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Dollar & Yen Firmer as Investors Hold Their Hands on Coronavirus Uncertainty

While risk sentiments stabilize today, there is no clear momentum of any meaningful recovery in global stock markets. Investors remain on guard against new developments of China’s coronavirus outbreak, which confirmed cases exceed 2003’s SARS already. Yen and Dollar trading generally firmer today, as in early US session. Though, Swiss Franc is pressured together with Aussie and Kiwi.

In Europe, currently, FTSE is up 0.17%. DAX is up 0.17%. CAC is up 0.44%. German 10-year yield is down -0.037 at -0.376. Earlier in Asia, Nikkei rose 0.71%. Hong Kong HSI dropped -2.82% in post-holiday catch up. Singapore Strait Times rose 0.04%. Japan 10-year JGB yield rose 0.0003 to -0.037.

Focus will turn to FOMC rate decisions. Markets are pricing in no chance of a cut today and Fed would in no way spoil such expectations. Fed Chair Jerome Powell would reiterate that monetary policy is at the right place. The committee will need more time to gauge the impacts of last year’s three rate cuts, as well as impact of US-China trade deal phase one etc. Overall, the announcement and press conference will likely be a non-event.

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Here are some previews on FOMC:

US goods trade deficit widened to $68.3B

US goods trade deficit widened 8.5% mom to USD -68.3B in December, larger than expectation of USD -64.5B. Goods exports rose USD 0.4B to USD 137.0B. Goods imports rose USD 5.8B to USD 205.3B.

Wholesale inventories dropped -0.1% mom to USD 675.6B. Retail inventories was flat at USD 661.2B.

China’s GDP growth could slow to 5% or below in Q1 due to coronavirus outbreak

Zhang Ming, an economist at the Chinese Academy of Social Sciences, said China’s annualized growth could slow to 5.0% in Q1 this year, or even lower, due to coronavirus outbreak. That’s sharply lower than original estimate of 6.0% annualized growth. While there could be recovery afterwards, full-year expansion could flow from 2019’s 6.1% to just 5.7%.

He estimated that the impact of the current coronavirus would be significantly higher than that of SARS back in 2003. Now, China’s economy is much more reliant on services and consumption. The outbreak has also hit sectors including transportation, tourism, catering and entertainment. It could also weigh on the employment market as unemployment rate could exceed 5.3% in the coming months.

In response, Zhang expected the government to step up policy support while PBoC could lower the reserve requirement ratios for banks and interest rates.

Germany Maas: Without meeting EU standard UK will not have full access to the single market

German Foreign Minister Heiko Maas said in a Die Zeit article that “we all want zero tariffs and zero trade barriers” between EU and UK. However, “that also means zero dumping and zero unfair competition.”

He emphasized, “Without similar standards to protect our workers, our consumers and the environment, there can be no full access to the largest single market in the world.”

Mass also urged that EU and UK must conduct the negotiations regarding post-Brexit relationship in a way that “won’t harm the European Union”.

German Gfk consumer sentiment rose to 9.9, economic expectations improved

Germany Gfk Consumer Sentiment for February rose to 9.9, up from 9.7, beat expectation of 9.8. Economic Expectations also rose from -4.4 to -3.7.

Rolf Bürkl, GfK consumer expert: “Initial agreements in the trade dispute between the United States and China will also ease the situation in Germany. As an export nation, the country relies on the free and unrestricted exchange of goods.”

“The positive start for the consumer climate in 2020 confirms our assessment that private consumption will continue to be an important pillar of the German economy this year. For the year as a whole, GfK forecasts real growth in private consumer spending in Germany of one percent.”

Also released, Eurozone M3 money supply rose 5.0% yoy in December, below expectatoin of 5.5% yoy. Swiss ZEW economic expectations dropped to 8.3 in January, down from 12.5.

BoJ: Only halfway out of Japanification, downside risks still significant

In the Summary of Opinions of BoJ’s January 20/21 meeting, it’s noted that there has been “no further increase in the possibility that the momentum toward achieving the price stability