The second quarter of 2020 kicked-off on a cautious note, as the risk sentiment remained tepid across the financial markets in Asia this Wednesday, with the coronavirus outbreak-led fears showing little signs of abating. The new infections continue rising across the globe, with the US, Europe and the UK facing a severe crisis situation.
The risk-averse environment is reflective of the declines in the US equity futures and Japanese equities while a rush to the US bonds knocked-off the Treasury yields sharply lower. The US dollar, however, attempted a tepid bounce against its main competitors, with the DXY looking to extend the gains beyond 99.00.
Within the G10 currency market, most majors traded within tight ranges, with the Canadian dollar the main loser despite the uptick in oil prices. USD/CAD rose 0.30% to regain 1.4100. Among other commodity currencies, the Aussie and Kiwi traded with mild losses amid weaker Gold prices, as they ignored the expansion in the Chinese Caixin Manufacturing PMI report for March. USD/JPY, on the other hand, staged a solid pullback from 107.25 lows and tested the 108 handle.
Both EUR/USD and GBP/USD remained under pressure, as the US dollar picked up bids following the previous slump. The cable tripped back below 1.2400 while EUR/USD managed to defend the 1.1000 level.
Main topics in Asia
US Pres. Trump: We're going to go through a very tough two weeks
New Zealand Treasury forecast at least 10% contraction in Q2 2020 GDP
US Pres. Trump: Raised issue of oil prices with Russian President Putin
US energy Dept to lease space for energy companies to store crude oil – Reuters
BoJ March Tankan: Big Manufacturers index -8 (Reuters poll: -10)
S&P 500 Futures drop 1.0%, US treasury yields decline amid risk-off
RBA Minutes: No appetite for negative interest rates
BoJ Gov Kuroda: If inflation nears 2%, BoJ will need to adjust monetary policy to stabilise prices
China Caixin/IHS Markit Manufacturing PMI, March, jumps to 50.1 (vs 40.3 in Feb, poll 45.5)
Australian Treasurer Frydenberg calls for global economic “controlled hibernation”
Japan PM Abe: Not in a situation to declare an emergency now
Japan’s Nishimura: Govt to hold experts' meeting on coronavirus pandemic Wednesday
USD/IDR off multi-day highs post-mixed Indonesia's CPI
Key focus ahead
Wednesday’s EUR macro calendar is a busy one, with the Final Manufacturing PMI reports from the Euro area dropping in from 0715 GMT onwards. The German and Eurozone PMIs will be published at 0755 GMT and 0800 GMT respectively. Ahead of that, the German Retail Sales will be reported at 0600 GMT. Later in European trading, the UK Final Manufacturing PMI and Eurozone Unemployment Rate will also offer some fresh trading incentives.
The NA calendar offers plenty of event risks, kicking-off with the US ADP Employment Change data, at 1215 GMT, followed by US Manufacturing PMI reports due to be published by both Markit and ISM around 1400 GMT. Also, of note remains the US Energy Information Administration (EIA) Crude Oil Stocks Change data lined up for release at 1430 GMT.
Apart from the macro news, the sentiment will remain driven by the incoming virus-related news flow and dollar trades.
EUR/USD: Euro remains on the offer ahead of German retail sales
EUR/USD trades in the red ahead of German retail sales and manufacturing data. Investors are likely to hold cash, preferably US dollars, amid the coronavirus-induced economic stalemate worldwide.
GBP/USD drops below 1.2400 as coronavirus woes UK diplomats
GBP/USD refrains to respect the previous day’s pullback moves amid coronavirus-led pessimism. UK’s death toll surges 27%, cases jump 14%, police pushed for strict lockdown. US data, virus headlines will be the key.
US ADP Employment Change March Preview: The job onslaught begins
Private payrolls expected to shrink for the first time in in 10 years. Initial jobless claims indicate continuing massive layoffs. First payrolls numbers with partial virus impact.
US Manufacturing PMI March Preview: Markets return first, factories second?
Manufacturing contraction expected to continue in March. New orders index forecast to remain positive. Nascent factory revival ended in viral outbreak.
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