USD/JPY struggles to maintain the bid as Asia gets going

USD/JPY roundtripped from 109.85 to 109.62 and back overnight but struggles to hold the bid in Asia as traders await more key US data tonight in the US and mull the latest developments in the coronavirus. At the time of writing, USD/JPY is trading at 109.76 between a range of 109.73 and 109.87. 

Firstly, the WHO official comments to press that “we're not dealing with a spike in cases in one day” was all that was needed for risk sentiment to fully recover following yesterdays announcements from the Chinese and the bounce in coronavirus cases due to its new methodology of reporting cases. Today, China’s Hubei province reports 4,823 new cases on 2nd day using the new method. Wuhan is the epicentre of the epidemic, capital of Hubei province.

• Reports 116 new deaths.
• Total confirmed cases rise to 51,986.
• Number of people in serious and critical condition 9,638,  from 7,084 yesterday 
• Around the globe, total 65,236 cases, 1,487 deaths.

Overnight, the expectations of increased China stimulus helped the commodity complex but not the US equity markets. copper is closing just shy of $5,800, a level it has not closed above since Jan 24 while US benchmarks all finished in the red. 

US 2-year treasury yields initially extended the reaction to the coronavirus news to 1.39% before rebounding to 1.44%, which is where they were pre-news. 10-year yields similarly dipped to 1.57% before rebounding to 1.62%. 

US CPI, firm overall

As for data, the US January Consumer Price Index inflation was firm overall. "Although the headline monthly rate slightly undershot estimates at +0.1% (+0.15% to 2 decimals, est. +0.2%), other counts were a touch firmer with headline annual CPI +2.5% (est. +2.4%), while core inflation rose 0.3%M/M and +2.3%y/y (est. +2.2%YoY). As a result, the DXY maintain form on the 99 handle. "Markets are pricing only a 5% chance of easing at the next Fed decision on 18 March, and a terminal rate of 1.20% (vs Fed’s mid-rate at 1.63% currently, effective FFR at 1.58%)," analysts at Westpac argued. 

USD/JPY levels