Market Roundup
• US Q4 GDP advance +1.9% V 2.2% forecast, 3.5% previous ’15, weak exports weighed.
• US Dec durable goods orders fall 0.4% vs -4.8% revised for Nov, durables ex-defense +1.7% v -6.8% previous.
• US Q4 core PCE price advance 1.3% v 1.4% forecast 1.7% previous.
• Univ of Mich final sent 98.5 v 98.1 forecast, 98.1 previous, 1-yr inflation steady at 2.6%, 5-yr inflation 2.6% from 2.5%.
• Trump says Mexico has taken advantage of U.S. 'for long enough’.
• White House: Trump, Nieto recognize clear & very public differences on issue of paying for wall.
• White House: Trump, Nieto have agreed to work these differences out as part of comprehensive discussion on all aspects of bilateral relationship.
• Japan: preparing for all possible trade contingencies, Japan pins hope on TPP, not ruling out bilateral talks with US.
• Euro zone lending picks up, driven by cheap ECB cash.
• Key EZ inflation gauge (euro 5y5y breakeven fwd) tops 1.8 pct, in region of ECB target.
• Sterling posts strong weekly gains as focus turns to British growth, Brexit woes take a backseat.
• USD advances vs yen on renewed optimism about Trump policies, fiscal spend.
Looking Ahead - Economic Data (GMT)
• 21:45 New Zealand Trade - Imports* Dec 4.56b-previous
• 21:45 New Zealand Trade Balance* Dec -705.0m- previous
• 21:45 New Zealand Trade Bal YY* Dec -3.18b- previous
• 21:45 New Zealand Trade - Exports* Dec 3.86b- previous
• 23:50 Japan Retail Sales YY Dec forecast 1.3%, 1.70%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan Bank of Japan monetary policy meeting (to Jan. 31).
Currency Summaries
EUR/USD is likely to find support at 1.0655 levels and currently trading at 1.0691 levels. The pair has made session high at 1.0724 and hit lows at 1.0675 levels. The euro declined against dollar on Friday for the second consecutive day after dollar was buoyed by expectations that U.S. President Donald Trump would deliver on his campaign promise to put policies in place to further bolster an economy that has improved but has sputtered at times. The greenback has climbed for two straight days, pulling it back from seven-week lows against a basket of currencies on the view that it would gain from a rise in border tariffs, tax reform and future spending. The dollar briefly wobbled after advance data showed U.S. economic growth slowed more than expected to 1.9 percent in the fourth quarter due to weak exports. The market was expecting growth of 2.2 percent. The economy grew only 1.6 percent in 2016, the weakest pace since 2011.
GBP/USD is supported in the range of 1.2454 levels and currently trading at 1.2550 levels. It reached session high at 1.2582 and dropped to session low at 1.2522 levels. Sterling declined against dollar on Friday but remained on track for one of its strongest weeks since mid-November, with investors setting aside their Brexit concerns to focus on signs the British economy is growing robustly. Consumer confidence showed its biggest monthly improvement since last summer in January, data showed, adding to a stream of indicators suggesting Britain's vote to leave the EU has yet to unsettle the households driving its economy. A day earlier, figures showed the economy kept up its strong pace of growth in the last part of 2016, though investors were also waiting to see if Moody's would cut the UK's credit rating having had it on a downgrade warning since Brexit. The key focus for currency traders since Britain voted to leave the EU has been how that departure plays out and whether it will be a "hard" exit in which Britain leaves the European single market or a "softer" one retaining greater access to the trading bloc.
USD/CAD is supported at 1.3080 levels and is trading at 1.3137 levels. It has made session high at 1.3144 and lows at 1.3088 levels. The Canadian dollar weakened against its U.S. counterpart on Friday as oil fell and the greenback extended its recovery against a basket of currencies, but the loonie remained on track to score its biggest weekly gain since early December. U.S. crude prices were down 1.15 percent at $53.16 a barrel, giving up gains from earlier in the day, as the market shifted its focus towards production increases in the United States from efforts by OPEC and other producers to support prices by cutting output. The loonie was on course to gain 1.6 percent this week, its biggest gain since the week ended Dec. 2, as investor fears of a more unfavorable trade outlook for Canada abated and after U.S. President Donald Trump signed orders on Tuesday smoothing the path for the Keystone XL oil pipeline. the Canadian dollar was trading at C$1.3139 to the greenback, or 76.27 U.S. cents, weaker than Thursday's close of C$1.3098, or 76.35 U.S. cents.
USD/JPY is supported around 114.70 levels and currently trading at 115.06 levels. It peaked to hit session high at 115.28 and made session lows at 114.85 levels. The U.S. dollar strengthened against the Japanese yen on Friday as greenback remained in positive territory despite data showing U.S. economic growth slowed more than expected in the fourth quarter. Gross domestic product grew at a 1.9 percent annualized pace in the final three months of 2016, compared with a 3.5 percent rate in the third quarter. The greenback, which has climbed for two straight days from a seven-week low against a basket of major currencies, was buoyed by hopes that U.S. President Donald Trump's pro-growth policies will further bolster the U.S. economy. The Federal Open Market Committee, the Fed's policy-setting group, is widely expected to leave rates unchanged in a target range of 0.50-0.75 percent at its meeting next Tuesday and Wednesday after a quarter-point hike in December. In the late US trading, the dollar was up 0.4 percent against the yen to 115.09.
Equities Recap
European shares pulled back on Friday with UBS dragging bank stocks lower after posting a drop in full-year profit, while Britain's biggest supermarket Tesco surged after a 3.7 billion-pound takeover deal to buy a supplier.
UK's benchmark FTSE 100 closed up 0.3 percent, the pan-European FTSEurofirst 300 ended the down up by 0.67 percent, Germany's Dax ended down 0.3 percent, France’s CAC finished the day down by 0.6 percent.
U.S. stocks edged lower for a second consecutive session on Friday as some underwhelming corporate earnings and gross domestic product data offset recent enthusiasm over policy actions by President Donald Trump.
Dow Jones closed down by 0.05 percent, S&P 500 ended down by 0.10 percent, Nasdaq finished the day down by 0.08 percent.
Treasuries Recap
U.S. Treasury yields fell on Friday as data showing a sharper-than-forecast deceleration in economic growth in the fourth quarter spurred buying of U.S. government debt ahead of the Federal Reserve's first policy meeting of 2017.
Benchmark 10-year Treasury yields were down over 2 basis points at 2.482 percent, retreating further from a four-week high reached on Thursday. For the week, the 10-year yield was up 1.5 basis points.
Commodities Recap
Gold was little changed on Friday, giving up earlier losses as U.S. equity markets and Treasury yields turned lower, but the metal was on track for its first weekly loss of the year after traders cashed in on this week's rally to two-month highs.
Spot gold was 0.1 percent higher at $1,190.06 an ounce by 2:56 p.m. EST (1956 GMT), while U.S. gold futures for February delivery settled down 0.1 percent at $1,188.40 per ounce.
Oil prices slipped on Friday, extending losses after data suggested drilling is ramping up in the United States, prompting investor concern about how effective OPEC and other producers will be at supporting prices by cutting supplies.
U.S. crude futures for March delivery settled down 61 cents, or 1.1 percent, at $53.17 a barrel. Brent was down 72 cents at $55.52 a barrel.
