Amid the Mainland China plunge
Iowa Caucus: As previewed in our Three Monday Talking Points: Loaded, there’s a fair bit of significance attached to this event. Especially since it’s first off the block in the presidential race to The White House. Sanders, a less market-friendly candidate, was last seen leading the heavily watched Iowa poll. A win here for Sanders could see him gain momentum ahead of New Hampshire primaries and Super Tuesday.
RBA Tuesday: Very little is priced into the curve with markets implying only a 22% chance the RBA cut in Feb., after bets lessened on ostensibly better employment and inflation prints in Jan. However, we’re still firmly in the short AUD camp given plenty of economic concerns for the Australian economy: sluggish labour, bushfires costs and yet-to-be determined Coronavirus impacts. Opportunity here to sell into any AUDUSD strength as rate cuts could be moved forward on Gov. Lowe citing Coronavirus impacts and downgrades to real GDP growth possible.
Non-farm Payrolls: Likely to see a rebound from December weakness against expectations on better weather. But undecided whether it confirms robust yet slowing job growth; look for ADP on Wed. to pre-empt to some extent. The resilience of the US economy was a precious source for bulls walking into 2020. A highly pessimistic print here, even without the impacts of nCoV, could deliver a more permanent wind change for risk equities till Q1 end.
NZ Q4 labour and inflation expectations: No rate-cut is expected from RBNZ throughout 2020 with only an 11% implied probability priced into Feb 12. Data has generally been good, and housing is at record highs. From all indications, there could be upside here to the print. But Coronavirus might drown out any rallies in NZDUSD.
CAD employment: After a dovish pivot from Poloz recently, this puts Canada’s employment print in the spotlight. With a full rate-cut only priced-in from July 2020, a weak print could push market pricing forward. This creates more downside risk, with USDCAD having climbed since the beginning of Jan.
Key things to look out for in the week ahead
