Forex news from the European morning session - 5 February 2020
Headlines:
- More details on the Chinese report on drugs said to treat the new coronavirus earlier
- ECB's Lagarde: Short-term uncertainties are mainly related to global risks
- WHO spokesman: There are no known effective therapeutics against this coronavirus
- China to issue more tax, fiscal measures to aid fight against coronavirus impact
- UK January final services PMI 53.9 vs 52.9 prelim
- Eurozone January final services PMI 52.5 vs 52.2 prelim
- China also says have found effective drug to treat people with new coronavirus
- UK scientists make 'significant breakthrough' in race for coronavirus vaccine
- Bank of Thailand cuts key rate to 1.00% from 1.25%
- ECB's de Cos: 2% inflation target would bring 'clarity'
- Shanghai to extend school closures until end of February
Markets:
- AUD leads, CHF lags on the day
- European equities higher; E-minis up 0.8%
- US 10-year yields up 3.5 bps to 1.634%
- Gold up 0.1% to $1,554.21
- WTI up 2.4% to $50.80
- Bitcoin up 3.3% to $9,445
It is still all about risk and the coronavirus outbreak this week as the market began with some relative calm before turning more risk-on on virus treatment hopes.
There were two separate reports - one from China and one from UK - around the same time but either way, risk jumped on the headlines as European stocks turned losses to gains and Treasury yields also spiked higher across the curve.
As such, USD/JPY moved up from 109.40 to 109.72 while the aussie built on its post-RBA gains to push higher to 0.6774 against the dollar from 0.6735.
The dollar is a bit more mixed as it recouped losses against the kiwi and loonie while extending gains against the euro, pushing EUR/USD nearer to 1.1000 again.
Meanwhile, the pound is in a world of its own as cable moved up from 1.3040 to 1.3070 as we saw better revisions to initial UK PMI data. But gains were short-lived as price now slips back to around 1.3040-50 levels.
Despite the coronavirus headlines being more optimistic than what the details suggest, the market is still running with it ahead of North American trading.
I still reserve some skepticism in all of this but we'll see how things go in the coming days.
