Global Rates/FX

 

The death toll from coronavirus in mainland China soared past 1,000 on Tuesday with a record daily rise in fatalities, although the number of new confirmed cases fell. Another 108 new coronavirus deaths were reported, a daily record, bringing the total number of people killed in the country to 1,016, the National Health Commission said. There were 2,478 new confirmed cases on the mainland on Feb. 10, down from 3,062 on the previous day, bringing the total to 42,638.

The coronavirus outbreak could trim China’s full-year economic growth rate by as much as 1% t in 2020, a senior member of a Chinese government think tank indicated. At present, according to different scenario assumptions, researchers expect the negative impact of the epidemic on full-year GDP growth to be in the range of 0.2% to 1%.


The Fed continues to be data driven, the latest being comments by Philly Fed president Patrick Harker said he expects economic growth to reach 2% this year and that the unemployment rate could stay below 4% for a couple of years. Fed officials left rates unchanged at last month’s policy meeting, with the target range for its benchmark rate at 1.50% to 1.75%. Policymakers said rates are well positioned following three rate reductions last year and signaled rates are likely to stay on hold unless there is a substantial change to the economic outlook.

The AUD, which is highly sensitive to China’s economic health because of Australia’s commodity-heavy export profile, rose 0.3% to $0.6707 It had hit a decade low on Monday and remains nearly 4.5% lower this year. The JPY was slightly softer by mid-session at 109.84. Volumes were lightened because it is a public holiday in Japan and markets there are closed. The currency gave up some of its safety flows, implying some normalcy back in the G10 space.
Chart 1 – USD/JPY back at 110.00
AxJ Rates/FXHeavily-sold Asian currencies were modestly firmer on Tuesday, as investor risk appetite recovered with an apparent slowdown in the rate of coronavirus infection, even as the death toll rose.

China’s Yuan inched up against the Dollar for a second straight session on Tuesday as investors hoped authorities would be able to contain a fast-spreading virus and limit the economic fallout of the epidemic. Sentiment was supported by comments from central bank advisor Ma Jun that China should consider lowering benchmark deposit rate to enable banks to reduce lending rates for businesses. The spot market opened at 6.9750 and was changing hands at 6.9779 at midday, 96 pips firmer than the previous late session close. Prior to market opening on Tuesday, the People’s Bank of China (PBOC) set the midpoint rate at 6.9897, 34 pips or 0.05% weaker than the previous fix of 6.9863.

USD/MYR back in the 4.13 handle as markets stabilize. The currency is facing stiff resistance at 4.1500 and may retrace towards 4.100 eventually as China curbs spread of the virus. Main focus being MY Q4 GDP and 2019 print that will be released tomorrow.
Technicals – Support, Resistance and Pivot Points
Daily Sovereign Rates
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