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Asia Roundup: Antipodeans at multi-week peaks on Fed's dovish stance, dollar consolidates within narrow ranges against yen as tariffs decision looms, investors eye UK election - Thursday, December 12th, 2019

Market Roundup

  • Oil prices gain as OPEC revises deficit forecast
     
  • Gold holds gains after Fed keeps rates steady
     
  • Sterling rallies ahead of UK election

Economic Data Ahead

  • (0500 ET/1000 GMT) EZ industrial production YoY
     
  • (0500 ET/1000 GMT) EZ industrial production MoM
     

Key Events Ahead

  • (0330 ET/0830 GMT) Swiss National Bank monetary policy decision
     
  • (0745 ET/1245 GMT) European Central Bank interest rate decision
     

FX Beat

DXY: The dollar index slumped to a 4-month low after the Fed held interest rates steady and signalled borrowing costs will not change anytime soon, with moderate economic growth and low unemployment expected to persist through the 2020 presidential election. The greenback against a basket of currencies traded flat at 97.09, having touched a low of 97.04 earlier, its lowest since August 9.         

EUR/USD: The euro surged, hovering towards an over 1-month peak recorded in the prior session, as investors awaited Christine Lagarde’s first meeting at the European Central Bank. Lagarde is all but certain to keep money taps wide open, but investors will scrutinize her first post-meeting press conference to seek clues about a broader policy revamp. The European currency traded 0.1 percent up at 1.1141, having touched a high of 1.1144 on Wednesday, its highest since November 4. Investors’ attention will remain on a series of data from the eurozone economies, EZ industrial production and ECB policy meeting, ahead of the U.S. producer price index and unemployment benefits claims. Immediate resistance is located at 1.1156, a break above targets 1.1179. On the downside, support is seen at 1.1117, a break below could drag it below 1.1106.

USD/JPY: The dollar gained, reversing most of its previous session losses, as U.S. President Donald Trump is expected to meet with top advisers later in the day on whether to let tariffs on nearly $160 billion of Chinese consumer goods take effect as planned on Dec. 15. The major was trading 0.05 percent up at 108.58, having hit a low of 108.42 on Monday, its lowest since Nov 21. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. producer price index and unemployment benefits claims. Immediate resistance is located at 108.99, a break above targets 109.20. On the downside, support is seen at 108.34, a break below could take it near at 108.18.

GBP/USD: Sterling rallied to an over 8-month peak above the 1.3200 handle, as a closely watched model from pollsters YouGov put Prime Minister Boris Johnson on course to win a majority of 28 in parliament. The major traded 0.1 percent up at 1.3214, having hit a high of 1.3229 earlier, it’s highest since March 27. Investors’ attention will remain on the development surrounding the general elections, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3246, a break above could take it near 1.3272. On the downside, support is seen at 1.3155, a break below targets 1.3100. Against the euro, the pound was trading up at 84.31 pence, having hit a high of 83.92 on Monday, it’s highest since May 2017.

AUD/USD: The Australian dollar advanced to a 1-month peak as markets took a steady outlook from the Federal Reserve as a dovish signal. The Fed board had earlier indicated rates would likely stay steady for all of 2020 and trimmed projected hikes in 2021 and 2022. The Aussie trades 0.1 percent up at 0.6880, having hit a high of 0.6889 earlier, it’s highest since November 8. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6847, a break below targets 0.6810. On the upside, resistance is located at 0.6904, a break above could take it near 0.6929.

NZD/USD: The New Zealand dollar slightly eased after rising to a 4-1/2 month peak in the previous session on speculation of one more interest rate cut next year by the Fed. The Kiwi trades 0.05 percent down at 0.6582, having touched a high of 0.6603 on Wednesday, its highest level since July 31. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6619, a break above could take it near 0.6641. On the downside, support is seen at 0.6556 (5-DMA), a break below could drag it below 0.6516 (10-DMA).

Equities Recap

Asian shares rallied to a 1-month peak after the Federal Reserve signalled rate settings were likely to remain accommodative.

MSCI's broadest index of Asia-Pacific shares outside Japan rallied 0.9 percent.

Tokyo's Nikkei eased 0.2 percent to 23,359.63 points, Australia's S&P/ASX 200 index gained 0.7 percent to 6,752.60 points and South Korea's KOSPI surged 1.5 percent to 2,137.35 points.

Shanghai composite index eased 0.3 percent to 2,915.70 points, while CSI 300 index traded 0.3 percent down at 3,891.02 points.

Hong Kong’s Hang Seng traded 1.4 percent higher at 27,008.50 points. Taiwan shares added 1.2 percent to 11,836.42 points.

Commodities Recap

Crude oil prices surged, reversing most of its previous session gains as OPEC forecast a supply deficit next year, however, data showing a surprise increase in U.S. crude inventories limited the upside.  International benchmark Brent crude was trading 0.2 percent up at $63.83 per barrel by 0540 GMT, having hit a low of $63.00 on Wednesday, its lowest since December 6. U.S. West Texas Intermediate was trading 0.2 percent up at $58.85 a barrel, after falling as low as $58.09 on Wednesday, its lowest since December 6.

Gold prices consolidated near a 1-week high hit in the previous session, as the greenback nursed its steepest losses in weeks after the U.S. Federal Reserve stood pat on interest rates and signalled moderate economic growth for next year. Spot gold was trading flat at $1,474.91 per ounce by 0544 GMT, having touched a high of $1478.81 on Wednesday, its highest since December 6. U.S. gold futures were up 0.3 percent at $1,479.10.

Treasuries Recap

The yield on U.S. benchmark 10-year Treasury notes rose to 1.7966 percent.

The Japanese government bond prices surged, with the March 10-year JGB futures rising 0.28 point to 152.37. The 10-year JGB yield fell 1.5 basis points to minus 0.020 percent, off nine-month high of zero percent touched earlier this week. The 20-year JGB yield fell 0.5 basis point to 0.290 percent, while the 30-year JGB yield was flat at 0.430 percent. The two-year JGB yield fell 2 basis points to minus 0.130 percent. The five-year yield fell 2.5 basis points to minus 0.125 percent.

The Australian yields lagged, narrowing the gap between 10-year yields to 64 basis points from 71 basis points a day ago. The three-year bond futures were off 0.5 ticks on Wednesday at 99.275.

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