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  • USD/JPT spikes back above 109 the figure on hotter Chinese data.
  • Coronavirus will likely be contained, according to the WHO. 

USD/JPY rallied following the Chinese data which showed a slight improvement in the services sector and came in line with expectations in the manufacturing. USD/JPY is currently trading at 109.05 having travelled between 108.87 and 109.13. 

Breaking: Chinese NBS Manufacturing PMI (Jan): 50 vs 50 expected (AUD rises slightly)

However, the data was actually conducted before some of the recently heightened concerns of the coronavirus. The Chinese State Bureau explained that the “PMI survey was conducted before Jan 20 meaning the impact of the coronavirus is not fully shown.”

WHO presser which portrayed a surprising relaxed tone

The US session was plagued with risk-off until the WHO presser which portrayed a surprising relaxed tone over what they termed as an international emergency. There was an element of clam in their delivery of that statement, confirming investors with a positive outlook considering that China has responded fast enough to contain the spread and the nations that are developed enough also have the capacity to control the spread while a vaccine is in the throes of being manufactured. That is now where markets will focus and promises of updates were delivered in the closing moments of the event.  

Meanwhile, US stocks ended in the green but were still down for the week so far. Positive earnings were a factor. However, USD/JPY could continue to unwind on the basis that some of the risk-off has been sucked out of the dollar and US yields continue to print lower lows. US 2-year treasury yields fell from 1.41% to 1.37% but then back to 1.40% while UST 10-year yields edged down from 1.58% to 1.53% (a fresh four-month low) but then bounced to 1.57%.

“Markets are pricing little chance of easing at the next Fed decision on 18 March, but a terminal rate of 1.10% (vs Fed’s mid-rate at 1.63% currently),” analysts at Westpac explained. This follows a slightly dovish tilt from the Fed’s governor, Jerome Powell, who is showing his concerns over persistently low inflation below the target of 2%. 

USD/JPY levels