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Asia Roundup: Aussie slumps on weaker-than-expected building permits, dollar index steadies following FOMC policy decision, Asian shares rebound - Thursday, February 1st, 2018

Market Roundup

  • Fed leaves rates unchanged, sees inflation rising this year
     
  • FBI expresses 'grave concerns' over Republican memo's accuracy
     
  • China Jan Caixin/Markit mfg PMI 51.5 (vs forecast 51.3, Dec 51.5)
     
  • Job shedding slowest in nearly 3 yrs - bodes well for demand
     
  • Australia Dec building approvals s/adj m/m -20.0% (vs forecast -8.0%)
     
  • Japan Jan mfg PMI – final 54.8, flash 54.4, highest since Feb ’14, Dec 54.0
     
  • MoF flow data week-ended Jan 27 – Japanese buy net Y374.5 bln foreign stks
     
  • Foreigners sell Y300.5 bln Japan stocks, Y253.6 bln JGBs, Y1.41 trln bills
     
  • UK small manufacturers see fastest rise in new orders since 1995 - CBI
     

Economic Data Ahead

  • (0200 ET/0700 GMT) Great Britain Jan Nationwide house price mm forecast 0.2%, last 0.6%
     
  • (0200 ET/0700 GMT) Great Britain Jan Nationwide house price yy forecast 2.5%, last 2.6%
     
  • (0315 ET/0815 GMT) Spain Jan Manufacturing PMI forecast 55.7, last 55.8
     
  • (0345 ET/0845 GMT) Italy Jan Markit/ADACI Mfg PMI forecast 57.5, last 57.4
     
  • (0350 ET/0850 GMT) France Jan Markit Mfg PMI forecast 58.1, last 58.1
     
  • (0355 ET/0855 GMT) Germany Jan Markit/BME Mfg PMI forecast 61.2, last 61.2
     
  • (0430 ET/0930 GMT) Great Britain Jan Markit/CIPS Mfg PMI forecast 56.5, last 56.3

Key Events Ahead

  • (0615 ET/1115 GMT) ECB's Peter Praet speaks at the luncheon conference of Cercle de Lorraine in Brussels

FX Beat

DXY: The dollar index steadied after the Federal Reserve signaled its confidence about inflation and growth, reinforcing views it will raise rates several more times this year. The greenback against a basket of currencies traded flat at 89.08, having touched a low of 88.44 on Friday, its lowest since December 2014. FxWirePro's Hourly Dollar Strength Index stood at -36.53 (Neutral) by 0500 GMT.

EUR/USD: The euro rose, extending gains for the third consecutive session, amid prospects for the European Central Bank to begin normalizing monetary policy this year. The European currency traded 0.1 percent up at 1.2422, having touched a low of 1.2336 on Tuesday, its lowest since Jan. 24. FxWirePro's Hourly Euro Strength Index stood at 28.85 (Neutral) by 0400 GMT. Investors’ attention will remain on series on Markit Manufacturing PMI's from Eurozone economies, ahead of U.S. unemployment benefit claims, preliminary nonfarm productivity and Manufacturing PMI from both Markit and ISM. Immediate resistance is located at 1.2500, a break above targets 1.2590. On the downside, support is seen at 1.2307 (38.2% retracement of 1.2264 and 1.2537), a break below could drag it lower 1.2252 (23.6% retracement).

USD/JPY: The dollar extended previous session’s rebound after the Federal Reserve kept interest rates unchanged on Wednesday but said inflation is likely to quicken this year, bolstering expectations borrowing costs will continue to rise. The major was trading 0.1 percent up at 109.27, having hit a low of 108.28 on Friday, its lowest since Sept 11. FxWirePro's Hourly Yen Strength Index stood at -40.40 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. unemployment benefit claims, preliminary nonfarm productivity and Manufacturing PMI from both Markit and ISM for further momentum. Immediate resistance is located at 109.52 (61.8% retracement of 111.49 and 108.28), a break above targets 109.90 (50.0% retracement). On the downside, support is seen at 108.20, a break below could take it lower 108.00.

GBP/USD: Sterling rose against the dollar as investors awaited Britain's Markit Manufacturing PMI, which is expected to rise to 56.5 in January from a previous reading of 56.3.  The major traded 0.1 percent up at 1.4192, having hit a high of 1.4345 on Thursday, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 35.03 (Neutral) by 0500 GMT.  Investors’ focus will remain on the UK Markit Manufacturing PMI, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.4263, a break above could take it near 1.4300. On the downside, support is seen at 1.4066 (10-DMA), a break below targets 1.3904 (50.0% retracement of 1.3458 and 1.4345). Against the euro, the pound was trading 0.1 percent down at 87.55 pence, having hit a low of 88.33 pence on Tuesday, it’s lowest since Jan. 22.

AUD/USD: The Australian dollar slumped, extending losses for the fourth straight session after domestic data showed building approvals tumbled 20 percent in December against expectations of an 8 percent fall. The Aussie trades 0.1 percent down at 0.8043, having hit a high of 0.8135 on Friday; it’s highest since May 2015. FxWirePro's Hourly Aussie Strength Index stood at -168.95 (Highly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.8012 (61.8% retracement of 0.7807 and 0.8135), a break below targets 0.7973 (50.0% retracement). On the upside, resistance is located at 0.8150, a break above could take it near 0.8200.

NZD/USD: The New Zealand dollar steadied after Chinese data showed Caixin Manufacturing PMI rose to 51.5 in January, surpassing expectations of 51.3. The Kiwi trades rose 0.05 percent at 0.7365, having touched a high of 0.7419 the day before, its highest level since Jan. 24. FxWirePro's Hourly Kiwi Strength Index was at 48.83 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7400, a break above could take it near 0.7490. On the downside, support is seen at 0.7288, a break below could drag it lower 0.7245 (Jan 18 Low).

Equities Recap

Asian shares edged up, reversing sharp losses from earlier this week, while the greenback steadied against a basket of currencies after the Federal Reserve flagged interest policy tightening later this year and upgraded inflation outlook.

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

Tokyo's Nikkei rose 1.4 percent to 23,415.11 points, Australia's S&P/ASX 200 index surged 0.9 percent to 6,090.10 points and South Korea's KOSPI rallied 0.3 percent to 2,572.80 points.

Shanghai composite index declined 1.05 percent to 3,444.16 points, while CSI300 index was trading 0.9 percent down at 4,236.39 points.

Hong Kong’s Hang Seng was trading 0.2 percent lower at 32,823.59 points. Taiwan shares added 0.5 percent to 11,160.25 points.

Commodities Recap

Crude oil prices rose, extending previous session's rebound as OPEC's strong compliance with a supply reduction pact offset news that U.S. production rose 10 million barrels per day for the first time in nearly half a century.  International benchmark Brent crude was trading 0.2 percent up at $69.01 per barrel by 0432 GMT, having hit a low of $67.82 the day before, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.1 percent up at $64.83 a barrel, after falling as low as $63.64 on Wednesday, its weakest since Jan. 22.

Gold prices edged down after the U.S. Federal Reserve left interest rates unchanged but hinted at hikes later this year. Spot gold was 0.1 percent down at $1,344.69 per ounce at 0435 GMT, having hit a low of 1,332.64 the day before, lowest since Jan 23. U.S. gold futures were up 0.3 percent at $1,342.90 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.725 percent higher by 0.006 bps, while 5-year yield was 0.008 bps up at 2.535 percent.

The Australian government bond futures were mixed, with the three-year bond contract up half a tick at 97.810. The 10-year contract eased 2 ticks to 97.165.

The New Zealand government bonds eased, sending yields 1 basis point higher at the long end of the curve.

The Canadian government bond prices were mixed across a flatter yield curve, with the two-year down 1.5 Canadian cents to yield 1.839 percent and the 10-year rising 4 Canadian cents to yield 2.289 percent. The two-year yield touched its highest point since June 2011 at 1.849 percent.

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