Markets stabilise, but virus threat lingers...>

FOREX: Markets stabilise, but virus threat lingers

- A somewhat quieter session for currency majors volumes Tuesday as the risk-off

theme persisted into another session, as the long-waited bounce failed to

materialise ahead of the close. It may be the case that traders are waiting for

some more clarity over the economic impact of the still-growing coronavirus

threat. Modestly higher equity markets in Europe and the US prevented USD/JPY

from falling further, while recovering oil prices helped underpin NOK and CAD

outperformance. EUR/CHF rose for the first session in four, raising new

suspicions of official involvement in the FX rate.

- Wednesday's Australian CPI release could be key for market expectations for

next week's RBA rate decision, at which the bank are seen cutting rates by a

further 25bps. AUD weakened further Tuesday, prompting AUD/USD to print down at

$0.6737, the lowest since mid-October.

- US December trade balance and pending home sales numbers cross, but markets

will likely tread water ahead of the FOMC rate decision. Powell's usual

post-decision press conference then follows.