What you need to know before markets open: Coronavirus risk-off remains the theme, yen crosses in focus

As we look to weekend events, it's the coronavirus contagion and financial markets crash that is taking up the headlines and what will be a very busy week ahead. The yen crosses are in focus along with oil prices, with the Fed, the US dollar and the price of gold. The number of coronavirus cases have jumped over the weekend and anyone betting on a meaningful correction in global equities might want to think twice before buying. 

For the end of the week's closing summary, see here: Forex Today: Markets bled out, despite Fed's chair factoring-in coronavirus impact

Meanwhile, the latest stats show a total of global coronavirus cases at 87,137. The World Health Organisation, (The WHO) says 1739 new cases of the infection confirmed over the past 24 hours, with death tolls rising and world hot spots shiting to European and the Middle East. We have also seen the first deaths in America and Australia. Globally, more than 2,900 people have died from the fast-moving virus. 

OPEC in focus

Another focus is OPEC and the recent headlines surrounding Russia's potential support of a production cut. Russian President Vladimir Putin commented ahead of the March 5-6 OPEC+ meeting in Vienna where Saudi Arabia is pushing for swift production cuts to compensate for the drop in oil demand due to coronavirus. According to the Moscow Times, "OPEC could agree on deeper oil supply cuts this week, with or without Russia's support, to halt the slide in crude prices triggered by the global spread of the coronavirus, said two sources familiar with the talks." The article said that Moscow is resisting further output curbs, arguing that reduced production by the Saudi Arabia-led Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, will not necessarily revive oil demand, the sources said.

However, while Russian President Vladimir Putin said that current prices are acceptable for his country's budget and that Russia – a key member of OPEC+ – has sufficient resources to contend with any deterioration in the global economy, Russia is still ready to cooperate with its OPEC+ partners to support the world oil market, even though it’s comfortable with current crude prices.

Saudi Arabia needs oil prices of about $80 a barrel to balance its state budget while Russia can cope with prices as low as $42.

In a Bloomberg News, its states that the OPEC+ mechanism “has already established itself as an effective tool in ensuring long-term stability in global energy markets,” Putin told a meeting with ministers in Moscow on Sunday. "The fact that Russia has large financial reserves to cushion the impact of turbulence in the market “doesn’t eliminate the need for action, including in cooperation with our foreign partners,” he said.

Market impacts

Looking ahead for the week, oil prices will be reacting to sentiment surrounding the meeting, gold and equities to the coronavirus and the yen have already begun to show signs in early forex prices of its intentions in a risk-off environment. Elsewhere, the Fed is being priced in for a rate cut which is weighing on the US dollar. CAD will be a focus as well, considering the price of oil and the Bank of Canada meeting this week, (CAD is regarded as a higher-yielding opportunity). AUD will also be a focus due to the Reserve Bank of Australia scheduled as a key event. EUR/USD is another focus on the charts, more on that here: Chart of the week: EUR/USD carry trade unwind done, mean reversion opportunities

For the open, the immediate focus will be how much of a risk-off bid the yen will catch.