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Several media reports in Asia suggested that China’s coronavirus has spread internationally, with the death toll rising. Japan, Macau, Taiwan and Singapore suspended travel to Wuhan, the epicentre. The rising concerns over the spread of the novel virus has rattled financial markets, as investors sought flight to safety.  Therefore, the demand for the risk assets such as the regional equities, Wall Street futures and Treasury yields was almost killed.

The Asian equities were a sea of red, led by the sharp decline in the Chinese stocks while oil prices tumbled to seven-week lows amid concerns that the virus outbreak might wallop the global economic upturn. The traditional safe-havens in gold and the yen drew bids, as gold prices firmed up near $1560 while USD/JPY dropped to an eight-day low near mid-109s.  

The strongest across the fx board was the Aussie dollar that benefited from a downtick in the Australian jobless rate and bigger-than-expected jobs growth figures. AUD/USD rallied hard to test the 0.6880 figure. The Kiwi also followed suit and briefly regained the 0.66 handle. Meanwhile, the Canadian dollar emerged the main laggard and drove USD/CAD to four-week highs above 1.3150, as oil-price weakness and broad-based US dollar rebound weighed.

Among the European currencies, GBP/USD fell for the first time in four days and headed towards 1.3100 despite Brexit optimism while EUR/USD traded in a tight range ahead of the key European Central Bank (ECB) monetary policy decision.   

Main Topics in Asia

China confirms 571 total cases of new coronavirus – China State TV

Australia Jobs Data: Unemployment Rate: 5.1% vs 5.2% expected (AUD bullish)

Australian bond yields rise as Aussie jobless rate slips to 5.1%

RBA rate cut probability falls to 30%

Macau reports second case of novel coronavirus – Cable TV

PBOC injects CNY 240.5 bn via one-year TMLF

Macau has cancelled all Lunar New Year festivities – TVB

Fitch: China’s manufacturing investment growth to recover on US-China partial trade deal

NZ FinMin Robertson: More government spending to be announced to support economy

Shanghai Composite drops below 200-HMA, Asian stocks bleed

PBOC Adviser Ma: China’s central bank to lower funding costs, prevent debt and inflation risks

USD/INR bounces back towards 71.25 despite RBI rate cut pause bets

Key Focus Ahead       

The main highlight in Thursday’s macro calendar remains the ECB Interest Rate Decision due to be announced at 1245 GMT. Markets expect the ECB to stand pat on its monetary policy but could start the strategy review. Ahead of the ECB, the Bank Indonesia’s Rate Decision will be closely watched (around 0730 GMT) after the rupiah posted strong gains starting out 2020.

In the NA session, the US weekly Jobless Claims will be released at 1330 GMT alongside the ECB Press Conference that will be addressed by President Lagarde. Lagarde’s take on the bloc’s and Germany’s economic situation will grab the eyeballs and could have a significant impact on the EUR markets. At 1500 GMT, the Eurozone Consumer Confidence for January will drop in, soon followed by the Energy Information Administration (EIA) Crude Oil Stocks Change data at 1600 GMT.

Apart from the ECB decision and the second-tier macro news, the China virus-related headlines will continue to influence the market sentiment in the day ahead.

EUR/USD: Sidelined in a narrow range ahead of ECB

EUR/USD is lacking a clear directional bias ahead of the all-important European Central Bank (ECB) rate decision. The spot has been largely restricted to a narrow range of 1.1120-1.1070 since Jan. 17. ECB is expected to keep rates unchanged and announce the start of the strategy review. 

GBP/USD snaps three-day winning streak despite UK PM Johnson’s Brexit victory

GBP/USD holds the lower ground near 1.3125 ahead of the London open on Thursday. The pair snaps the three-day winning streak, ignoring the UK PM Johnson’s ability to end the years of Brexit deadlock by winning support for his Brexit Withdrawal Agreement Bill (WAB).

ECB Preview: Glass half green or a Lagarde drag on EUR/USD? Three scenarios

The ECB is set to leave rates unchanged in its first meeting of 2020. President Lagarde may find hope at the potential of fiscal stimulus and improving inflation. A focus on downside risks – which remain significant – may send the euro down.