Traders are in big-time risk aversion mode as more bad news on the Coronavirus outbreak continues to hit the wires. Most notable that seems to have traders running to safe havens. Safe havens like the Greenback have already benefited in the session, while risk currencies like the Aussie (and the major currency most likely affected by this outbreak given Australia’s strong economic ties with China). AUD/USD which has already made more than a full daily ATR move lower since the week open (0.6814) before bottoming out around 0.6765. This week, the US Federal Reserve is scheduled to have its first meeting this year and expected to decide on its monetary policy. The key interest rate will apparently remain intact, but that’s not 100%. One for the more prudent traders who like to go after higher risk-to-reward returns on this major pair will not hesitate to risk and we all know "No pain... No gain! meaning no risk no profit!"
Comment:
CPI edging just a touch higher and still falling short of the lower bound of the RBA target band (2 to 3% for core over the course of a cycle). Still, the slight tick up will give some encouragement to the RBA. The Bank is targeting a lower unemployment rate with the idea that more workers and more spending will drive inflation higher.
Comment:
While the probability of a rate cut next week (the RBA meeting is Feb 4) fell sharply after the decline in the unemployment rate in last week's labour market data release this slight uptick in inflation probably nails the rate cut door shut.
Comment:
AUD is little changed after the CPI data comes in slightly above expectations.
