Global markets see another wave of risk aversion at the start of a new trading week amid the reports that China coronavirus spread is accelerating. The virus has killed at least 80 people and infected over 2,700. Against this backdrop, stock markets extended losses on Monday, with Japan’s Nikkei 225 shedding over 2%, while most Asian markets are still on holiday.
During the upcoming week, investors will have a chance to temporarily abstract their attention from the China virus theme and instead focus on the economic updates and central bank. This week will bring the Federal Reserve and the Bank of England’s meetings. It is widely expected that the Fed will leave its monetary policy unchanged on Wednesday, while the accompanying statement will hardly contain significant changes compared to the one in December. Besides, there will be no update on economic projections. Still, the central bank’s rhetoric may affect the dynamics in USD pairs. Should monetary authorities point to the easing downside risks for the economy, the greenback may receive a short-lived boost. By the way, the US currency remains elevated amid a broad-based risk aversion these days.
Also, traders will focus on the important economic reports. As such, the Eurozone and the United States will report their GDP estimates. The European inflation will also be interesting for market participants and could affect the euro sentiment. Once China returns from the Lunar New Year holidays, it will report its PMI data. As for the yen that receives a strong support as a safe haven currency these days, it could receive the additional support should retail sales and industrial production data in Japan surprise to the upside.
In general, risk trends will further dictate market sentiment this week, with the situation surrounding China coronavirus remains the main source of concern for investors. Against this backdrop, USDJPY briefly dipped to over two-week lows around 108.70 at the start of the trading day and still hasn’t closed a wide bearish gap in the daily charts.