FOREX-Euro bears lurk as worries about economic outlook grow

Reuters

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    * Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
    * Tracking the coronavirus https://tmsnrt.rs/3aIRuz7
    * Euro draws fire as focus shifts to economic outlook
    * Pound slips on worries about relations with EU
    * Virus still a worry as traders try to measure impact

    By Stanley White
    TOKYO, Feb 18 (Reuters) - The euro traded near a three-year
low versus the dollar ahead of a highly watched German survey on
Tuesday, which is expected to show a sharp slump in investor
confidence and fuel growing pessimism about the outlook for
Europe's largest economy.
    Financial markets clung to tight ranges following a U.S.
public holiday on Monday, shifting the investor focus to
European news and developments in the coronavirus crisis.
    Sterling nursed losses against the dollar and the euro due
to lingering worries about economic ties between Britain and the
European Union as both sides laid out conflicting views on how
to proceed with trade negotiations.
    In Asia, the Chinese yuan and the Japanese yen held steady
as traders assessed the spread of an outbreak of a new
coronavirus both inside and outside China.
    Sentiment for the euro has worsened dramatically this month
after weak manufacturing and gross domestic product data from
Germany, Europe's largest economy, suggests that the euro zone
is more vulnerable to external shocks that previously thought.
    "The euro is close to testing an important support level at
$1.08 due to the diverging economic outlook between the euro
zone and the United States," said Junichi Ishikawa, senior
foreign exchange strategist at IG Securities in Tokyo.
    "It looks a little oversold, so in the very short term there
could be a bounce, but the euro's fundamentals still point more
to the downside."
    The euro  EUR=EBS  was quoted at $1.0836 in Asia, close to
its lowest since April 2017.
    Since the start of February, the single currency has lost
2.3% versus the greenback as disappointing economic data raised
concerns that euro zone monetary policy will have to remain
accommodative for much longer.
    The euro's next hurdle is the release of Germany's ZEW
survey later on Tuesday, which is forecast to show economic
sentiment slipped from the highest since July 2015.
    The pound  GBP=D3  held steady at $1.3003 in Asia on Tuesday
following a 0.3% decline in the previous session. Sterling
 EURGBP=D3  was quoted at 83.30 pence per euro, nursing a 0.4%
decline on Monday.
    Prime Minister Boris Johnson's Europe adviser David Frost
said on Monday Britain will not be threatened into following EU
rules to win a free trade agreement with the bloc.  urn:newsml:reuters.com:*:nL8N2AH4IE
    Frost's comments are in contrast with those of European
Commission President Ursula von der Leyen, who has called on
Britain to guarantee fair competition based on ambitious
environmental and labour standards.  urn:newsml:reuters.com:*:nL8N2AB240
    Britain left the EU last month and the two sides will now
start negotiating a new relationship from trade to security.
    Elsewhere in the currency market, the offshore yuan  CNH=D3 
held steady at 6.9882 per dollar after China's Hubei province,
considered the epicentre of the coronavirus outbreak, said new
cases of the illness fell slightly to 1,807 on Monday from 1,933
the previous day.  urn:newsml:reuters.com:*:nL4N2AH3XQ
    However, currency markets are increasingly likely to react
to new data on the virus cautiously given uncertainty about the
actual number of cases and difficulties in estimating when the
epidemic will peak.
    The yen  JPY=EBS , which initially gained on safe-haven
flows as the outbreak unfolded last month, held steady in a
narrow range at 109.82 per dollar.
    The Australian dollar  AUD=D3  fell 0.22% to $0.6702 after
minutes from the Reserve Bank of Australia's first meeting of
the year showed policymakers discussed easing policy.
    The RBA kept rates unchanged at an all-time low of 0.75% at
that meeting, but the minutes showed central bankers are
prepared to ease policy further if needed.  urn:newsml:reuters.com:*:nRUAHDEG7R 
    The New Zealand dollar  NZD=D3  was little changed at
$0.6436.
    The antipodean currencies have been buffeted by the virus
due to Australia's and New Zealand's extensive trade ties with
China, with commodities, tourism and education especially
vulnerable.

 (Reporting by Stanley White; Editing by Sam Holmes)
 ((stanley.white@tr.com; +81 (0)3 4563 2799;
twitter.com/stanleywhite1 ;))

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