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Riskier Assets Sink as the Coronavirus Goes Global

Bob Mason

Earlier in the Day:

It was a quiet day on the Asian economic calendar this morning. There were no material stats due out, with holidays in China and Australia leaving volumes on the lighter side.

A lack of stats left the markets in the hands of the news wires, as updates on the coronavirus hit market risk appetite. Riskier assets hit reverse early, as the spread of the virus could ultimately impact the Chinese economy and beyond.

On the geopolitical front, concerns over U.S tariffs on EU goods and autos, in particular, were also market risk negative.

For the Majors

At the time of writing, the Japanese Yen was up by 0.43% to ¥108.81 against the U.S Dollar, while the Aussie Dollar was down by 0.38% to $0.6806. The Kiwi Dollar was down by 0.36% to $0.6583.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include IFO business Climate Index figures due out of Germany.

Following better than expected PMI numbers out of Germany last week, today’s Business Climate Figures will need to support. Optimism across the private sector hit a 16-month high in January, according to the prelim PMI.

Outside of the numbers, however, risk aversion over the coronavirus could pin back the EUR, as would any further chatter from the U.S on EU trade tariffs…

At the time of writing, the EUR was up by 0.03% to $1.1028, with early support coming as the Asian markets responded to last week’s PMIs.

For the Pound

It’s a quiet day ahead on the economic calendar, with no material stats due out of the UK to provide the Pound with direction.

Based on last week’s numbers alone, the Pound should find a further upside, though chatter from the EU on trade will likely influence.

The EU is not expected to be in too much of a hurry in reaching a trade agreement with the UK. Johnson will need to keep the focus on the EU and other trading partners to support a positive outlook post-transition.

It’s Britain’s last week as a member of the EU. After more than three-and-a-half-years of political chaos, the wait is over…

At the time of writing, the Pound was down by 0.07% to $1.3064.

Across the Pond

It’s a relatively quiet day on the data front, with economic data limited to December new home sales figures from the U.S.

Barring dire numbers, the figures are unlikely to have a material impact on the day.

Outside of the numbers, expect updates on the coronavirus and the Oval Office to also influence. A further spread of the virus would further raise demand for the safe havens.

In the early part of this week, a further spread of the virus could force the World Health Organization’s hand in revising its view of the virus…

The Dollar Spot Index was down by 0.02% to 97.832 at the time of writing.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no material stats due out of Canada.

A lack of stats will leave the Loonie in the hands of risk appetite on the day. The effect of the coronavirus on the Chinese economy and demand would be negative for crude oil prices and riskier assets in general.

The Loonie was down by 0.13% at C$1.3160 against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire