Risk Aversion Plagues Early, with U.S Nonfarm Payrolls unlikely to Shift the Narrative

Earlier in the Day:

It was a relatively busy day on the Asian economic calendar this morning. The Aussie Dollar and the Japanse Yen were in action in the earlier part of the day.

Outside of the numbers, it was “risk-off” as the Asian markets reacted to the slump in the U.S equity markets overnight.

Governents increased travel restrictions and quarantines and the U.S reported a jump in new cases, adding to the negative sentiment towards the virus.

For the Japanese Yen

Household spending fell by 3.9% in January, year-on-year, following on from a 4.8% tumble in December. Economists had forecast a 4.0% decline.

According to the Statistic Bureau,

• Spending on education tumbled by 13.1% as a result of the government shutting schools.
• There were also sharp declines in spending on furniture & household utensils (-11.7%), transportation & communication (-7.9%), culture & recreation (-6.1%), fuel, light & water charges (-5.5%), clothing & footwear (-4.6%), and housing (-3.8%).
• Bucking the trend in January was a 3.1% increase in spending on medical care.
• Month-on-month, household spending fell by 1.6%, following a 1.7% decline in December.

Th Japanse Yen moved from ¥106.163 to ¥106.171 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.18% to ¥105.97 against the U.S Dollar.

For the Aussie Dollar

Retail sales fell by 0.3%, month-on-month, in January, following on from a 0.7% decline in December. The ABS attributed the decline to the negative impact of the bushfires.

According to the ABS,

• Household goods retailing (-1.1%), department stores (-2.2%), clothing, footwear and personal accessory retailing (-1.1%) saw heavy falls in sales.
• There were also declines for cafes, restaurants and takeaway food services (-0.3%), and other retailing (-0.1%).
• Food retailing reported a 0.4% increase to buck the trend.

The Aussie Dollar moved from $0.66158 to $0.66135 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.27% to $0.6596.

Elsewhere

The Kiwi Dollar was up by 0.05% to $0.6305.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. January German factory order figures are due out later this morning.

Following Germany’s GDP numbers for the 4^th quarter and the anticipated impact of the coronavirus, positive numbers will deliver a limited upside for the EUR.

It’s all about a combination of monetary and fiscal policy support. For the EUR, the current hold by the ECB to force the likes of the German government to loosen the purse strings remains positive.

Questions over whether either or both will be effective, however, will come into play as the EUR inches towards $1.13 levels.

At the time of writing, the EUR was down by 0.01% at $1.1236.

For the Pound

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

With little for the markets to focus on from the economic calendar, expect the markets to begin looking ahead to next week’s autumn budget and Brexit chatter.

The good news, for now, is that the markets have walked through the EU’s threats before, so there should be some near-term resilience.

At the time of writing, the Pound was up by 0.02% to $1.2957.

Across the Pond

It’s a busy day ahead on the U.S economic calendar.

Key stats include February nonfarm payroll and wage growth figures. Expect the NFP numbers to have the greatest impact alongside January’s unemployment rate.

January trade data will likely have a muted impact, with February and March figures likely to garner more interest.

Outside of the numbers, updates from the U.S on the spread of the coronavirus will also influence. As the number of infections rises, expect the Dollar to come under more pressure.

The Dollar Spot Index was down by 0.30% to 96.533 at the time of writing.

For the Loonie

It’s also a busy day ahead on the economic calendar. Key stats due out later today include employment, trade and Ivey PMI numbers out of Canada.

Following a particularly dovish BoC Statement and expectations of another FED rate cut in March, weak numbers could sink the Loonie to $1.35 levels.

While the stats are in focus, the OPEC meeting will also be of influence. The markets will be looking for OPEC to formally agree to some sizeable cuts in production to deliver price stability.

Fiscal policy alone may not be enough to drive demand and offset the impact of the coronavirus on the demand outlook for crude. The markets will at least need to be able to quantify the damage and its too early for that.

The Loonie was up by 0.07% at C$1.3402 against the U.S Dollar, at the time of writing.