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The markets’ risk perception saw a slight turnaround, as the sentiment somewhat soured, after G7’s draft coronavirus response statement provided little in way of details on expected global coordinated stimulus efforts.

Although expectations of a global coordinated policy action kept the investors hopeful. The Asian stocks outside Japan rebounded while the US bonds witnessed outflows that benefited the US Treasury yields across the curve. S&P 500 futures erased early gains and turned negative, which dragged USD/JPY back below the 108 handle.

The Aussie dollar jumped on the Reserve Bank of Australia’s (RBA) surprise 25bps rate cut to cushion the economic blow from the virus spread. AUD/USD hit a high of 0.6566 on the rate decision, having tested the 0.6500 level in early Asia. The Kiwi traded weaker around 0.6250 while USD/CAD rose briefly above 1.3350 despite the bounce in oil prices, fuelled by OPEC+ output cuts optimism.

Among the European currencies, EUR/USD stalled its rally and consolidated around 1.1150 while the cable’s bounce remained capped below 1.2800. The Swiss franc gained vs. the greenback amid cautious market mood while the traditional store of value, gold, hovered around $1600 mark amid global easing hopes.

Main topics in Asia

US VP Pence: Despite latest coronavirus-related deaths, risk to Americans remains low

US Sec. of State Pompeo: State department is working with HHS Sec. Azar and VP Pence on coronavirus

Abe: Japan has already compiled stimulus package aimed at forestalling risks

Australian PM Morrison: Targeted fiscal stimulus needed after coronavirus outbreak

South Korea confirms 600 new coronavirus cases, 3 new deaths

NZ Treasury: Domestic data signaled a pick up in momentum but coronavirus weighs on outlook

Redmond, Washington declares a state of emergency due to coronavirus outbreak

RBA cuts Official Cash Rate by 25 bps to 0.50%, AUD/USD jumps

RBA: Board took this decision to support economy as it responds to global coronavirus outbreak

Westpac, CBA, NAB lower variable interest rates by 0.25% per annum after RBA rate cut

G7 now drafting statement on coronavirus response to issue Tuesday or Wednesday – Reuters

Key focus ahead       

Markets brace for the G7 finance chiefs and central bankers’ response to the negative economic impact of the coronavirus outbreak, as they will hold a teleconference led by the US Treasury Secretary Mnuchin and Fed Chair Powell at 1200 GMT.

In the meantime, the coronavirus-led updates and hopes of global stimulus support will continue to drive the risk trends.

On the data front, the focus will remain on the key Eurozone Preliminary Consumer Price Index (CPI) data among other second liner releases. Also, the UK Construction PMI report will grab some attention at 0930 GMT amid ongoing EU-UK post-Brexit trade talks and ahead of the Bank of England (BOE) outgoing and incoming Governors Carney and Bailey’s testimony before the UK Treasury Select Committee.

In the NA session, New Zealand’s GDT Price Index, American Petroleum Institute’s (API) weekly Crude Stocks data and US Democratic Primaries Super Tuesday will be closely eyed, in absence of significant US macro data. Fourteen states vote on the most important US Democratic primaries’ day. 

EUR/USD: Rally stalls as ECB rate cut bets rise, Eurozone CPI eyed

The upside in EUR/USD looks to have stalled with markets pricing higher odds of a European Central Bank (ECB) rate cut next week. ECB could likely cut rates by 10 bps. A below-forecast Eurozone CPI would bolster the rate cut bets, sending the EUR lower. 

GBP/USD: Firmer, still below 1.2800, UK data, G7 call in focus

GBP/USD bounces off five-month low but remains below 1.2800 ahead of the London open. The EU-UK post-Brexit trade talks, G7 conference call on coronavirus’ response and BOE Governor Carney’s testimony to hog the limelight.

Eurozone inflation preview: Small miss may trigger more ECB stimulus, accelerate EUR/USD correction

Core eurozone inflation is set to advance from 1.1% to 1.2%. The ECB may enact stimulus in response to coronavirus, and inflation may have an impact. EUR/USD’s rise may be dented by a miss on expectations. 

All eyes on Tuesday’s G7 amid risk reset

The focus now turns to the G7 finance minister meeting (1 pm France time), led by Mnuchin and Powell, who will be discussing the coronavirus.

UK Treasury committee to question BOE’s Carney and Bailey

The UK Treasury Committee is to question BOE’s Carney and Bailey.