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Asia Roundup: Aussie rallies on better-than-expected employment report, dollar index eases as Fed leaves 2018 policy outlook unchanged, investors await ECB and BoE policy decision - Thursday, December 14th, 2017

Market Roundup

  • Fed raises interest rates, keeps 2018 policy outlook unchanged
     
  • US Republicans forge tax deal, final votes seen next week
     
  • US core inflation slows, puts spotlight on 2018 interest rate outlook
     
  • Despite Tillerson overture, White House says not right time for N. Korea talks
     
  • Steady as she goes: ECB to keep money taps wide open
     
  • UK urgently needs Brexit transition deal, and more time after that, lawmakers say
     
  • Bank of England's Brexit views in focus as rates set to stay on hold
     
  • UK RICS house price balance slips to lowest since March 2013
     
  • New Zealand gov't unveils plans to boost spending, sees slightly lower budget surplus
     
  • Australia November employment rises by 61,600 vs 18,000 forecast
     
  • China raises market rates as data shows economic growth moderating
     
  • China Nov Urban Investment (ytd) y/y, 7.2%, 7.3% last, f' cast 7.2%
     
  • China Nov Industrial Output y/y, 6.1%, 6.2% last, f' cast 6.0%
     
  • China Nov Retail Sales y/y, 10.2%, 10.0% last, f' cast 10.2%
     
  • Japan to cut new government bond issuance for 8th straight year – Nikkei
     
  • Muslim leaders call on world to recognise East Jerusalem as Palestinian capital

Economic Data Ahead

  • (0245 ET/0745 GMT) France Nov CPI (EU Norm) Final m/m, y/y, f' cast 0.1%, 1.3%, 0.1%, 1.3% last
     
  • (0300 ET/0800 GMT) France Dec Markit Mfg Flash PMI f' cast 57.2, 57.7 last
     
  • (0300 ET/0800 GMT) France Dec Markit Serv Flash PMI f' cast 55.9, 60.4 last
     
  • (0300 ET/0800 GMT) France Dec Markit Comp Flash PMI f' cast 59.4, 60.3 last
     
  • (0300 ET/0830 GMT) Germany Dec Markit Mfg Flash PMI f' cast 62.0, 62.5 last
     
  • (0300 ET/0830 GMT) Germany Dec Markit Services Flash PMI f' cast 54.6, 54.3 last
     
  • (0300 ET/0830 GMT) Germany Dec Markit Comp Flash PMI f' cast 57.2, 57.3 last
     
  • (0400 ET/0900 GMT) EZ Dec Markit Mfg Flash PMI f' cast 59.8, 60.1 last
     
  • (0400 ET/0900 GMT) EZ Dec Markit Serv Flash PMI f' cast 56.0, 56.2 last
     
  • (0400 ET/0900 GMT) EZ Dec Markit Comp Flash PMI f' cast 57.2, 57.5 last
     
  • (0430 ET/0930 GMT) Great Britain Nov Retail Sales m/m, y/y, f' cast 0.4%,0.3%, 0.3%, -0.3% last
     
  • (0700 ET/1200 GMT) Great Britain Dec BOE Bank Rate, f' cast 0.50%, 0.50% last
     
  • (0745 ET/1245 GMT) EZ ECB Refinancing Rate, f' cast 0.00%, 0.00% last

Key Events Ahead
 

  • N/A SNB's monetary policy assessment – Bern
     
  • (0300 ET/0800 GMT) Riksbank executive board meeting – Stockholm
     
  • (0400 ET/0900 GMT) Norway's central bank rate decision announcement – Oslo
     
  • (0700 ET/1200 GMT) BoE's rate decision and minters – London
     
  • (0830 ET/1330 GMT) ECB's Draghi speaks after rate decision meeting – Frankfurt
     
  • (1225 ET/1725 GMT) BoC's Poloz speals at a press conference – Toronto
     

FX Beat

DXY: The dollar index extended previous session losses, after U.S. core consumer price data released on Wednesday showed slowing inflation, raising doubts whether the Fed will be able to execute multiple rate hikes next year. The greenback against a basket of currencies traded flat at 93.42, having touched a low of 93.33 earlier, its lowest since Dec. 6. FxWirePro's Hourly Dollar Strength Index stood at -84.49 (Slightly Bearish) by 0500 GMT.

EUR/USD: The euro rose to a fresh 1-week high as the greenback continued to weaken after Janet Yellen mentioned that it could take a longer period of a very strong labour market for inflation to reach the 2 percent target. The European currency traded 0.1 percent up at 1.1832, having touched a high of 1.1843 earlier, its highest since Dec. 6. FxWirePro's Hourly Euro Strength Index stood at 1.78 (Neutral) by 0500 GMT. Investors’ attention will remain on preliminary PMI's from Eurozone and other EZ economies and ECB policy outcome, ahead of U.S. retail sales, unemployment benefit claims, import and export price index and preliminary Markit PMI's. Immediate resistance is located at 1.1878 (Dec. 4 High), a break above targets 1.1940 (Dec. 1 High). On the downside, support is seen at 1.1776 (5-DMA), a break below could drag it lower 1.1712 (Nov 21. Low).

USD/JPY: The dollar steadied after falling declining nearly 1 percent to a 5-day low in the previous session as the Federal Reserve raised key short-term rates by a quarter point to a range of 1.25-1.50 percent and projected three more hikes in both 2018 and 2019, unchanged from the prior forecasts in September. The major was trading 0.1 percent up at 112.60, having hit a high of 113.75 on Monday, its highest since Nov. 14. FxWirePro's Hourly Yen Strength Index stood at 55.88 (Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. retail sales, unemployment benefit claims, import and export price index and preliminary Markit PMI's for further momentum. Immediate resistance is located at 112.81 (10-DMA), a break above targets 113.22 (5-DMA). On the downside, support is seen at 112.35 (21-DMA), a break below could take it near 112.00.

GBP/USD: Sterling rose to a 6-day high ahead of the Bank of England policy meeting, where it is widely expected to keep interest rates on hold at 0.5 percent, but investors will closely watch for clues on the future path of UK monetary policy. The major traded 0.2 percent up at 1.3439, having hit a high of 1.3448 earlier, it’s highest since Dec. 8. FxWirePro's Hourly Sterling Strength Index stood at -4.32 (Neutral) by 0500 GMT. Investors’ focus will remain the UK retail sales and BoE policy meeting ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3484, a break above could take it near 1.3540. On the downside, support is seen at 1.3385 (5-DMA), a break below targets 1.3303 (Dec. 12 Low). Against the euro, the pound was trading 0.1 percent up at 88.05 pence, having hit a high of 86.89 pence on Friday, it’s highest since Jun. 9.

AUD/USD: The Australian dollar rallied to a 1-month high after data showed Australian employment surpassed all expectations in November, rising the most in more than two years, while the jobless rate remained near five-year lows. The Aussie trades 0.3 percent up at 0.7662, having hit a high of 0.7674 earlier; it’s highest since Nov. 10. FxWirePro's Hourly Aussie Strength Index stood at 45.18 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7627 (Session Low), a break below targets 0.7603 (Nov. 23 Low). On the upside, resistance is located at 0.7685, a break above could take it near 0.7700.

NZD/USD: The New Zealand dollar declined after rising to a near 2-month high in the previous session after the new Labour-NZ First Government released its first economic and fiscal report that showed downward revisions to the NZ growth forecasts for the next two years, compared to the PREFU projections. The Kiwi trades 0.4 percent down at 0.6998, having touched a high of 0.7027 the day before, its highest level since Oct. 20. FxWirePro's Hourly Kiwi Strength Index was at 124.00 (Highly Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7050, a break above could take it near 0.7085. On the downside, support is seen at 0.6980, a break below could drag it lower 0.6931 (Previous Session Low).

Equities Recap

Asian shares nudged up, while the greenback eased after the Federal Reserve delivered a much-anticipated interest rate hike but flagged caution about inflation.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.

Tokyo's Nikkei declined 0.3 percent to 22,687.39 points, Australia's S&P/ASX 200 index slumped 0.2 percent to 6,011.30 points and South Korea's KOSPI rose 0.7 percent to 2,497.85 points.

Shanghai composite index eased 0.5 percent to 3,285.16 points, while CSI300 index was trading 0.8 percent down at 4,019.45 points.

Hong Kong’s Hang Seng was trading 0.5 percent lower at 29,066.73 points. Taiwan shares added 0.6 percent to 10,538.01 points.

Commodities Recap

Crude oil prices rose after falling for two consecutive sessions, boosted by a fourth straight weekly fall in U.S. crude inventories. International benchmark Brent crude was trading 0.2 percent up at $62.78 per barrel by 0449 GMT, having hit a high of $65.80 on Tuesday, its highest since Jul. 2015. U.S. West Texas Intermediate was trading 0.1 percent higher at $56.68 a barrel, after rising as high as $58.53 on Tuesday, its highest since Dec. 1.

Gold prices rallied to a 1-week peak as the dollar continued to slump after the U.S. Federal Reserve's raised interest rates, but left the outlook on rates unchanged. Spot gold was 0.2 percent up at $1,257.68 an ounce as of 0454 GMT, after rising nearly 1 percent in the previous session. U.S. gold futures were up nearly 1 percent at $1,260.60.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.363 percent higher by 0.015 bps, while 5-year yield was 0.018 bps up at 2.128 percent.

The Japanese government bonds traded nearly flat as investors remain remained sidelined in any major deal ahead of the upcoming Christmas holidays. But, markets will look forward to the industrial production and Reuters Tankan survey data. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 0.045 percent, the yield on long-term 40-year declined nearly 1/2 basis point to 0.967 percent and the yield on short-term 3-year declined 1 basis point to -0.141 percent.

The Australian government bonds slumped following the weakness in the U.S. Treasuries after the Federal Reserve raised interest rates on Wednesday but left its rate outlook for the coming years unchanged even as policymakers projected a short-term jump in US economic growth from the Trump administration's proposed tax cuts. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 2 basis points to 2.563 percent, the yield on the long-term 30-year note climbed 2 basis points to 3.306 percent and the yield on short-term 2-year surged 5 basis points to 1.910 percent.

The New Zealand government bonds jumped sharply at the time of closing after the country’s coalition government revised down its economic and fiscal forecasts in its half-yearly update. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 6 basis points to 2.78 percent, the yield on 20-year note plunged 7-1/2 basis points to 3.32 percent while the yield on short-term 2-year ended 1 basis point lower at 1.95 percent.

The Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 3 Canadian cents to yield 1.504 percent and the 10-year gained 19 Canadian cents to yield 1.843 percent. The gap between the 10-year yield and its U.S. equivalent narrowed by 3.5 basis points to a spread of -50.2 basis points.

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