Market Roundup
- MC Chair Yellen – Unwise-risky to allow the economy to run persistently hot, prudent to adjust policy gradually, Fed not behind curve, policy stance still modestly accommodative, fiscal policy may affect outlook, data impact on policy decisions limited, in favor of Fed dual mandate, independence.
- SF Fed Williams (non-voter) – Makes sense for Fed to take foot off ease pedal given economic progress, lots of uncertainty but not elevated, eyes gradual pace of hikes but ready to reassess on new information – Reuters.
- Japan FinMin Aso – Won’t fret about every up-down move in currencies, rapid fluctuations undesirable, will stick with plan to achieve budget balance, will communicate with new US administration on currency stability – Reuters.
- BoJ DepGov Nakaso – Japan financial system stable, will continue to take steps to ensure market liquidity, USD funding especially vulnerable –Reuters.
- PM Abe advisor Hamada – Japan should push back if Trump takes “wrong” economic policies, should intervene in FX if USD plunges 7-8/day – Reuters.
- Japan business mood upon growth prospects, some wariness, Jan Mfg index +18, Non-Mfg +30, Dec +16, +19, Mfg index highest since Aug ’14, non-mpg since June ’15, Mfg index eyed at +16 in April, Non-Mfg +28.
- BPCE prices Y142.7 bln three-tranche samurais via Daiwa, Mizuho et al – IFR.
- EDG prices Y137 bln four-tranche samurais, via MUFJ/MS, Mizuho, SMBC – IFR.
- Foreign CB US debt holdings -$11.917 bln to $3.169 trillion Jan 18 week, Treasury holdings -$11.338 bln to $2.850 trillion, agencies -$564 mln to $260.156 bln.
- NY Fed – Swaps with foreign CBs $615 mln Jan 18 week, ECB $265/BoJ $350 mln.
- Lipper – Investors pull $3.1 bln from US-based stock funds ahead of Trump.
- China Q4 GDP +1.7% q/q, +6.8% y/y, +1.7% and +6.7% eyed, Q1 ’17 eyed at +1.3% q/q against prev +1.2% estimate, economy facing complex internal-external environment still, ’16 GDP +6.7%, on target.
- China ’16 fixed asset investment slowest since ’99 at +8.1% y/y, +8.3% eyed.
- China ’16 property investment +6.9% y/y, best in seven years.
- China Dec industrial output +6.0% y/y, retail sales +10.9%, +6.1% and +10.7% eyed.
- Australia Nov HIA new home sales +6.1%, houses +5.2%, apartments +9.3%.
- S&P affirms NZ AA foreign currency/AA+ local ratings, outlook stable.
- New Zealand Q4 Westpac/MM employee confidence index 112.7, best in 8 years, Q3 110.1.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Dec producer prices, +0.4% m/m, +1.0% y/y eyed; last +0.3%, +0.1%.
- (0430 ET/0930 GMT) Great Britain Dec retail sales, -0.1% m/m, +7.2% y/y eyed; last +0.2%, +5.9%.
- (0430 ET/0930 GMT) Great Britain Dec - ex-fuel, -0.3% m/m, +7.6% y/y eyed; last +0.5%, +6.6%.
- (0430 ET/0930 GMT) Great Britain Dec BRC retail sales; last +1.0% y/y.
- (0900 ET/1400 GMT) Belgium Jan consumer confidence index; last -5.0.
Key Events Ahead
- N/A Davos World Economic Forum (final day).
- (0400 ET/0900 GMT) ECB survey of professional forecasters.
- (0600 ET/1100 GMT) UK DMO GBP0.5/2.0/2.0 bln 1/3/6-month treasury bill auctions.
- (0900 ET/1400 GMT) Philly Fed Harker speaks at Somerset, NJ bankers forum.
- (1130 ET/1630 GMT) US Pres-elect Trump inauguration, various related events to follow.
- (1300 ET/1800 GMT) SF Fed Williams speaks at San Francisco Bay Area Council event.
FX Beat
DXY: The dollar declined versus its major peers following U.S. Federal Reserve Chair Janet Yellen's less hawkish speech. The greenback against a basket of currencies traded 0.1 percent down at 101.03, pulling away from a high of 101.73 hit in the previous session. FxWirePro's Hourly Dollar Strength Index stood at 3.25 (Neutral) by 0500 GMT.
EUR/USD: The euro rose, extending previous session gains as the greenback eased across the board, while investors brace for the U.S. President-elect Donald Trump to be sworn in later in the day. The dollar weakened as Federal Reserve Chair Janet Yellen's comments on the U.S. monetary policy sounded slightly dovish. Yellen noted the central bank should continue to hike interest rates gradually to keep inflation low and employment abundant. The European currency traded 0.2 percent higher at 1.0682, after rising as high as 1.0719 earlier in the week, it’s highest since Dec 8. FxWirePro's Hourly Euro Strength Index stood at 36.13 (Neutral) by 0400 GMT. Investors’ focus remains Trump inauguration ceremony, amid a lack of relevant data from the Eurozone and the U.S. docket. Immediate resistance is located at 1.0700, a break above targets 1.0745 (Nov 17 High). On the downside, support is seen at 1.0630 (9-EMA), a break below could drag it near 1.0600.
USD/JPY: The dollar declined after rising to an over 1-week high on Thursday as less hawkish speech by Federal Reserve Chair Janet Yellen on the gradual pace of rate hikes dragged the shorter-duration treasury yields lower. The major attempted a minor recovery above the 115.00 handle, however, persisting risk-off sentiment strengthened the bid tone around the safe-haven Japanese yen. The pair trades 0.1 percent down at 114.73, after rising to a high of 115.61 in the previous session, it’s strongest since Jan. 11. FxWirePro's Hourly Yen Strength Index stood at 119.04 (Highly Bullish) by 0400 GMT. Investors will continue to digest Fed Yellen's comments, ahead of Donald Trump’s inauguration speech. Immediate resistance is located at 115.61 (Jan 19 High), a break above targets 115.93 (20-DMA). On the downside, support is seen at 114.21 (5-DMA), a break below could take it lower 114.00.
GBP/USD: Sterling advanced, extending its previous sessions' recovery mode, as the greenback weakened across the board following Fed Chair Yellen's less hawkish remarks. Sterling trades 0.1 percent higher at 1.2353, after rising as high as 1.2416 on Tuesday, it’s strongest since Jan. 6. FxWirePro's Hourly Sterling Strength Index stood at 105.48 (Highly Bullish) by 0400 GMT. Investors’ attention will remain on the UK retail sales figures, ahead of Donald Trump’s inauguration ceremony. Immediate resistance is located at 1.2400, a break above could take it near 1.2481 (Nov 23 High). On the downside, support is seen at 1.2300, a break below targets 1.2261 (20-DMA). Against the euro, the pound trades 0.1 percent down at 86.45 pence, having hit a peak of 86.27 earlier in the week, it’s strongest since Jan. 9.
AUD/USD: The Australian dollar rose to a near 2-1/2-month high after data showed Chinese economy grew at a faster-than-expected pace in the fourth quarter of 2016. China's economy expanded at an annualized rate of 6.8 percent in the fourth quarter, against expectations of 6.7 percent, boosted by government spending. However, downbeat industrial production data which came in at 6.0 percent, compared to estimates of 6.1 percent and previous 6.2 percent limited the major's gains. The Aussie trades 0.2 percent higher at 0.7571, after hitting a high of 0.7588 earlier in the session, it’s strongest since Nov. 11. FxWirePro's Hourly Aussie Strength Index stood at 38.78 (Neutral) by 0500 GMT. Investors will continue to digest mixed Chinese economic data, ahead of Trump’s inauguration speech. Immediate support is seen at 0.7512 (7-EMA), a break below could drag it lower 0.7482 (10-DMA). On the upside, resistance is located at 0.7600, a break above targets 0.7630 (Nov 11 High).
NZD/USD: The New Zealand dollar rallied to a fresh 1-month high above the 0.7200 handle after credit rating agency S&P affirmed the country's AA rating. The major was also supported by better-than-expected Chinese gross domestic product data and higher commodity prices. The Kiwi trades 0.2 percent up at 0.7202, having hit an early peak of 0.7225, it’s strongest since Dec. 14. FxWirePro's Hourly Kiwi Strength Index was at 58.68 (Bullish) by 0500 GMT. Investors will continue to track board based market sentiment, ahead of the inauguration of Donald Trump for further cues on the pair. Immediate resistance is located at 0.7238 (Dec 14 High), a break above could take it near 0.7300. On the downside, support is seen at 0.7150, a break below could drag it till 0.7126 (9-EMA).
Equities Recap
Asian shares declined, weighed down by risk-off sentiment despite better-than-expected China's fourth-quarter economic growth figures, while investors await the U.S. President-elect Donald Trump's inauguration.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 percent and was set to end the week 0.1 percent lower.
Tokyo's Nikkei gained 0.4 percent to 19,156.43 points, Australia's S&P/ASX 200 index fell 0.56 percent to 5,660.10 points and South Korea's KOSPI was trading 0.2 percent down at 2,069.43 points.
Shanghai composite index rose 0.68 percent to 3,121.91 points, while CSI300 index was trading 0.8 percent lower at 3,335.80 points.
Hong Kong’s Hang Seng was trading 0.6 percent lower at 22,909.17 points. Taiwan shares added 0.1 percent at 9,331.46 points.
Commodities Recap
Crude oil prices rose, strengthened by expectations of tighter supply and on reports of record Chinese demand, however, rising U.S. crude and gasoline inventories capped gains. International benchmark Brent crude was trading 0.3 percent higher at $54.34 per barrel by 0400 GMT, having hit a low of $53.75 on Wednesday, its weakest since Jan. 11. U.S. West Texas Intermediate crude added 1.17 percent at $52.26 a barrel, after falling as low as $50.89 hit the day before.
Gold prices stood firm and were heading for their fourth straight weekly gain, while investors await U.S. President-elect Donald Trump's inauguration later in the day. Spot gold was up 0.2 percent at $1,207.43 per ounce by 0408 GMT, after dropping to a low of $1,195.75 in the previous session. U.S. gold futures were up 0.3 percent at $1,205.20 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.4631 percent higher by 0.004 bps, while 5-year yield was down by 0.003 bps at 1.9498 percent.
The Australian government bonds shrank, as investors cashed in profits on the last trading day of the week after relishing previous gains, observing a relatively subdued trading session. The yield on the benchmark 10-year Treasury note rose 1/2 basis point to 2.79 percent, the yield on 15-year note also moved 1/2 basis point higher to 3.24 percent and the yield on short-term 2-year moved higher nearly 1 basis point to 1.90 percent.
The New Zealand government bonds ended the week on a softer note, following a strong reading of China’s gross domestic product which further dragged the country’s debt market. The yield on the benchmark 10-year bond jumped 4 basis points at the time of closing at 3.27 percent, the yield on 7-year note also ended 3-1/2 basis points higher at 2.94 percent and the yield on short-term 2-year note surged 2 basis points to 2.31 percent.
The Canadian government bond prices were lower across a steeper yield curve, with the 2-year down 3 Canadian cents to yield 0.787 percent and the 10-year falling 41 Canadian cents to yield 1.756 percent.
