Market Roundup
- FOMC Chair Yellen – Waiting too long to hike rates could force aggressive action, push economy into recession, eyes to hike a few times/year through ’19, economy near maximum employment, inflation moving towards target, makes sense to reduce accommodation gradually, growing divergences in the US- global rates putting upward pressure on USD, will closely follow new economic policies - Reuters.
- China-US Treasury debt holdings fall for 6th month in November, net overall flow +$23.7 bln, Oct +$20.6 bln, China Treasury holding $1.049 trillion, Oct $1.116 trillion, Japan $1.109 trillion vs $1.132 trillion.
- BoJ looking to boost growth outlook, but guarded on inflation – Nikkei.
- Japan MoF flow data week-ended Jan 14 – Japanese buy net Y49.8 bln foreign stocks, Y332.1 bln bonds, Y67.4 bln bills; foreign investors buy net Y246.5 bln Japanese stocks, Y517.0 bln bonds, sell Y79.8 bln bills.
- Toyota warns of Brexit damage to UK operations, HSBC and UBS too – FT.
- China SAFE – Pressure on cross-border capital outflows eased somewhat in ’16, closely eyeing impact from Fed’s expected rate hikes-stronger USD, foreign debt to stabilize-rebound, no basis for CNY depreciation – Reuters.
- China SAFE - commercial banks sell net Y46.3 bln FX in Dec, Nov $33.4 bln.
- UK Dec RICS house price balance +24, +30 forecast, Nov +29, 1st fall since July.
- Australia Dec employment +13.5k, unemployment 5.8%, participation 64.7%, +10k, 5.7% and 64.6% forecast, full-time employment +9.3k, Nov +38.4k, 5.7%.
- Goldman Sachs halving workforce in London, re-organizing operations in Frankfurt – Handelsblatt.
- Australia Jan MI inflation expectations +2.6% WM, +4.3% TM, Dec +2.2%, +3.4%.
- Local investors purchases over 70% of AOFM AUD4.6 bln Dec ’21 bond – IFR.
- New Zealand Jan ANZ/RM consumer confidence index 128.7, 21-month high, Dec 124.5.
- New Zealand Dec PMI 54.5, stabilizes but still at a 13-month low.
- New Zealand Nov building consents -9.2% m/m, +5.0% y/y, Oct +2.0% m/m.
Economic Data Ahead
- (0315 ET/0815 GMT) Switzerland Dec producer/import prices; last +0.1% m/m, -0.6% y/y.
- (0400 ET/0900 GMT) Eurozone Nov current account balance, EUR32.8 bln surplus nsa, E28.4 bln sa.
- (0400 ET/0900 GMT) Eurozone Nov net investment flows; last E65.1 bln inflow.
- (0830 ET/1330 GMT) United States Jan Philly Fed business sentiment index, 15.8 forecast; last 21.5.
- (0830 ET/1330 GMT) United States Dec housing starts, 1.20 million AR forecast; last 1.09 million, -18.7% m/m.
- (0830 ET/1330 GMT) United States Dec building permits, 1.23 million AR forecast; last 1.21 million, -3.8% m/m.
- (0830 ET/1330 GMT) United States w/e initial jobless claims, 254k forecast; last 247k.
Key Events Ahead
- N/A Davos World Economic Forum (till January 20).
- N/A Sweden inflation-linked government bond auction.
- (0430 ET/0930 GMT) Spain E4-5 bln 0.25/0.4/4.4% 2019/22-23 Bono auctions.
- (0450 ET/0950 GMT) France E7-8 bln zero% 2020 and 2022 BTan auctions.
- (0550 ET/1050 GMT) France E1.5-2.0 bln 0.1/1.85/0.1% 2021/27/47 index-linked OAT auctions.
- (0730 ET/1230 GMT) BoE Rule speaks in London.
- (0745 ET/1245 GMT) ECB policy announcement, no change in zero/-0.4% refi/depo rates.
- (0830 ET/1330 GMT) ECB Pres Draghi press conference.
- (0830 ET/1330 GMT) Canada international securities flow data.
- (0915 ET/1415 GMT) US Pres-elect Trump press conference.
- (1545 ET/2045 GMT) SF Fed Williams speaks at Fairfield, CA luncheon.
FX Beat
DXY: The dollar edged down after rebounding versus its major peers on hawkish comments by Federal Reserve Chair Janet Yellen. The greenback against a basket of currencies traded flat at 101.26, having hit a low of 100.26 on Tuesday, it’s lowest since Dec. 8. FxWirePro's Hourly Dollar Strength Index stood at -42.23 (Neutral) by 0500 GMT.
EUR/USD: The euro edged up, reversing some of its previous session losses, as investors shifted their attention on the European Central Bank interest rate policy decision due later in the day. The central bank is expected to keep the key rates unchanged, however, the chances of Draghi talking up euro is high given a recent rise in inflation. The European currency trades 0.1 percent up at 1.0638, having touched a high of 1.0719 on Tuesday, it’s highest since Dec 8. FxWirePro's Hourly Euro Strength Index stood at -21.2 (Neutral) by 0400 GMT. Investors’ will also eye Eurozone's current account figures, U.S. initial jobless claims number, monthly housing starts and building permits data for further clues on the major. Immediate resistance is located at 1.0650, a break above targets 1.0684 (Jan 12-High) /1.0700. On the downside, support is seen at 1.0607 (10-DMA), a break below could drag it near 1.0550.
USD/JPY: The dollar eased after rising to a 1-week high earlier in the session on the back of comments by Federal Reserve Chair Janet Yellen indicating the U.S interest rates could be raised gradually this year. However, investors' cautious tone ahead of U.S. President-elect Donald Trump's inauguration on Friday weakened the bid tone around the major. The pair trades 0.1 percent down at 114.55, after rising to an early high of 114.89, it’s strongest since Jan. 13. FxWirePro's Hourly Yen Strength Index stood at -59.64 (Bearish) by 0400 GMT. Investors will continue digest Fed Yellen's hawkish comments, ahead of the U.S. unemployment claims, building permits, and housing starts figures. Immediate resistance is located at 115.00, a break above targets 115.51 (Jan 13). On the downside, support is seen at 114.06 (5-DMA), a break below could take it till 113.62 (Jan 16 Low).
GBP/USD: Sterling steadied after declining below the 1.2300 handle in the previous session, as the greenback stalled its upward movement versus a basket of currencies. Moreover, persisting risk-on market sentiment amid higher global equity and oil prices strengthened the demand for the British pound. Sterling trades 0.1 percent higher at 1.2275, after rising as high as 1.2416 on Tuesday, it’s highest since Jan. 6. FxWirePro's Hourly Sterling Strength Index stood at 65.85 (Bullish) by 0400 GMT. Investors’ attention will remain on series of U.S. economic data, amid a lack of relevant macro-fundamental drivers from the UK docket. Immediate resistance is located at 1.2300, a break above could take it near 1.2353 (Jan 4 High). On the downside, support is seen at 1.2217 (10-DMA), a break below targets 1.2200. Against the euro, the pound trades flat at 86.65 pence, having hit a high of 86.27 earlier in the week, it’s strongest since Jan. 9.
AUD/USD: The Australian dollar rebounded after declining below the 0.7500 handle, as risk-on sentiment offset mixed Australian employment data led-disappointment. The economy's unemployment rate edged up moderately to 5.8 percent in December, however, employment rose to a net 13,500, surpassing forecasts of 10,000 and registering a third month of gains. The Aussie trades 0.2 percent higher at 0.7517, after hitting a high of 0.7568 on Tuesday, it’s strongest since Nov. 16. FxWirePro's Hourly Aussie Strength Index stood at 66.46 (Bullish) by 0500 GMT. Investors will continue to digest mixed Australian employment report, ahead of the U.S. economic data. Immediate support is seen at 0.7482 (7-EMA), a break below could drag it till 0.7450 (10-DMA). On the upside, resistance is located at 0.7550, a break above targets 0.7580 (Nov 15 High).
NZD/USD: The New Zealand dollar steadied after falling 1.3 percent below the 0.7200 handle on Wednesday, its biggest one-day percentage loss since Nov. 9. The major gained on the back of upbeat NZ Business PMI figures in January, which rose to 54.5 versus previous 54.4, however, worse-than-expected building permits data limited the upside. The Kiwi trades 0.1 percent up at 0.7136, having hit a peak of 0.7219 on Tuesday, it’s strongest since Dec. 14. FxWirePro's Hourly Kiwi Strength Index was at -1.41 (Neutral) by 0500 GMT. Investors will continue to track board based market sentiment, ahead of the U.S. unemployment claims and housing data for further momentum on the pair. Immediate resistance is located at 0.7150, a break above could take it till 0.7200. On the downside, support is seen at 0.7099 (7-EMA), a break below could drag it till 0.7070 (Jan 13 Low).
Equities Recap
Asian shares edged lower, while the dollar steadied after Federal Reserve Chair Janet Yellen suggested that the U.S. central bank is set to hike interest rate gradually this year.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.2 percent.
Tokyo's Nikkei gained 1.1 percent to 19,103.37 points, Australia's S&P/ASX 200 index rose 0.13 percent to 5,686.30 points and South Korea's KOSPI was trading 0.07 percent up at 2,072.56 points.
Shanghai composite index fell 0.28 percent to 3,104.21 points, while CSI300 index was trading 0.12 percent lower at 3,335.99 points.
Hong Kong’s Hang Seng was trading 0.47 percent lower at 22,984.52 points. Taiwan shares shed 0.3 percent at 9,318.12 points.
Commodities Recap
Crude oil prices rose, after declining to a 1-week low in the previous session, with investors shifting their attention on upcoming government data on U.S. inventories. International benchmark Brent crude was trading 0.2 percent higher at $54.36 per barrel by 0405 GMT, having hit a low of $53.75 on Wednesday, its lowest since Jan. 11. U.S. West Texas Intermediate crude added 0.16 percent at $51.44 a barrel, after falling as low as $50.89 hit the day before.
Gold prices declined, extending previous session losses after Federal Reserve Chair Janet Yellen indicated lifting U.S. interest rates gradually. Spot gold edged lower at $1,203.12 per ounce by 0413 GMT, having hit an eight-week high of $1,218.72 on Tuesday. U.S. gold futures were down 0.7 percent at $1,203.50 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.3509 percent higher by 0.024 bps, while 5-year yield was up by 0.023 bps at 1.8489 percent.
The Australian government bonds sunk following overnight hawkish comments from the Federal Reserve Chair Janet Yellen, with the 10-year benchmark yields hitting a 2-week high. However, investors remained unnerved by the negative Australian December 2016 Labor market report released early today. The yield on the benchmark 10-year Treasury note jumped 8-1/2 basis points to 2.76 percent, the yield on 15-year note bounced nearly 10 basis points to 3.21 percent and the yield on short-term 2-year moved higher nearly 4 basis points to 1.89 percent.
The New Zealand government bonds closed modestly higher as investors covered previous short positions. Also, investors await the release of the fourth-quarter consumer price inflation data, scheduled to be released next week. The yield on the benchmark 10-year bond ended 1 basis point higher at 3.22 percent, the yield on 7-year note also ended near 1 basis point lower at 2.90 percent and the yield on short-term 2-year note also dipped 1/2 basis point to 2.28 percent.
Canadian government bond prices were mixed across a steeper yield curve, with the 2-year up 2.5 Canadian cents to yield 0.766 percent and the 10-year falling 32 Canadian cents to yield 1.705 percent. The 2-year yield fell 8.1 basis points further below its U.S. equivalent to a spread of -46.0 basis points, as Canadian government bonds outperformed.
