- Global financial markets remain fully focused on the coronavirus, with the spread outside of China becoming of growing concern, notably in South Korea and Japan.
- There has been shift in price action over the past week, however, as global stock averages continued to climb to new cycle and record highs, but at a slightly slowing pace, punctuated by some jittery, rapid selloffs.
- In fact, the selloffs at the end of last week have seen notable damage to the US equity averages, neutralising intermediate-term bullish forces, from a technical analysis perspective.
- Safe haven assets, such as bonds, continue to push solidly higher, reflecting a flight to quality.
Gold has surged to the upside, probably reflecting the absence of any safe haven yield, hitting its highest point since early 2013.
- However, the most striking theme over the past week across global assets classes, has been the ongoing strength of the US Dollar, with a very bullish breakout versus the Japanese Yen (USDJPY higher).
- The USDJPY bullish break has positioned the market at its highest point since April 2019 and nearly since December 2018.
- The US dollar has pushed to multi-year highs versus the Euro and Australian Dollar in February, with AUDUSD at its lowest point since 2009, whilst EURUSD is at its weakest since May 2017.
- The Fed Meeting Minutes from their last meeting were released last week, but with a muted reaction as the FOMC have signalled they are on hold
- On the data side, preliminary data for February for Manufacturing, Services and Composite Purchasing Managers Index (PMI) from Markit, were broadly better than market expectations for Europe and the UK, although the US data missed consensus.
Key this week
- The data regarding the international spread of and deaths from the coronavirus will remain the broader market and geopolitical focus into this week, and likely for some time.
- There is no Central Bank activity of note.
- The macroeconomic data spotlight will be on German IFO, GDP, Unemployment and CPI reports through the week. From the US we get US Durable and Capital Goods Orders, then Personal Consumption Expenditure on Thursday and Friday respectively. We also get Japanese CPI and Canadian GDP on Friday.
|Date||Key Macroeconomic Events|
|24/02/20||New Zealand Retails Sales, China Industrial Production and Retails Sales, German IFO Business Climate|
|26/02/20||Nothing of note|
|27/02/20||US Durable and Capital Goods Orders|
|28/02/20||Japan CPI, German Unemployment and CPI, US Personal Consumption Expenditure, Canada GDP|