By Han Tan, Market Analyst at FXTM
Most Asian stock indices were advancing on Wednesday, refusing to follow Wall Street’s cues after the S&P 500 and the Dow Jones index declined having returned from an extended weekend. However, Asian currencies are mixed against the US Dollar, laying bare investors’ uncertainties over the coronavirus outbreak’s implications for the world economy.
Covid-19 remains the market driver and is set to frame policymakers’ reactions around the world over the near-term. The global economic outlook remains mired in uncertainty at this point in time, with coronavirus-related warnings emanating out of Apple and corporate America, the Eurozone economy and Asian governments.
In the interim, Asian currencies are expected to hold a bias for more softness, which should help take some of the pressures off their respective economies.
Scarce challengers to King Dollar’s throne
The Dollar index has continued on its unrelenting advance this month, as it now carves out a larger gap above the 99 psychological level and closes in on its 2019 peak. With the Empire Manufacturing Index hitting a nine-month high, the Dollar could climb further if Thursday’s Philadelphia Fed Business Outlook shows a better-than-expected reading for February.
The upcoming FOMC minutes release isn’t likely to hold significant sway over the Greenback, barring any surprise reveals from the Fed’s January policy meeting, that could cause markets to reprice their expectations for the next US interest rate adjustment.
As the biggest component in the Dollar index, the Euro is currently offering little resistance, and coupled with the risk-aversion stemming from the coronavirus outbreak, the US Dollar has scant reason to retrace from these elevated levels.
Gold to remain well-bid amid coronavirus concerns
Gold has finally breached the $1600 psychological level for the first time since the US airstrike in Iraq at the start of the year, as investors increase their exposure to safe-haven assets, amid swirling concerns over the Covid-19 outbreak.
The technical picture shows more headroom for Bullion before it breaks into overbought territory, which could see bulls testing the $1610 handle.
Oil’s outlook clouded by coronavirus concerns
Brent futures are set to mark seven consecutive days of gains, edging closer to the $60/bbl handle, as the latest US sanctions on a subsidiary of Russia’s Rosneft offer Oil prices a further boost.
Oil’s supply-demand fundamentals remain mired in uncertainty as OPEC+ has yet to officially decide on whether to deepen supply cuts, while investors are still trying to ascertain the toll on global demand from the coronavirus outbreak. The supply-demand conundrum should keep Brent futures from moving well past $60/bbl for the time being.
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