The Daily Edge - A Complete Cross Asset Analysis

Quick Take

The New Zealand Dollar and the Pound were the top performing currencies. The former was boosted by an upbeat ANZ inflation indicator, leading to calls for the RBNZ to cement its neutral bias for the foreseeable future. Too premature to think the language may shift to hawkish though, even if the jump by 0.8% q/q is above the RBNZ target. The Sterling’s rise, in my opinion, has a lot more to do with the slow money re-engaging in weakness as the weekly trend remains bullish, even if reason to turn more bearish are also piling up with the BoE more likely to cut rates in the next few meetings (pricing of a cut has gone to near 70% for Jan 30). The Euro, the Aussie and Yen were the main laggards for the session. It is especially counter-intuitive to have seen the Euro perform so poorly as the ECB revealed a more upbeat tone in its policy minutes, with the outlook for inflation and growth slightly more constructive. The sell-side pressure on the Yen, for a 7th consecutive day, shows that the ‘trend is your friend’ in this market, one that continues to move in opposite lock steps to record equities in the US. The Aussie’s struggle has more to do with impending technicals at an index level, even if the latest Chinese data dump today should provide interim support as upbeat numbers emerged. The Swissy paused its hot rally after reaching a weekly 100% proj target in the index, while the US and Canadian Dollar saw weakness bought up aggressively through the NA session.

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Quick Take

We start a new week with the US Dollar at the forefront of trader’s mind amid the steady demand flows it’s shown through the course of January in line with positive seasonals. The fundamental news out of the US, with a huge 17% jump in housing starts aiding the trend, as together with the US-China phase one trade truce, reaffirms the neutrality of the Fed policies. The Swissy, after meeting its 100% measured move at an index level, has seen buy-side interest petering out as the fast money-type accounts take the foot off the gas pedal. The Canadian Dollar is the third best performing currency this year, piggy-backing the rise in the USD, and opening up a significant gap with the Euro, which follows as the 4th best currency. In the bottom half, I must say that amid very depressed volatility conditions, the outlook is mixed, with only the Japanese Yen displaying the cleanest downtrend. The Aussie, the Kiwi, and the Pound, are all confined in ranges of difference dimensions from an index standpoint, even if the British currency was the most punished in the last 24h following a dismal UK retail sales. Judging by the ebbs and flows seen as of late, the USD and CAD look best positioned to capitalize on the current market conditions, while the JPY and the GBP, with risk-on flows (S&P 500 keeps making record highs) and UK fundamentals deteriorating at a rapid pace, appear to be the most vulnerable currencies this week. Remember though, today’s trading activity is likely to be much more quiet than usual, as US stock and bond markets are closed to commemorate the Martin Luther King Jr. holiday. Later in the week, things will spice up as we get the moneta policy decision by the BOJ, BOC, ECB, Aussie jobs, Canadian/NZ CPI and EZ manuf numbers.

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Quick Take

If it wasn’t enough with volatility shot to pieces in recent times, Forex traders had to navigate even calmer waters though Monday as the US markets (cash equities and bonds) were closed in commemoration of Martin Luther King Day. The Canadian Dollar attracted the most buy-side interest, followed by the US Dollar, in line with the slow money directional bias through this month of January. The Pound gave us some brief spell of volatility through the European morning hours, but the momentum never picked up further steam and the market ended rotating back up recouping all the losses. The Euro, the Yen or the Swissy were a snooze fest, with no action of note ahead of today’s BoJ policy meeting and Thursday’s ECB. Meanwhile, the Oceanic complex (AUD, NZD) moved in lockstep towards the downside, ending as the worst performing currencies

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Quick Take

In the last 24h of trading activity, the Pound, the Yen, and to a lesser degree the US Dollar, were the best performing currencies. The British currency was mainly driven by a jump in the UK employment figures, even if the positive input has barely budged bond traders, still assigning fairly high chances of a rate cut by the BOE next week (around 70%). The Yen’s strength, as it’s been the case this year, has emanated due to panic-induced dynamics; it was the case when Iran and the US engaged in a tug of retaliatory offenses which never amounted to the worst fears, and sadly, an episode of a virus outbreak in China (coronavirus) was the prelude to another round of Yen buying. Did you notice where the Yen is finding gains from? Today’s technical outlook reveals a relevant snippet of technical information for those aiming to be on top of the market context. The USD buying, plain and simple, follows the underlying buy-side flows dominating since the start of the month. Not favored by today’s ebbs and flows, the Aussie, Kiwi and the Canadian Dollar were all laggars, in a classic move away from commodity-related currencies as the risk-off settled in, a dynamic that was reaffirmed by the sell-side flows that hit US equities as well. Note, one must put this sell into context, as the S&P 500 remains really close to its recent all-time high. Remember, the CAD is likely to attract the most volatility in the next 24h as the BOC policy meeting is due. On Thursday, it will be the time for the ECB to update the market on its latest policy settings. Until then, trading the Euro continues to be a low-key affair as the tight range in the index reflects. Lastly, the Swissy, which remains the star performer this month, keeps the upside capped after reaching its 100% projection target. Don’t underestimate the power of symmetries in Forex!

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Quick Take

The Pound has been, by a fair margin, the currency paying the most dividends for those with long-side exposure ahead of next week’s BoE policy meeting. Price action, which in the case of the Pound, has been rather constructive this week, goes a long way to decipher the true intentions of the market, diminishing the risk of marrying you to a bias just because the hype as of late it’s been that the BOE may lower rates next week. Well, it turns out, the market had clearly other intentions, aided by the highest quarterly business optimism among UK factories (UK CBI report) since April 2014. The Aussie is another currency flying high after a solid jobs report in Australia even if remains at the very tail of performing currencies in January. Again, such behavior, may have defied logic if one had been fixated in the US-China trade deal as the catalyst for higher prices as opposed to price action and the monitoring of the AUD index, which told us a different story. The Swissy, meanwhile, is a currency that just keeps on giving those those committed to buy the dips in what’s, together with the USD, the top performing currency this month. In stark contrast, the Canadian Dollar was completely annihilated by market forces as the BOC did a 180-degree turnaround on its monetary policy stance, openly recognizing that lower rates are back on the table for the next few months. In response, the CAD saw one-way transit flows. The Euro is the currency to shift the focus towards in the next 24h, as the ECB is up next. As I argue in today’s report, watch out for some type of hawkish surprise by the CB, even if just at the margin. The Yen, amid a mixed-bag of risk dynamics, with US equities and global bonds in stand-by, also portrays choppy price action amid a short-term correction of its bear tendencies. China’s efforts to contain the coronavirus has also contributed to appease market fears even if the situation is still fluid, with the WHO to decide today if the crisis is declared an international emergency. Lastly, the Kiwi is going nowhere fast, with an absence of fundamental drivers as of late.

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Quick Take

The whippy movements in Forex extended on Thursday. The Euro fell miserably amid the lack of hawkish emphasis by the ECB, with the tentative green shoots seen in the Euro area nothing out of the ordinary. The remarks by the ECB statement, later reaffirmed by Lagarde, was an admission that the ECB will be slow to shift its well-anchored dovish bias. An interesting market to trade in the last 24h as volatility certainly did not lack either was the Aussie, initially emboldened by a strong employment report out of Australia, however, since the market is still fixated about an escalation of the corona virus in China and connecting the dots with lower local growth, it weighted on the Aussie later on. As we know, the number one currency to act as a proxy for all things China is the Aussie. While the jobs data was a positive input for the AUD, even to the point of lowering the RBA rate cut odds in February to just 25% from 60%, it clearly isn’t the only focus at present. On the contrary, the NZD has enjoyed strong buy-side flows, with more fuel added to the intraday rally following an upbeat in the NZ CPI q/q figures. This should keep the RBNZ powder dry (no cuts) near term, even if the upside may prove still limited as China’s coronavirus plays out. The volatility in the Yen wasn’t too shabby either, with the currency appreciating strongly amid the sharp falls in global yields. The Canadian Dollar, recently battered, finally reverted its exceedingly oversold conditions, even if the BOC dovish turnaround from Wednesday is the type of development that can act as the onset of a prolonged sell-side campaign as technicals and fundamentals are starting to align in favor of sellers. Lastly, the USD and the CHF traded in a stable fashion, with modest weakness on the latter, even if these currencies have only contributed at the margin to the increase in FX volatility since mid this week.

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Quick Take

The threat of the Corona Virus hitting much harder than thought the Chinese growth prospects, and as a consequence, the global GDP outlook this first semester, is a reality that the markets are starting to decisively account for, as demonstrated by the sharp falls in equities globally or proxies for China such as the Aussie, Kiwi, the Yuan itself, or the appreciation of safe-havens the likes of Gold, the Yen or seeking out protection by buying fixed-income (bonds). Originated in China, the virus is now thought to have infected more than 100,000 people in China, and is now spreading to other countries such as Japan, India, Hong Kong, the US, France, Australia and more. Aside from the BOE policy decision this week (50/50 chance of a rate cut), the virus spreading news is going to dominate the proceedings. Even the FOMC or Aussie CPI may prove to be just small hiccups in volatility as opposed to the movements that the coronavirus developments may produce. The markets are in clear risk-off mode and if the virus continues to get worse, there may be great plays on the horizon this week with a marked improvement in volatility to be expected, even if sadly, it’s for the wrong reasons. Be on high alert as this is one of those weeks when, as traders, there may be a lot of opportunities up for grabs. At this stage late in January, the best performing currencies continue to be the USD, CHF, GBP and the JPY, with the latter appreciating very rapidly as the coronavirus topped the headlines. On the other side of the spectrum, the AUD and NZD are the two stand out losers, with the outlook for the EUR and CAD not looking good at all from an index technical perspective.

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Quick Take

As the coronavirus woes extend, so does the upside in the USD, JPY and CHF. These 3 currencies has expanded the gap versus its main peers in the G8 FX space as market participants take no chances and resort to the safe-haven appeal of classic plays. If you ask me, it is no wonder as the outlook for Chinese growth, and as spillover effect, the global GDP outlook is looking bleaker by the day with more than 50 million people in China on lock-down mode and over 100,00 cases diagnosed in Chin alone. What’s going to be absolutely critical is the rate of reproduction of the disease and whether or not there may be tentative signs that China is able to contain it. While one may take slight comfort from the fact that China seems to be doing all it can, one wonders if it’s too late to mitigate the spreading as it’s thought that more than 5 million Chinese from ground 0 where the virus originated from left the city of Wuhan before the ban on travelling. It definitely looks like the market may be on tenterhooks for another week or two until there is more clarity on the true outreach of this disease. A currency that depicts like no other the worsened outlook towards China near term remains the Aussie and to a lesser extend the Kiwi, taken to the woodshed as the favorite short play to express the dire view on the Chinese economy to start 2020. There is a third camp of currencies (EUR, GBP, CAD) that found rather stable dynamics notwithstanding the pick up in risk aversion. This is important to note, because this is a week with higher than average trading opportunities for the avid trader to capitalize on the increase in volatility that we are seeing in financial markets, so making a distinction of the most one-sided flows is critical to catch the strongest trends at play. This is a healthy improvement in volatility, even if sadly, once again, for the wrong reasons. Remember, while you definitely must be accounting for the FOMC or Aussie CPI this week, make no mistake, there is a thematic overriding it all, and that’s the coronavirus propagation. The markets are in clear risk-off mode as also reflected by the largest one-day fall in the S&P 500 since October.

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Quick Take

The financial markets finally took a bit of a breather after the disproportionate one-sided movements in instruments the likes of the Yen, the Aussie, the Yuan, bonds, gold, equities. The fact that there was no new alarming developments in the number one driver of the market since last week, that is, the coronavirus outbreak, acted on its own right as the trigger to justify what’s seen as a correction very much technical in nature, not yet enjoying the fundamental backing of a complete disregard by market forces to the virus news, far from it. It is still a real possibility that the coronavirus saga keeps getting worse before it gets better. Amid this more sanguine environment, the Yen succumbed to the improved bid tone in risk, as did the allure towards the Swiss Franc, even if both remain top performing currencies in January, alongside a USD that keeps charging higher as the US economic news keep shining. As a result of the recovery in risk appetite, the Aussie and Kiwi moved higher in locksteps. Meanwhile, two currencies also enjoying buy-side flows, even if it may not last (spoiler: watch for shorts) judging by the technical stance conducted include the EUR and CAD. In my objective technical analysis of the G8 FX indices, I make a case as to why you want to be on the alert for these currencies to be, sooner or later, engulfed by renewed sell-side pressure. Lastly, the GBP traded on a soft note as it got hit by news that the U.K. will allow Huawei to build parts of the 5G network, in a move that defies Trump, and potentially the future trade relationships with the US.

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Quick Take

The USD kept advancing further ground up until the point when a dovish tilt by Fed’s Powell on inflation during Wednesday’s FOMC press conference led to a change of heart by the market. The currency ended softer after the remarks by Powell as the market now prices about one and a half cuts by the Fed by the end of 2020 vs 1.2 cuts pre-FOMC. The EUR, which continues its recovery, finds little technical grounds to expect the current run higher to last.

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Quick Take

With the WHO finally declaring the coronavirus (NCoV) a public health emergency alongside news that the US travel advisory just raised the alert level to its highest by advising nationals not to travel to China, the market, understandably, remains on shaky grounds. Note, I am firmly convinced, as I exposed in yesterday’s Youtube livestream, that the NCoV will remain the number one driver for at least another week or two. As a visual reflection, the chart below depicts the performance of G8 FX ever since the coronavirus (NCoV) news broke out. By now, it’s become visibly obvious what currencies have been affected the most. The Yen, the Swissy and the US Dollar, in this order, are unequivocally the main beneficiaries, while the Aussie and the Kiwi have been hit the hardest as the Chinese growth story is about to face some very bleak times in Q1 and Q2, and as a consequence, the market has been rapid to factor that in via the depreciation of the Oceanic currencies as ‘proxies’ for China. The Canadian Dollar, weighted by the prospects of lower rates in Canada and the recent slide in Oil prices as the NCoV also takes its toll on the projected consumption of the black gold. A currency fueled by its own idiosyncratic driver is the Pound, immune to the NCoV fuss, to instead be marked aggressively higher in the last 24h by a less dovish BoE after a 0.75% rate hold with a 7-2 split. Sandwiched in between, we find the Euro, which had an impressive run on Thursday, with further tentative evidence of a recovery in the Eurozone economic data to blame.

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Quick Take

There continues to be no respite to the tightening of financial conditions as depicted by the sharp falls in US equities before the end of business on Friday. The coronavirus-induced risk-off is highly likely to be here to stay for weeks if not months with more research papers indicating that the peak of the disease may still be months away. How it all played out in the currency market was a perfect script of text-book movements to be expected in times of suppressed risk conditions as the prospects of bleak Chinese growth in H1 2020 become an outcome factored-in. So, in forex, the swings were characterized by a surge in the three funding currencies (EUR, JPY, CHF), alongside follow-through demand towards the Pound as the bullish BOE play extended. On the other side of the spectrum, the AUD and the NZD saw another massacre in value, this time also joined by the CAD, which tracked the Oceanic currencies lower in locksteps. The USD, which put on a stellar performance in January in line with seasonals, finally succumbed in what some bank research report appear to attribute to month-end flows redistribution.

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Quick Take

The market has gone through a short-term relief rally in risk-sensitive instruments. The modest easing of financial conditions as depicted by the rise in US equities or the pause in the bloodbath of global bond yields, has led to a minor recovery in the likes of the Aussie or Kiwi. Interestingly, the bid in the Yen or the US Dollar puts into question this recovery as one that still communicates further trouble ahead, as does the fact that Oil or industrial metals keep losing ground. The Swiss Franc is also holding up its trend quite well as the index reflects. The resilience of the Euro is also quite impressive as buyers piled into Monday’s dip. The Canadian Dollar saw follow through supply with no particular fundamental catalyst, so my read on the fall is predicated on the fact that the CAD technicals remain very fragile. However, the main loser was the Sterling, with sellers in control of price from the open in Asia until the final hours of US. What appears to be behind the latest sell-off in the currency is the anticipation that the negotiations between the EU and the UK on a trade deal may collapse unless either side stops playing ball and starts to provide a substantial number of concessions, which looks unlikely.

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Quick Take

The pick up in risk appetite, in what I call ‘true risk on’, as both equities and bond yields in the US rose strongly in tandem, led to a further reprieve in the Oceanic currencies (AUD, NZD). The currencies were catapulted into higher ground for a second straight day, also aided by an RBA policy meeting and subsequent speech by Lowe today, with both events failing to make a strong case with regards to the RBA ready to ease policy any further in the short-run. The Kiwi found its wings again as the NZ employment report saw a significant reduction in the jobless rate, even if the details were troublesome as the change in employment and participation were down. On the other side of the G8 FX spectrum, the Yen was smashed lower as the ‘risk on’ flows in equities were maintained at a steady pace throughout the three sessions (Asia, Europe, US). The easing measures, aka bazooka, by the Chinese government, of which I provide details in today’s report, have proven to be an effective tool to combat the panic selling on the back of the coronavirus, a crisis that still remains well and alive even if the Chinese government is doing all it can to massage the number of cases and the death toll to avoid the chaos that may emerge. The Swiss Franc also found solid sellers in line with the improved risk profile, even if the currency remains in a steady bullish trade premise since the start of the year. The Pound, after being hammered following the European Commission unveiling of its draft mandate for upcoming negotiations with the UK, which was interpreted as bearish for the future prospects of reaching some mid-ground on trade negotiations, saw strong buying off the lows. Encapsulated in between we find the USD, EUR and CAD, which saw limited flows on Tuesday.

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Quick Take

Another very strong performance by risk assets, almost analogous to the price action script seen in the prior 24h, with equities flying higher and fixed-income (bonds) dumped. The in-sync reinvigoration in these two asset classes wreaked havoc the Yen or Swissy, even if as I distill in the study of the G8 FX indices, gain further exposure to safe-haven currencies’ short inventory carries a heightened level of risk given the NCoV context we are in. By the same token, it should be troublesome that the market has bought up risk in dubious headlines about a breakthrough in the treatment of the virus, while shrugging off the factual and worsening details of a steady increase in the number of cases and death toll. Whenever the market stops going down in bad news and overplays questionable bullish news, that’s a motive to be worried. A clear winner regardless of the risk dynamics, I must state, is the US Dollar. As the aggregate flows reflect, which I detail in the charts section, it’s finally gunned through a key resistance, which opens the door to fresh bullish dynamics as part of this newly found bullish leg. US data aided the rise. The Euro, despite better EZ services PMIs, has kept the downside pressure, with an intervention by ECB Chief Lagarde failing to stimulate the price action as all she did was to touch on old news that were well telegraphed in the last ECB policy meeting. The Pound remains in a position that lacks technical clarity with swings up and down without a clear bias. It goes without saying that amid this pick up in the risk vibes, the commodity-linked currencies (AUD, NZD, CAD) have fared the best, even if technically speaking, we are far from out of the woods just yet.
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Quick Take

A renewed surge on risk aversion reignited the Yen, while the USD, invigorated by a solid US NFP, and backed up by strong technicals, also rose, in tandem with the appreciation seen in the Canadian Dollar as the domestic employment numbers topped expectations. The Swiss Franc managed to firm up its stance amid this risk-off dynamics, but far from amassing the most demand last Friday. The tightening of financial conditions came as the number of deaths caused by the NCoV now exceed SARS (813 v 774), even if the predictions by several epidemiologists of prestige see a peak in the NCoV in Wuhan by mid-late February. As a consequence of the sell-off in risk assets, the Aussie and Kiwi, as the two favorite shorts acting as a proxy for China, got dumped last Friday. The Euro continues to trade in a confined range at an index level amid the lack of clear catalysts, while the Pound is still attracting committed sellers since the highs printed over a week ago as the UK enters a tricky period of trade negotiations with the EU.

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Quick Take

The economic calendar was packed with Central Bank events, including Fed’s Powell, ECB’s Lagarde and BOE’s Carney. The net effect, after all said and done, is a sense that these policymakers did a great job at sounding non-committal and sticking to the familiar mantra. What does this mean? It means there was little meat in the bone, a lack of substance or new surprises in the remarks they had prepared. As a consequence, the movement in currencies this week continues to be rather dull in nature, with the US Dollar a touch softer, even if that has not acted as a catalyst to see buying in the Euro, which remains in free-fall. Watch the EUR index closely as it nears a key level where long inventry building is a real possibility.

The Kiwi, however, is the exception, marked up aggressively by algo activity and the unwinding of shorts on the aftermath of a more hawkish-than-expected RBNZ. The Aussie, meanwhile, saw buy-side flows re-emerge but at a much slower pace as the positive groove in equities feeds through. The lower reported rate of new NCoV infections by China (even if numbers manipulated), or expectations of some factories in China to soon re-open are factors supporting equities. Not to forget, the Fed’s balance sheet expansion via money market operations, alongside the boost in Trump ratings to win this year’s presidential race after the Iowa caucus fiasco is also an aid.

This recovery in equities is causing the Yen and Swissy to see sell-side flows dominate this week, but the setback in the currencies is still under a bullish context when analyzing the aggregated daily flow. The Sterling is one of the clear beneficiaries from the current state of affairs, with its recovery more to do with a technically-inspired re-loading of longs at a critical liquidity area than any particular fundamental catalyst, as the EU-UK trade talks still the key driver with the outlook as tricky as it was during the aggressive sell-off in the Pound earlier this month. Lastly, the Canadian Dollar remains firmer but on the daily the currency remains structurally bearish.

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Quick Take

The more days that go by, the more traders are getting a sense that the worst in the NCoV scare may be behind us. This is not a hunch or something I write out of my gut feeling, but as usual, I let price action and the aggregated flows in G8 FX tell the story. We are witnessing, without exception, the three funding currencies (EUR, GBP, CHF) be dumped this week. Whenever speculators show a greater interest to borrow a low-interest rate currency to use it as a funding currency to profit, it suggests the carry trade is ‘back on’, and this would not be happening if the market was still engulfed by elevated levels of uncertainty. As one shifts the focus to equities, the same picture arises, with the S&P 500 making fresh record highs. Chinese equities? The same story, with 7 days of straight gains in the CSI 300 index. The Aussie has clearly benefited from this recovery in risk, at a time when the RBA Governor Lowe is starting to sound more upbeat on the economy judging by the speech given this Thursday. However, the Aussie performance was eclipsed by the aggressive mark-up in the New Zealand Dollar after the RBNZ hints at the end of its easing bias. Shifting gears to the world’s reserve currency, the USD maintains a bullish outlook with a notable dip buying participation noted as Fed’s Powell testimony failed to act as a catalyst to alter the northbound tendency. Its neighboring peer, the Canadian Dollar, had a stellar performance as Oil keeps recovering in line with risk, while the Pound saw very tepid aggregated flows.

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Quick Take

The British Pound had no rivalry in the Forex land, with the currency finding strong demand after the British Finance Minister Sajid Javid resigned in what was seen as a surprise move. Immediately, the market started to connect the dots, assuming that the successor (Rishi Sunak) will support looser fiscal policy to satisfy UK PM Johnson wishes, and as a result, this may lead to a reduction in the odds for the BOE to cut rates this year. The Yen was the other currency that gained ground with the bulk of the gains seen in Asia as the number of reported coronavirus cases spiked, leading to algo-selling to dominate early doors. The catch, however, is that this spike in numbers won’t be sustained as it was due to change in the standards to measure the disease by the Health Commission for Hubei Province. Nonetheless, it was enough to see the spectacular 7-day bull run in the Chinese market to come to an end and weakness to ensue in the Aussie and the New Zealand Dollar, even if the losses were marginal. The Canadian Dollar was also affected by the selling in carry trades, but the losses were minimal. The USD continues to put up a fight to prevent further downside and as I pointed out when analyzing aggregated flows in the charts section, while the USD valuation is high, the current pullback is the most pronounced seen in 2020, hence counting for further USD weakness is betting on this 2020 pattern to be broken; quite a bold call if you ask me. A currency which just keeps on delivering for the satisfaction of sellers is the Euro, unable to find sufficient buyers to stop the bleeding. Speculation that a dovish shift in rhetoric at the March ECB meeting could be in store amid the slowdown in China’s economic activity is one of the narratives doing the rounds.

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Quick Take

Last Friday was one of those uninspiring days with minimal flows in the G8 FX complex. Buy on dip strategies continue to thrive in the British Pound and US Dollar markets, while the Japanese Yen has firmed up its stance in recent days too, despite fresh record highs in US equities. These currencies are by a large margin the strongest since the unraveling of the coronavirus crisis in China, even if the Pound trades based on factors largely non-related to the drama China is undergoing as Brexit/politics-led stories play the bigger role. Therefore, it is safe to say that the USD and the JPY are by far the fiats drawing the most demand by such an uncertain landscape.

The coronavirus has led, on the contrary, to the Aussie and Kiwi, now joined by the outperformance of the Euro, as the other group of three currencies most punished by this new dynamics in the market. As weeks have rolled by and the market keeps working out the ramifications of the coronavirus, this fall in the Euro to multi-year lows appears to carry a clear message about the impending risks of a more dovish ECB heading into the March meeting. The story here is that when ‘China sneezes, Germany catches a cold (no pun intended)’, so the market is betting on this Chinese drama to re-instill economic sluggishness in Europe, something that the ECB may have to act upon through easier tools.

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