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The Week Ahead – Virus risk uncertainty, Powell testifies to Congress, RBNZ to signal patience, and Germany’s recession fears

Wall Street’s resilience will be tested again as some clarity emerges on whether the Chinese containment efforts were successful in limiting the spread of the virus globally.  The death toll and number of infections continue to rise in China, but optimism is growing the lockdown efforts in Hubei have prevented a broader breakout.  The coronavirus economic impact to Chinese growth is unknown and if the larger manufacturers decide to keep their workers at home even longer, markets will quickly have to price in further demand destruction.

Fed Chair Powell’s testimony to Congress will focus heavily on the coronavirus, the “new risk” to the economic outlook.  Congress will want further clarity on what the Fed is prepared to do and how will the coronavirus impact their current plans with the growing of the balance sheet.

On Tuesday, Democrats will get another chance at restoring voters’ faith in elections.  Wall Street is primarily interested in seeing if a progressive will emerge as the frontrunner for the democratic nomination.  Financial markets however might not see any strong shifts with risk appetite as President Trump is still favored to get re-elected.

Earnings season will also deliver critical updates from Alibaba, Cisco, Toshiba and along with several car and plane manufacturers.  The latest updates on production in coronavirus impacted regions will be closely followed. Extended halting of operations could start to weigh on multi-nationals.


The upcoming week has a busy calendar filled with US economic data releases, Fed speakers and Treasury auctions.  The US economy is strong and if growth reaccelerates and inflation picks up, we could see rate hike calls return once coronavirus concerns ease.  Powell’s testimony to Congress on Tuesday and Wednesday will be the main event with investors also paying a close look at retail sales and consumer sentiment data on Friday.

Phase-two trade talks are should not begin until China knows how big of a downturn the coronavirus will deliver to their economy.  China may push for some leniency in delivering some of the phase-one purchase commitments until travel has returned to normal.  The recent decision by the Chinese to halving tariff on US goods was done mainly with the hope the US will play nice until they know the overall impact the virus will have on their economy.


Brexit trade deal uncertainty has been dragging down the British pound.  Expectations are mixed on whether Boris Johnson will be able to secure a trade deal before the end of the year.  In the meantime, the focus will shift to the reshuffling of his cabinet, which is not expected to be massive and the economic health of the UK economy.  Tuesday will see the release of preliminary fourth quarter GDP, December manufacturing and industrial production data and the trade balance release.  While we could see growth turn negative, expectations are for the December production readings to rebound.


Mexico’s debt burden has the government scrambling for cash.  New regulations are coming and will impact foreign online businesses.  The proposed sales tax will likely have an impact on Amazon, Netflix, Airbnb and Uber.  Mexico has a very attractive tax rate for businesses, one of the lowest in the OECD, so the government might not see too much resistance with fresh taxes here. President Andres Manuel Lopez Obrador is trying to make up for a tax revenue shortfall of 3%, around 109 billion pesos.  AMLO is trying to not raise Mexico’s debt burden as they will see likely see a downgrade from the big three ratings and possibly risk a cut into junk status.  With the Mexican economy going through a downturn, AMLO will try to not kill the economy with tax increases.

On Thursday, Mexico is expected to see the Banxico cut rates again by 25-basis points.  Economic activity has been weak for Mexico and sentiment is falling with domestic demand.


Emerging market FX will likely take a queue from the overall flight to quality trade. The lira might not see too many big swings from the release of December industrial production data nor the November unemployment rate.


The Bank of Russia has rate cuts on cruise control following the sixth consecutive rate cut and could very well cut again at the next meeting.  Russia is vulnerable to weakness in China and could see the ruble continue to weaken on safe-haven flows to the dollar.

US Politics

Following the debacle that was the Iowa Caucus, all eyes will be on Tuesday’s New Hampshire primary.  This is do or die time for Joe Biden and his campaign and if he has another disappointing outing that could be the end of his run for the nomination.


Coronavirus and its global spread remains the hot topic. News reports that the first person-to-person transfers outside of China should be causing concerns, but it hasn’t….so far. With a 14-day incubation period estimated for the virus, we are approaching the deadline when we will find if the containment/isolation process is a success.

So far only 2 deaths have been reported outside of mainland China, hence the bullish themes in equity markets this week. Data will likely continue to take a back seat with the Wuhan virus grabbing the headlines.

Next week’s data releases include CPI data for January (a slight increase is nothing extraordinary during the Lunar New Year period)  while retails sales and industrial production on Friday will suffer from the New year lockdown in some provinces.


No signs of a pause in the escalation in the spread and death toll from the Wuhan virus this week and next would hurt risk appetite, pressuring equities to the benefit of the usual safe havens of gold, the yen, Swiss franc, the US dollar and US Treasuries. It would be negative for oil and industrial metals.

Hong Kong

Anti-government protests have really taken a back seat with the coronavirus outbreak. Surprisingly, the number of Hong Kong cases remains relatively low (21 at time of writing) but there’s still the stigma of one virus-related death. The Hong Kong dollar is holding up pretty well, with USD/HKD still in the lower half of the permitted trading band. In the meantime, the offshore yuan has gained 0.35% versus the US dollar so far this week.


Any escalation in the coronavirus outbreak, especially given Hong Kong’s “connectivity” with the Chinese mainland (though border crossings have now been cut back to two locations) would be negative for the HK33 index and could push USD/HKD back to the upper half of the trading band. Carrie Lam is still under pressure to resign.


The Indian central bank left its benchmark rate unchanged at Thursday’s meeting. It was the second meeting in a row the Bank stood pat after five consecutive cuts in a row during the 2018-2019 period but the central bank said the decision was not a pointer for future policy and a pickup in growth can be achieved by other means rather than monetary policy. India now has three coronavirus cases.


The Central bank acknowledged that the local economy was sluggish, which would be helped by government spending.


RBA Governor Lowe has been moderate in recent speeches, almost suggesting he was unwilling to cut rates further. Local yields are higher this week and the Aussie has overcome disappointing data releases.


Gov Lowe expects a 0.2% hit to Q1 GDP as a result of the wildfires. If it’s more, it will be negative for the Aussie. However, that GDP data will not be available until June.

New Zealand

The RBNZ is expected to hold rates at Wednesday’s meeting, though given the coronavirus outbreak, we may hear comments about the preparedness/scope to ease policy.


A surprise cut would hurt the kiwi.


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 a fifth weekly decline with oil prices, OPEC + is still trying to see if they can do anything to prevent prices from collapsing any further. We were suppose to see a commitment of an additional cut of 600K  bpd, but the Russians needed more time to agree upon  it. Oil will have trouble stabilizing unless we see positive news on the virus front or if we see a significant amount of supply removed.


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 is getting a steady flow of good news that seems to make it poised to break above its recent $6,400 to $10,000 range.  Bitcoin is benefiting from some safe-haven flows, improved progress in mainstream usage, and as the heavily anticipated halving event in May nears.  While Bitcoin is not a true safe-haven, cryptocurrency demand improved following the recent escalations in the Middle East.  Progress on the Lightning network is also boosting hopes we could see further improvements in mainstream usage.  The recent rally is a part of a broader appeal for risky assets as optimism grows the coronavirus impact might be limited to the first quarter and on optimism that China will play nice with the US on phase-two trade talks.

Economic Releases and Events

Sunday, February 9th

6:50 pm Japan Dec BoP Current Account Adjusted: ¥1.66Te ¥1.79T prior

8:30 pm China Jan CPI Y/Y: 4.9%e v 4.5% prior; PPI Y/Y: 0.0%e v -0.5% prior

Monday, February 10th

(Feb10th-15th) China Jan Aggregate Financing, New Yuan Loans and Money Supply Data

1:45 am Swiss Jan Unemployment Rate (SA): No est v 2.3% prior

2:30 am Swiss Jan CPI M/M: -0.3%e v 0.0% prior

8:15 am Canada Jan Housing Starts: No est v 197.3K prior

8:30 am Canada Dec Building Permits M/M: No est v -2.4% prior

7:30 pm Australia Jan NAB Business Confidence: No est v -2 prior

Tuesday, February 11th

Japan closed in observance of National Foundation Day

4:30 am UK Preliminary Q4 GDP Q/Q: 0.0%e v +0.4% prior

4:30 am UK Dec Manufacturing Production M/M: 0.2%e v -1.7% prior

4:30 am UK Dec Industrial Production M/M: 0.2%e v -1.2% prior

5:00 am Eurozone Dec Industrial Production M/M: -0.3%e v +0.2% prior

6:00 am US Jan NFIB Small Business Index: No est v 102.7 prior

10:00 am Fed Powell will discuss the economy and monetary policy before the House Financial Services Committee

8:00 pm New Zealand Central Bank (RBNZ): Expected to keep Official Cash Rate at 1.00%

Wednesday, February 12th

10:00 am Fed Chair Powell delivers semi-annual testimony to the Senate Banking Committee.

10:30 am US DOE Crude Oil Inventories

2:00 pm US Jan Federal Budget Balance: No est v -$13.3b prior

6:50 pm Japan Jan PPI Y/Y: 1.5%e v 0.9% prior

Thursday, February 13th

2:00 am Germany Jan Final CPI Y/Y: 1.7%e v 1.7% prelim

8:30 am US Jan CPI M/M: 0.2%e v 0.2% prior; Y/Y: 2.4%e v 2.3% prior

8:30 am US Weekly Jobless Claims

1:00 pm US Treasury 30-Year Bond Auction

4:30 pm New Zealand Jan Business Manufacturing Index: No est v 49.3 prior

11:30 pm Japan Dec Tertiary Industry Activity M/M: 0.3%e v 1.3% prior

Friday, February 14th

2:00 am Germany Q4 Preliminary Q/Q: 0.1%e v 0.1% prior; Y/Y: 0.4%e v 0.5% prior

2:00 am Eurozone Q4 Preliminary Q/Q: 0.1%e v 0.1% prior; Y/Y: 1.0%e v 1.0% prior

8:30 am US Jan Retail Sales M/M: 0.3%e v 0.3% prior

9:15 am US Jan Industrial Production M/M: -0.3%e v -0.3% prior

10:00 am US Feb Preliminary U of Michigan Sentiment: 99.0e v 99.8 prior

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 [4]

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 TradeTheNews.com, 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