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The risk-off flows returned to Asia this Friday, as mounting China coronavirus death toll and new confirmed cases globally spooked investors and boosted the demand for the safe-havens at the expense of the risk assets. Meanwhile, a typical pre-US Payrolls caution trading also dented the appeal of the higher-yielding assets, as markets ignored the recent US-China trade optimism.

Within the G10 basket, the Australian dollar emerged as the main laggard, as AUD/USD traded weaker around 0.6715 following the Australian GDP forecasts downgrade in the Reserve Bank of Australia’s (RBA) quarterly Statement on Monetary Policy. The Kiwi also remained pressured in a tight range around 0.6450, despite an uptick in New Zealand’s Inflation Expectations for Q1 2020.

The yen, on the other hand, drew bids, as the US equity futures, Treasury yields and Asian equities fell back into losses amid risk-aversion. Subsequently, USD/JPY traded with bearish bias while below the 110 level.  Meanwhile, the EUR/USD pair attempted a tepid bounce amid a broad-based US dollar retreat. But the further upside appears capped ahead of the key German macro news. The Cable traded with small gains below 1.2950 amid EU-UK trade deal optimism and upbeat UK retail trade survey.

On commodity markets, oil prices pared gains and traded flat amid worries over the China coronavirus impact on global growth. Gold futures on Comex also trade little changed around $1570 levels.

Main Topics in Asia

RBA’s Lowe says economic growth to pick up to 2¾ per cent this year and 3 per cent over 2021

RBA Lowe: Coronavirus risks to Australia greater than SARS

Fed’s Quarles: Important to focus on size of fed balance sheet relative to GDP, not on absolute size

RBA’s Monetary Policy Statement said unemployment would have to be moving “materially higher” to hike

Japan’s Nishimura: Coronavirus outbreak starting to impact economy

Russia ForeignMin Lavrov: Russia supports OPEC+ proposal to cut oil output

PBOC: China fully confident and able to cope with possible impact from coronavirus outbreak on economy

RBNZ Survey: New Zealand inflation expectations rise in Q1, Kiwi keeps losses

China Vice FinMin Yu: Will ensure fiscal funding for coronavirus control

China CBIRC Chair Zhou: Coronavirus will not have big impact on China’s financial system

China’s Pres. Xi: China has taken comprehensive measures for coronavirus outbreak

US Pres. Trump, China’s Pres. Xi reaffirmed commitment to phase one trade deal implementation

Russia’s Novak: ‘Our decision on OPEC+ recommendation will be in a matter of days’

Key Focus Ahead       

The EUR macro calendar kicks-off with the key German data flow, including the Industrial Production, Trade Balance and Current Account data, all of which will drop in at 0700 GMT. Also, of note remains the Chinese Trade figures due around the same time.

Next of relevance remains the US and Canadian January Employment data, due at 1330 GMT, which will set the tone across the fx space for the coming days, with the US Non-Farm Payrolls data to headline. Later on, at 1500 GMT, the Canadian Ivey PMI will be reported while oil traders will await the Baker Hughes US Oil Rigs Count data, lined up for release at 1800 GMT.

When is the German Industrial Production and how could it affect EUR/USD?

EUR/USD defended the support at 1.0964, the 76.4% Fib level of the rally from 1.0879 to 1.1240, on Thursday, but so far, the bounce has been capped below 1.1000. The probability of the German Industrial Production surprising on the higher side is quite low.

GBP/USD bounces off six-week low, focus on Brexit headlines, US NFP

GBP/USD registers mild gains below 1.2950 while heading into the London open on Friday. The pair dropped to a multi-day low on Thursday amid broad US dollar strength but bounced off-late amid risk-aversion and Brexit positive headlines.

US Non-Farm Payrolls January Preview: Indications turn positive

Payrolls forecast to be moderately higher in January, unemployment stable. ADP employment soared to 291,000 after December’s 199,000. Jobless claims at 211,750 continue near record run.

Canada Net Change in Employment January Preview: Is this the month?

Job creation expected to moderate after volatile second half in 2019. Unemployment rate to be stable near 45 year low. US-China trade pact could help Canadian employment.