Market Roundup
• Euro declines amid political uncertainty; dollar dips vs yen as US yields fall.
• US Jan Employment trends 130 v 129.7 previous (revised from 129.6).
• ECB’s Draghi: ECB won't act on temporary inflation spikes, due mostly from rising oil prices.
• Investors shun French bonds on election jitters, seek safety in Germany.
• Oil dips further below USD57 as USD strength counters OPEC, US oil rig count rises to highest since Oct 2015.
• Janus’ Bill Gross: Without ECB, BOJ policies, US 10-yr yield would be 3.5%.
Looking Ahead - Economic Data (GMT)
• 22:30 Australia AIG Construction Index Jan 47-previous
• 05:00 Japan Coincident Indicator MM* Dec 1.6- previous
• 05:00 Japan Leading Indicator* Dec 1.9- previous
Looking Ahead - Events, Other Releases (GMT)
• 03:30 Australia-RBA Cash Rate* Jan forecast 1.5%, 1.50%-previous
Currency Summaries
EUR/USD is likely to find support at 1.0700 levels and currently trading at 1.0753 levels. The pair has made session high at 1.0756 and hit lows at 1.0706 levels. Euro declined against the dollar on Monday as concerns over French politics ahead of the presidential vote in April, as well as other elections in Europe later in the year, dented the euro. Investors were largely focused on French politics, as far-right National Front leader Marine Le Pen launched her presidential bid, vowing to fight globalization and take France out of the eurozone. Higher demand at home and abroad for goods needed in production drove the biggest monthly increase in German industrial orders in December. German factory orders rose 5.2 percent in December, the biggest monthly increase in 2 1/2 years, but the data had little market impact. The much stronger-than-expected data, released by the Economy Ministry in Berlin on Monday, gave some reassurance that Germany's economic upswing will carry into 2017 despite growing political uncertainties that include the potentially protectionist U.S. trade agenda. In mid-morning trading, the euro fell 0.4 percent against the dollar to $1.0737. It dropped to $1.0705, its weakest level since Jan. 31.
GBP/USD is supported in the range of 1.2412 levels and currently trading at 1.2468 levels. It reached session high at 1.2481 and dropped to session low at 1.2426 levels. Sterling declined to hit a one-week low against the dollar on Monday as Prime Minister Theresa May faced challenges over her legislative plan for taking Britain out of the European Union. A three-day debate on a law giving May the right to trigger Brexit began on Monday and will be followed by a series of votes on whether to attach extra conditions to her plan to start talks on March 31. May has said parliament will be given a choice between accepting the deal she has reached with the EU or rejecting it and leaving the bloc without any agreement on issues such as trade and immigration. MPs want to be given more influence. The pound shed 2 percent last week against the dollar as investors pushed back their expectations for a Bank of England interest rate increase and after disappointing services sector data. Sterling fell as low as $1.2427, its weakest since Jan. 31, before recovering slightly. In late trade, it stood at $1.2448, down 0.2 percent on the day. The pound edged up 0.1 percent against a broadly weaker euro.
USD/CAD is supported at 1.3000 levels and is trading at 1.3082 levels. It has made session high at 1.3135 and lows at 1.3066 levels. The Canadian dollar declined against its U.S. counterpart on Monday as Canadian dollar was pressured by lower oil prices and while investors awaited December trade data due on Tuesday. The loonie, as Canada's currency is colloquially known, has gained for two straight weeks on a combination of favorable economic data and greenback weakness. Last week it touched its strongest level since September. Economists have a wide range of expectations for Tuesday's data after Canada achieved its first trade surplus in more than two years in November. The most optimistic see a C$1.5 billion surplus, while the most pessimistic expect a C$1.5 billion deficit. The median view is for a surplus of C$350 million after the surprise C$526 million surplus in the prior month. The Canadian dollar was last trading at C$1.3082 to the greenback, or 76.49 U.S. cents, weaker than the Bank of Canada's official close on Friday of C$1.3028, or 76.76 U.S. cents.
AUD/USD is supported around 0.7618 levels and currently trading at 0.7660 levels. It hit session high at 0.7664 and made session lows at 0.7628 levels. The Australian dollar slipped on Monday after making a three-month peak last week, as Australian dollar was weighted down by weak domestic data and lower oil prices. Retail sales slipped 0.1 percent in December, below expectations for a 0.3 percent increase. It was the first monthly decline since December 2015. The data also showed price gains remained very subdued as the retail deflator rose just 0.3 percent in the quarter, a worrying sign for underlying inflation which is below the central bank's target band of 2-3 percent. That could spell further cuts in interest rates. The Reserve Bank of Australia (RBA) lowered rates twice last year to fight anaemic inflation. The Aussie has risen 6.5 percent since the start of the year, as the U.S. dollar made a broad retreat as U.S. President Donald Trump's protectionist policies made investors more risk averse. The Australian dollar last traded 0.3 percent to $0.7661 in the late US session, slightly off the three-month peak of $0.7696.
Equities Recap
European shares closed in negative territory on Monday as risk-off sentiment prevailed, with a negative note on carmakers and worries over Italian banks leading those sectors down.
The UK's benchmark FTSE 100 closed down by 0.2 percent, FTSEurofirst 300 ended the day down by 0.56 percent, Germany's Dax ended down by 1.1, and France’s CAC finished the day down by 0.9 percent.
U.S. stocks slipped on Monday, led by the energy sector as oil prices dropped, while investors awaited the next run of major earnings reports and sought further clarity on President Donald Trump's economic policies.
Dow Jones closed down by 0.10 percent, S&P 500 ended up 0.22 percent, Nasdaq finished the day down by 0.22 percent.
Treasuries Recap
U.S. short- and medium-dated Treasury yields hit their lowest levels in at least 13 days on Monday on mounting European political uncertainty and a dearth of information on U.S. President Donald Trump's promised pro-growth policies.
U.S. 30-year Treasuries prices briefly rose by more than a full point as their yields touched a session low of 3.050 percent.
Benchmark 10-year Treasuries were last up 14/32 in price to yield 2.439 percent, while two-year notes were last up 2/32 in price to yield 1.173 percent. U.S. 30-year bonds last yielded 3.075 percent.
Commodities Recap
Oil fell on Monday as ample U.S. supplies and excess speculative length outweighed OPEC output curbs and rising tensions between the United States and Iran.
Brent futures fell $1.09, or 1.9 percent, to settle at $55.72 a barrel, while U.S. West Texas Intermediate crude lost 82 cents, or 1.5 percent, to close at $53.01. That was the lowest close for both contracts since Jan. 31.
The Brent premium to WTI narrowed to $2.09 a barrel at the close, its smallest since Jan. 19.
Gold jumped 1 percent on Monday to its highest in nearly three months as worries about the political landscape in the United States and Europe, and a subdued dollar, reinforced investor interest.
Spot gold was up 1.1 percent at $1,233.01 an ounce by 3:02 p.m. EST (2002 GMT), after touching $1,233.80 - a level last reached on Nov. 11. U.S. gold futures 1 settled up 0.9 percent at $1,232.10.
