Gold advanced to $1575 an ounce and the yen gained on increased risk-haven trades. The USDJPY retreated after trading above the 110 mark.

WTI crude held ground above the $51 a barrel, however, although the US stockpiles increased 7.5 million barrels last week versus
3.1-million-barrel build expected by analysts and near 3.5-milllion-barrel rise printed over the past two weeks. Higher oil
inventories, significant fall in oil demand mostly due to coronavirus impact and OPEC’s resistance to curb production earlier than in
March should hit back sooner rather than later. We remain seller on advances for a settlement within $48/$50 area.

In the FX, the euro gave in to a strong US dollar and soft data pressure and slipped below the 1.0880 handle in Asia to levels last seen in 2017.
Yesterday’s data showed that the industrial production in the Eurozone contracted 2.1% m-o-m in December, the most in four years, versus
-1.8% expected by analysts. The fact that the data referred to the period prior to the coronavirus breakout warned that the worst may not be
behind for European industries. Today, the German inflation will likely confirm a 0.6% retreat in January. A soft inflation figure from the
Eurozone’s growth engine could further jazz up the European Central Bank (ECB) doves and further weigh on the single currency. The euro’s
move below the critical 1.0880 should encourage investors to strengthen their core short euro positions for a deeper fall to

Cable was better bid despite solid gains in the US dollar elsewhere, but the upside remained capped by the 200-hour moving average, which
currently stands near 1.2975.

On the US economic agenda today, the January headline inflation may confirm an advance to 2.4% from 2.3%
printed a month earlier. But the Federal Reserve will likely welcome an above-the-target inflation for a short period, provided that the
falling energy prices will likely pull the US consumer price index below the 2% target sooner rather than later. Therefore, even a solid
inflation report will not offer enough conviction for a rate hike in the US. The Fed will likely remain seated on its hands this year. If
anything, we have a higher probability of seeing a rate cut, and probably not before the second part of the year.

By Ipek Ozkardeskaya

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