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Risk Appetite Trickles Back Early in Response to Stimulus though COVID-19 News Updates Could Test Later

Coronavirus news updates and government and central bank action remain the key drivers as the week comes to a close.
Bob Mason
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Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. There were no material stats to provide direction through the session, leaving the PBoC in focus.

While updates on the coronavirus were negative, the U.S administration’s latest moves supported riskier assets.

Out of China

On the monetary policy front, the PBoC was in action in the early part of the session.

China’s central bank left loan prime rates unchanged, with the 1-year loan prime rate held at 4.05% and the 5-year at 4.75%. Economists had forecasted the PBoC to cut the 1-year LPR from 4.05% to 3.95% and the 5-year from 4.75% to 4.65%.

The Aussie Dollar moved from $0.58093 to $0.58101 upon the announcement. At the time of writing, the Aussie Dollar was up by 1.97% to $0.5856.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.42% to ¥110.25 against the U.S Dollar, with, the Kiwi Dollar up by 1.41% to $0.5769.

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The Day Ahead:

For the EUR

It’s another quiet day ahead on the economic calendar. Economic data is limited to German wholesale inflation figures for February.

The numbers are unlikely to have a material impact on the EUR this time around, though we will expect wholesale inflation to feature next month.

Outside of the numbers, updates from Italy and beyond on the spread of the virus to remain the key driver.

The markets will be looking for measures to contain the virus to be reflected in the latest updates. A wider spread will raise more alarm bells.

At the time of writing, the EUR was up by 0.36% at $1.0731.

For the Pound

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

Is there a way back for the Pound?

Much will depend on the latest coronavirus numbers and whether there has been a marked increase in the number of cases.

On the policy front, the government may need to step up its support should the number of cases surge.

We won’t expect a move without a material escalation, however, following the BoE’s latest move.

At the time of writing, the Pound was up by 1.30% to $1.1634.

Across the Pond

It’s a relatively quiet day ahead on the U.S economic calendar. On the economic data front, key stats include existing home sales figures for February.

The February numbers are unlikely to reflect any marked shift in consumer sentiment to weigh the sector, which should limit any influence from the numbers.

Throughout the day, we can expect the market focus to remain on the U.S administration action plans to combat the virus.

According to the latest figures, the virus has continued to spread, which will be a test for the Dollar.

The Dollar Spot Index was down by 0.41% to 102.332 at the time of writing.

For the Loonie

It’s a relatively busy day ahead on the economic calendar, with January retail sales figures due out later today.

We would expect the Loonie to be exposed to downside risk, with the markets likely to fret if the bar is already at a low level before the spread of the coronavirus…

Crude oil prices and market sentiment towards demand the economic outlook will likely remain the Loonie’s nemesis on the day.

The Loonie was up by 0.67% at C$1.4414 against the U.S Dollar, at the time of writing, with support coming off the back of a weaker Greenback and a pickup in crude oil prices.

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