Collinsonfx Daily Market Commentary

Asian markets crashed in trade ahead of the Chinese Lunar New Year, alarmed by the outbreak of the 'Coronavirus' in China and the possible spread across Asia and the World. Chinese officials have confirmed 200 cases and recognised that it is contagious, while the US CDC confirmed a case has been detected. The Chinese New Year is a mass migration of hundreds of millions of Chinese people returning home, exasperating the risk of the virus spreading, hitting tourism, airlines, consumer and restaurant stocks. The Bank of Japan left rates unchanged, which are already negative, although upgraded growth forecasts. This did not satisfy local equity markets, which were caught up in the 'coronavirus' panic, with comparisons being made to the SARS outbreak in 2003.
 
The World Economic Forum in Davos is underway, but has been overshadowed by the news from Asia, although the IMF did kick it off with a slight downgrade of global growth forecasts. President Trump confirmed that the new front in the global trade wars was the EU and that they would be subjected to tariffs on vehicles, if a trade deal was not reached. This would be cataclysmic for the EU, meanwhile the UK is keen to agree to a Super-Trade deal with the US, giving them the inside running. The EUR traded 1.1090, while the GBP pushed back to 1.3050, with trade deals front and centre.
 
Commodity currencies were steady overnight, with the AUD trading 0.6850, while the NZD held 0.6600. These economies would be disrupted by the Chinese Coronavirus escalation globally and the impact of this, on their economies could be dramatic. It is early days and no need for panic.