back to 5.3% vs 5.2% expected, AUD slides
Japan Finance Minister Aso: there is no need to revise the fy20 budget plan due to virus measures
The People's Bank of China cut interest rates: AUD and Yuan sliding
AUD/USD drops to fresh 11-year low as China’s PBOC cuts interest rate
China’s NHC reports 394 new confirmed cases of coronavirus, 114 new deaths
IMF’s Georgieva: Coronavirus poses risks to fragile recovery in global economy
S&P: China’s FY growth will fall to 5% in 2020
Saudi OilMin expresses his concerns on the coronavirus impact
Yellow metal hits record high in Euro terms
Fed’s Mester: Economy is in a 'good spot' but coronavirus presents risk
Key Focus Ahead
Markets are primed for the German leading indicator data, in Gfk Consumer Confidence due at 0700 GMT, for fresh cues on the euro. Also, the German Producer Price Index (PPI) and Swiss trade data will drop in at the same time.
Next of note remains the Indonesian Interest Rate decision, with a rate cut widely priced in by the markets to counter the coronavirus impact on the economy. Later at 0930 GMT, the UK Retail Sales data will be eyed for fresh GBP trades ahead of the CBI Industrial Trends Survey – Orders release at 1100 GMT.
Markets will also look forward to the European Central Bank’s (ECB) January meeting’s minutes, due at 1230 GMT, for any hints on additional easing, in light of the coronavirus outbreak and subdued Euro area price pressures.
The NA session also remains eventful, with the US Jobless Claims, Philly Fed Manufacturing Index and Canadian Housing Price Index at 1330 GMT. The focus will also remain on the US EIA Crude Oil Stocks Change data, dropping in at 1600 GMT.
EUR/USD struggles to keep gains above key hurdle, German data eyed
EUR/USD is feeling the pull of gravity while heading into the London open. A big beat on the forward-looking German Gfk Consumer Confidence is needed to stall the sell-off. The index is expected to tick lower to 9.8 from February's 9.9 reading.
GBP/USD extends losses below 1.3000 ahead of UK Retail Sales
GBP/USD drops to 1.2900 ahead of the London open on Thursday. The EU-UK tussle over post-Brexit trade deal and broad US dollar strength dragged the quote to the lowest in seven days. The cable traders will now focus on the UK Retail Sales data for immediate direction.
ECB Minutes Preview: Coronavirus, inflation, and strategic review comments set to move EUR/USD
The ECB's meeting minutes may reveal the bank's thinking amid worsening conditions. The hawk-dove divide may also be exposed as it faces new challenges. EUR/USD is at a critical spot and may move in both directions.
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