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As the dust settled over the emergency US Federal Reserve (Fed) rate cut aftermath, the Asian traders witnessed risk reset, reflective of the recovery in the US Treasury yields and equity futures.

Despite a recovery in the risk sentiment, the Asian equity markets traded mixed, with a sense of caution. The Fed rate cut failed to lift the market confidence, instead, investors took as a panic signal, as the global economy battles the coronavirus crisis.

Amid cautious market mood, USD/JPY bounce from a five-month low of 106.86 remained capped below 107.50. However, the Aussie benefitted from Australia’s Q4 surprise growth numbers but failed to hold the gains above 0.6600 amid a collapse in the Chinese Services PMI to a record low of 26.5 last month. The Kiwi kept its recovery momentum intact below 0.6300. The USD/CAD pair stalled its recovery and fell back to the midpoint of 1.33 handle amid a rebound in oil prices.

Among the European currencies, EUR/USD corrected slightly from two-month tops but held above 1.1150 while the cable defended 1.2800 amid a broad-based US dollar rebound. The Swiss franc slipped vs. the greenback despite looming coronavirus risk while the traditional safe-haven, gold, eased below $1650 mark after the recent upsurge..

Main Topics in Asia

World Bank announces $12 billion immediate support for COVID-19 country response

China Securities Journal: PBOC may cut OMO rates this month

Fed’s Evans: Fed was very well positioned but felt rate reduction would help boost confidence

HKMA announces 50 bps rate cut, USD/HKD pulls back from 13-day low

Australia Q4 GDP beats estimates and supports AUD higher

US two-year yield drops to lowest since July 2016

South Korea unveils $9.8 billion stimulus to fight coronavirus

Australian Treasurer Frydenberg: Working on targeted series of fiscal measures

China’s Caixin services PMI slumps to a record low of 26.5 in Feb, Aussie trims gains

China’s NHC: Mainland China reports 119 new coronavirus cases vs. 125 previous

Japanese coronavirus infections reach 1,000 cases – Reuters

UK to register coronavirus/ COVID-19 as ‘notifiable disease’ – BBC

S. Korean FinMin: Will take stern action if needed to stabilize markets

Biden dominates Super Tuesday returns but nomination remains elusive

Key Focus Ahead       

With the expectations of global coordinated monetary stimulus still in play, the sentiment across the financial markets will be driven by the risk trends and coronavirus updates.

Therefore, the macroeconomic data could likely have a limited market impact. The immediate focus is on the German Retail Sales and Swiss CPI data due at 0700 GMT and 0730 GMT respectively. Next of relevance remains the Euro area and the UK final Services PMI reports due later in the European session.

From the UK docket, the US Services PMI reports from Markit and ISM will grab some attention after the ADP jobs report. However, the main event risk this Wednesday remains the Bank of Canada (BOC) monetary policy decision due at 1500 GMT. The press conference by the BOC Chief Poloz will be also closely for fresh hints on the economic and monetary policy outlook.

Meanwhile, the EIA US Crude Oil Stocks Change data, dropping in at 1530 GMT, will offer fresh impetus to the oil traders.

EUR/USD: Off two-month highs as US yields recover, focus on risk sentiment

EUR/USD pulls back from eight-week highs as US yields bounce from record lows. The US index futures are pointing to risk reset. Risk-on will likely weigh over the EUR, a safe-haven currency. 

GBP/USD defends 1.2800 ahead of UK Services PMI

GBP/USD manages to defend the 1.28 handle ahead of the London open. The Cable recently benefited from the broad US dollar weakness after the Fed’s shock 0.50% rate cut. Markets eye UK Services PMI and coronavirus updates for fresh impulse.

US ADP Employment Change February Preview: Fears but few facts

February private payrolls projected to moderate after very strong January. ISM manufacturing employment index rose in January.

US ISM Non-Manufacturing February PMI Preview: The Fed, US Treasuries and the dollar

Services PMI forecast to slip in February but remain expansionary. Fed rate cut underlines US and global risks.

BOC Preview: Buy the coronavirus cut rumor, sell USD/CAD on the fact? Five scenarios

The Bank of Canada is set to cut interest rates in its March decision. The BOC would be responding to the coronavirus crisis and recent weakness in the economy.