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XE Morning Update

The NZDUSD opens higher at 0.6338 this morning.

The coronavirus was again front and centre in market thinking overnight.

Fears of a coronavirus pandemic mounted with sharp rises in new cases reported in Iran, Italy and South Korea, with Afghanistan and Iraq reporting their first cases. Oil prices plummeted 5%, global equities slumped more than 3%, bond yields approached record lows, with the US 3-month to 10-year yield curve inverting – seen as a potential recession signal.

Gold prices soared in a safe-haven bid, while the USD weakened a little overnight, nudging the NZDUSD higher.

The risk-off mood solidified as the epidemic now seen as likely to meaningfully impact global growth. Governments and companies are curbing travel and trade in an attempt to contain the outbreak, with weaknesses in global supply chains becoming apparent.

The World Health Organisation said the outbreak does not reach the threshold for ‘pandemic’ – it’s focus is on containment while preparing for a ‘potential pandemic.’

Chinese President Xi Jinping said China will adjust policy to help cushion the economic impact of the virus outbreak. Goldman Sachs said commodity prices could fall sharply before any rebound on the back of Chinese stimulus.

On the domestic front, yesterday’s New Zealand’s 4Q Retail Sales figures were slightly weaker than expected (+0.7% versus +0.8%), but actual (seasonally adjusted) retail sales rose a solid 3.3%. The NZD moved little in response.

There is nothing scheduled on the domestic data calendar today.

Global equity markets nose-dived on the day - Dow -3.4%, S&P 500 -3.3%, FTSE -3.3%, DAX -4.0%, CAC -3.9%, Nikkei -0.4%, Shanghai -0.3%.

Gold prices jumped 1.8% to USD$1,673 an ounce. WTI Crude Oil prices plunged 5.0% to US$50.76 per barrel.

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