Risk Appetite Trickles Back but Will Remain in the Hands of the New Wires…

Earlier in the Day:

It was another relatively busy day on the Asian economic calendar this morning. The Pound, Kiwi Dollar and Aussie Dollar were in action in the early part of the day, with stats out of China also in focus.

While the stats tested the Aussie dollar early on, it was a tentative start to the day, with the Yen seeing an early pullback. The pullback came in spite of a mixed start to the day in the Asian equity markets.

For the Aussie Dollar

The NAB Business Confidence Index fell from -1 to -4 in February.

According to the NAB,

• Both confidence and conditions declined in the month. Confidence is now firmly negative and conditions back on a downward trend.
• The business conditions index fell by 2 points to 0 index points, with profitability and trading conditions weighing. The profitability sub-index slid from 1 to -5, with the trading index easing from 5 to 4.
• By contrast, the employment index rose from 1 to 2 in February.
• Sentiment towards forward orders weakened, with the sub-index falling from -1 to -4.
• With the exports sub-index falling from -1 to -2, the full effects of the coronavirus had yet to be reflected in the numbers…

The Aussie Dollar moved from $0.65925 to $0.65791 upon release of the numbers that preceded inflation figures out of China. At the time of writing, the Aussie Dollar was down by 0.18% to $0.6575.

Out of China

The annual rate of inflation eased from 5.4% to 5.2% in February, with consumer prices rising by just 0.8% in February, following a 1.4% rise in January.

Wholesale inflationary pressures also eased in February, with wholesale prices falling by 0.4%. In January, the annual rate of wholesale inflation had stood at 0.1%.

The Aussie Dollar moved from $0.65810 to $0.65768 upon release of the figures.

Elsewhere

At the time of writing, the Japanese Yen was down by 1.03% to ¥103.41 against the U.S Dollar, with the Kiwi Dollar down by 0.14% to $0.6328.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. The Eurozone’s 3^rd estimate GDP numbers for the 4^th quarter are due out along with 4^th quarter nonfarm payrolls out of France.

The markets have little to no interest in 4^th quarter numbers, particularly positive ones that are likely to reverse.

We have seen the EUR find strong demand in spite of negative deposit rates. It’s hardly surprising when considering carry trade unwinds, with the EUR having been a funding currency for some time now.

A lack of interest in the stats will continue to leave the EUR in the hands of market sentiment towards the impact of the coronavirus. There’s also fiscal and monetary policy to consider.

While the Eurozone is certainly in for a hit, the U.S economy could be at greater risk from the coronavirus.

At the time of writing, the EUR was down by 0.43% at $1.1401.

For the Pound

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

We’ve seen the Pound find support against the Dollar as market chaos hits riskier assets. This could change, however, should economic indicators begin to point to imminent BoE action.

While the markets have priced in a 2^nd FED rate cut this month, the BoE could stand pat should the budget and Wednesday’s numbers support a hold.

The Pound did sink against the EUR and Yen on Monday, however, which were on the move at the start of the week.

Expect speculation over the autumn budget and Brexit negotiations to also influence.

At the time of writing, the Pound was down by 0.34% to $1.3073, with the Dollar clawing back some of Monday’s losses.

Across the Pond

It’s another quiet day ahead on the U.S economic calendar, with no material stats due out of the U.S later today.

While the U.S administration will continue to attempt to restore market stability, the harsh truth remains. As the Chinese government learned quickly, containment is the only way forward. The U.S administration may have already missed the boat…

Expect updates on the spread of the coronavirus to continue to influence the U.S Dollar.

The Dollar Spot Index was up by 0.56% to 95.43 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 to provide the Loonie with direction.

Stats would have had little influence anyway, with Monday’s slide in crude oil prices raising the odds of another BoC move.

Crude oil prices may have recovered from sub-$30 levels, but with the U.S economy at risk of a material slowdown, it could go from bad to worse.

Much will depend on FED monetary policy that will also influence the BoC…

The Loonie was up by 0.42% at C$1.3645 against the U.S Dollar, at the time of writing, with an early pickup in crude oil prices providing support.