The Week Ahead – Virus Saga Continues, Iowa Caucuses are here, RBA to deliver dovish hold, and US NFP to see slight rebound

The primary driver for financial markets remains the coronavirus and its potential impact on the global economy.  It is still too early to forecast the peak of the virus or even the impact it will have on the Chinese economy.  The virus was spreading for a month before containment efforts were in place and most cases were mild.  If the virus continues to spread at a rapid rate, we might see Chinese businesses lose confidence in having their employees return to work around Feb 10th.  If China gets a big hit to GDP, we will see all their major trading partners suffer.  We should not be surprised if they are unable to deliver on their promises with the phase-one trade deal.  The risks to the global outlook are growing and we could still see the strong demand for US Treasuries help keep the dollar bid.

In addition to all the incremental virus updates, it will be an extremely busy week with rate decisions, voters in Iowa hit the polls in the first contest for the Democratic nomination and the US employment report which is expected to show the economy is not weak, but nowhere near overheating.



Earnings season has been pretty robust, but the focus remains stuck on the coronavirus and its impact on the global economy.  US Treasury yields will continue to freefall if the coronavirus impact intensifies.  The dollar will likely see safe-haven flows if the 10-year breaks the record low of 1.32%.  US stocks could remain vulnerable as Asia reopens.

Next week, Google, Baidu, Sony, Cigna, BP, Total, Disney, and GM report results and they may struggle to replicate the strong results we just saw from Apple, Microsoft and Amazon.

US Politics

The Iowa Caucus is here and Former Vice President Joe Biden, the front-runner looks to derail Vermont Senator Bernie Sander’s recent momentum. The Democrats look to get closer in narrowing down the field and if we see Buttigieg or Warren deliver lackluster results we could learn quickly if Sanders can win over Warren’s supporters.

President Trump will also deliver his State of the Union address to a joint session in Congress.  This however is likely to be more of a campaign event than the announcement of anything new.


The UK is finally leaving the European Union which means the topic of conversation can finally change from if to how. Trade discussions will now begin with the EU, something that should be less interesting and controversial for the UK public. Instead the last few weeks, the Bank of England has been the main topic of conversation with the odds of a rate cut having spiked. The central bank refrained from doing so this week and even indicated that the next move could be higher, rather than lower, just not likely soon. The pace of tightening is also now likely to be slower than previously anticipated. Of course, a lot could change over the coming months as we get more reliable data. The surveys have been better but the hard data needs to confirm or policy makers may be tempted to dip into the tool kit.


The Central Bank of Russia meets next week as policy makers look to solve the conundrum of why inflation has slipped below target and is continuing to trend lower even as it cuts interest rates. Another rate cut looks on the cards for the central bank as it looks to jump start the economy and hit its inflation target, two things that are currently eluding it. The economy may have other issues that, as with the rest of the world, could be resolved with more central government action but policy makers have plenty of room to lend a hand. At 6.25%, easing are efforts may be far from done but the recent cuts have been incremental and that looks likely to continue.


In addition to tracking the weakness that is emerging markets, investors will pay close attention to Mexico’s release of January inflation data.  If we don’t see a strong rebound with prices, we could see calls for another rate cut to grow for the Banxico.


The only game in town is the spread of the coronavirus in China and beyond. The number of virus-related cases has now surpassed the total during the SARS epidemic in 2002-03, though fatalities remain low in comparison. The incubation period for the virus is estimated at 14 days, so the numbers are likely to continue to get worse until the 14-days of the first “lockdown” of cities in China. That should be the middle of next week. Any reports of virus-related deaths outside of China would be a severe hit for risk appetite.

Data has taken a back seat with the Wuhan virus grabbing the headlines. Next week’s data releases include the Caixin PMIs for both the manufacturing and services sectors (both seen little changed from the previous month) and the trade data for January. January included the Lunar New Year celebrations, so the risk is the headlines will look far worse than December’s solid numbers. Generally the market aggregates the January and February numbers to remove the distortions of the Lunar New Year break. A better-than-forecast number would be a positive for risk appetite.


The severity of the escalation in the spread and death toll from the Wuhan virus would hurt risk appetite, pressuring equities to the benefit of the usual safe havens of gold, the yen, the US dollar and US Treasuries. It would be negative for oil and industrial metals. 

Hong Kong

Protests have died down though Carrie Lam is facing the same predicament one of her predecessors had in 2002-03. At that time, the leader faced opposition to China-backed national security legislation just as the SARS epidemic hit. Tung Chee-hwa resigned a few weeks later. Current leader Carrie Lam has already faced opposition to her plans to turn a newly-built housing estate into a quarantine facility as protesters set fir to the lobby area.


The severity of any protests remains the risk driver, with any escalation and violence a negative for the HK33 index and could push USD/HKD back to the upper half of the trading band. A single death in the SAR would intensify pressure for Carrie Lam to resign.


The Indian central bank is likely to leave its benchmark rate unchanged at Thursday’s meeting. This would be the second meeting in a row the Bank stands pat after five consecutive cuts in a row during the 2018-2019 period. India reported Thursday its first case of the coronavirus infection.


A surprise rate cut would push USD/INR higher but may benefit equities. More coronavirus reports would hurt sentiment. 


This week’s data has forced local banks to push back RBA rate cut expectations to the middle of the year, though this has not helped the Aussie amid the current risk-off environment. Tuesday’s meeting is expected to keep benchmark rates unchanged with a forward guidance that refers to the spreading coronavirus.


A surprise cut or a very dovish accompanying statement would be negative for the AUD. We may get a reference to the economic impact of the bushfires in New South Wales and Victoria states.


New Zealand

Quarterly unemployment data is not expected to spring too many surprises, with estimates suggesting a slight improvement in Q4. The Kiwi dollar continues to be impacted by the risk-off theme across global markets.


Nothing particular to influence apart from global themes.



Nothing of note for this week


Not really applicable…..the stronger yen on the back of safe haven flows is not expected to influence the economy too much.



After the biggest monthly drop in several months, OPEC + will look to see if they can do anything to prevent prices from collapsing any further.  Oil will have trouble stabilizing unless we see positive news on the virus front or if we see a significant amount of supply removed.  If OPEC delivers another 500k barrels per day of cuts, that could help stabilize prices.


It seems gold prices are on the verge of ripping higher.  The impact of the coronavirus on the global economy is unknown and it seems many investors may have been too optimistic.  Gold has been capped the $1,600 an ounce level, but if we see severe weakness when Asia returns to the market, we could easily prices target the $1,650 area.


Bitcoin remains stuck near the upper boundaries of its 5-month range.  Positive steps on attracting mainstream commerce and as regulatory concerns take a backseat in the news cycle have helped Bitcoin rally above $9,000.  It will be difficult to break the $10,000 mark, but if it does we could see crypto enthusiasts return strongly.


Economic Releases and Events

Sunday, February 2nd

7:30 pm AUD Dec Building Approvals M/M: No est v 1.4% prior

8:45 pm CNY China Jan Caixin Manufacturing PMI: 51.0e v 51.5 prior


Monday, February 3rd

2:00 am Turkey Jan CPI Y/Y: 11.8%e v 11.8% prior

3:30 am Hong Kong Q4 Advance Q/Q: -2.2%e v -3.2%e prior; Y/Y: -4.0%e v -2.9% prior

3:55 am Germany Jan Final Manufacturing PMI: 45.2e v 45.2 prelim

4:00 am Eurozone Jan Final Manufacturing PMI: 47.8e v 47.8 prelim

4:30 am UK Jan Final Manufacturing PMI: 49.8e v 49.8 prelim

10:00 am US Jan ISM Manufacturing: 48.4e v 47.2 prior

10:00 am US Dec Construction Spending M/M: 0.4%e v 0.6% prior

4:00 pm Atlanta Fed President Bostic discusses Big Data, Machine Learning/AI, and Digital Money

4:45 pm New Zealand Dec Building Permits M/M: No est v -8.5% prior

10:30 pm Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave the Cash Rate unchanged at 0.75% 


Tuesday, February 4th

4:30 am UK Jan Construction PMI: No est v 44.4 prior

5:00 am Eurozone Dec PPI Y/Y: No est v -1.4% prior

10:00 am US Dec Factory Orders: 0.7%e v -0.7% prior

10:30 am Mexico Jan Manufacturing PMI: No est v 47.1 prior

4:45 pm New Zealand Q4 Unemployment Rate 4.2%e v 4.2% prior

8:30 pm RBA Governor Philip Lowe gives a speech, entitled The Year Ahead

8:30 PM BOJ’s Wakatabe Speech in Ehime

8:45 pm China Jan Caixin PMI Services: 52.0e v 52.5 prior


Wednesday, February 5th

Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%

2:05 am Thailand Central Bank (BOT) Interest Rate Decision: Expected to leave the benchmark interest rate unchanged at 1.25%

5:00 am Eurozone Dec Retail Sales M/M: -0.5%e v 1.0% prior

8:15 am US Jan ADP Employment Change 150Ke v 202K prior

9:45 am US Jan Final Services PMI: 53.2 prelim v 53.2 prior

10:00 am US Jan ISM Non-Manufacturing Index: 55.1e v 55.0 prior

7:30 pm Australia Dec Retail Sales M/M: 0.1%e v 0.9% prior

7:30 pm Australia Dec Trade Balance (A$): 5.0Be v 5.8B prior


Thursday, February 6th

China Trade Data expected by end of week

1:15 am India Central Bank (RBI) Interest Rate Decision: Expected to keep Repurchase Rate unchanged at 5.15%

2:00 am Germany Dec Factory Orders M/M: 0.5%e v -1.3% prior

3:20 am ECB President Lagarde speaks in Brussels

4:00 am ECB publishes Economic Bulletin

7:00 am Czech National Bank (CNB) Interest Rate Decision: Expected to leave 2-week Repurchase Rate unchanged at 2.00%

8:30 am US Weekly Initial Jobless Claims

9:00 am ECB’s Villeroy speaks at conference on over-indebtedness in Paris

9:15 am Fed’s Kaplan speaks on Economic Outlook in Dallas

5:30 pm RBA Lowe’s semi-annual appearance before the House Economics Committee in Canberra

7:30 pm RBA Statement on Monetary Policy

9:00 pm New Zealand Inflation Expectations Q1: No est v 1.8% prior


Friday, February 7th

2:00 am Germany Dec Industrial Production M/M: -0.2%e v +1.1% prior

4:00 am Norway Q4 GDP Mainland Q/Q: 0.3%e v 0.7% prior

8:30 am USD Jan Nonfarm Payrolls: 160Ke v 145K prior; Unemployment Rate to stay steady at 3.5%

8:30 am USD Jan Average Hourly Earnings M/M: 0.3%e v 0.1% prior

8:30 am CAD Jan Net Change in Employment: 17.5Ke v +35.2K prior; Unemployment Rate: 5.7%e v 5.6% prior

11:00 am USD Fed publishes semi-annual Monetary Policy Report

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya