Market Roundup
• US Jan U Mich Sentiment Prelim, 94.4, 97.0 forecast, 95.9 previous.
• Schumer, Trump meet at White House as government shutdown nears.
• Possible U.S. shutdown won't affect U.S.'s AAA-rating - Fitch.
• Trump to tout U.S. economy, urge fair trade at elite Davos forum.
• U.S. Supreme Court to decide the legality of Trump travel ban.
• N.Y. Fed sees U.S. Q1 GDP slowing near 3 percent.
• Fed's Williams, citing tailwinds, says U.S. economy well-situated.
• Fed's Quarles says regulators have begun work to'streamline' Volcker Rule.
• CA Nov Manufacturing Sales MM, 3.4%, 2.0% forecast, -0.4% prev, -0.6% revised.
• Canada PM to boost support for NAFTA in the U.S. as talks intensify.
• Merkel upbeat SPD will approve talks with her conservatives.
• Merkel and Macron play up eurozone reform plans.
Looking Ahead - Economic Data (GMT)
• No major econ events
Looking Ahead - Events, Other Releases (GMT)
• Jan 22 N/A Eurogroup finance ministers' meeting - Brussels
• Jan 22 N/A Bank of Japan monetary policy meeting (to Jan. 23) - Tokyo
Currency Summaries
EUR/USD is likely to find support at 1.2156 levels and currently trading at 1.2234 levels. The pair has made session high at 1.2275 and hit lows at 1.2215 levels. Euro declined against the dollar on Friday as investors booked profits and avoided taking on large new positions on the single currency ahead of next week’s European Central Bank meeting. The ECB, who’s Governing Council meets on Thursday, last expressed concern over the single currency in September, when it said exchange rate volatility was an uncertainty that required "monitoring". In the last week, it has surpassed $1.23, and is now some 4 percent higher than when ECB policymakers met in December, although on a trade-weighted basis the euro's rise is not as steep. Its January surge followed the release of minutes from the December ECB meeting showing the bank intended to revisit its policy message in early 2018, prompting markets to price in a 70 percent chance of a rise in interest rates by the end of the year. The euro was down 0.07 percent at $1.2228, near a three-year high of $1.2323 touched on Wednesday. The common currency was on track to book a fifth straight week of gains in advance of next Thursday's European Central Bank meeting.
GBP/USD is supported in the range of 1.3738 levels and currently trading at 1.3873 levels. It reached session high at .3887 and dropped to session low at 1.3837 levels. The British pound declined against the greenback on Friday as disappointing UK retail sales data dented broadening optimism about a currency that is enjoying its best winning streak against the dollar since 2014.Before Friday's drop, sterling had been rallying against the dollar, with traders welcoming positive noises from the European Union about negotiations for Britain's exit and growing risk appetite encouraging sterling bulls to add to their positions against a widely weakened dollar. Figures from the Office for National Statistics showed 2017 was the weakest year for retail since 2013 and a drop in sales of 1.5 percent from November, as consumers squeezed by high inflation continued to keep a tight grip on spending. Sterling was down 0.4 percent at $1.3860 in the late US session on Friday, a full cent lower from its daily high as the dollar staged a broad recovery. Sterling had earlier hit $1.3945, its highest since Britain's June 2016 vote to leave the European Union. Sterling, however, remains on track for its longest winning streak against the dollar since 2014, with five straight weeks of gains. Against the euro, sterling was down 0.2 percent on Friday and 0.3 percent weaker versus the yen.
USD/CAD is supported at 1.2396 levels and is trading at 1.2478 levels. It has made session high at 1.2505 and lows at 1.2429 levels. The Canadian dollar dipped against its U.S. counterpart on Friday as lower prices of oil, one of Canada's major exports, offset domestic data showing the biggest increase in manufacturing sales in 2-1/2 years. Canadian manufacturing sales jumped 3.4 percent in November on strength in transportation equipment and petroleum and coal products, Statistics Canada said. Analysts in a poll had forecast a 2.0 percent gain. On Wednesday, the Bank of Canada raised its benchmark interest rate by 25 basis points to 1.25 percent, its highest since January 2009, after recent data showed stronger inflation and strong job growth. But expectations for additional rate hikes over the coming months were tempered after the central bank said the future of the North American Free Trade Agreement was the most significant downside risk the economy faced. Talks in Montreal later this month to update NAFTA will be extended by one day, officials said on Thursday, as Mexico and the United States exchanged barbs. The Canadian dollar was trading 0.2 percent lower at C$1.2497 to the greenback. The currency traded in a range of C$1.2400 to C$1.2500.
AUD/USD is supported around 0.7937 levels and currently trading at 0.8001 levels. It hit session high at 0.8014 and made session lows at 0.7993 levels. The Australian dollar held handsome gains for the week against the dollar on Friday as optimism on the global economy underpinned risk assets, largely at the expense of the U.S. dollar. The Aussie stood at $0.8008, just off its recent four-month peak of $0.8023 and up 1.2 percent for the week so far. The next major targets are $0.8105 and $0.8125, tops from last September which were then the highest since mid-2015.Sentiment remained buoyed by Thursday's blockbuster jobs report which led the market to bring forward the likely timing of a rate hike from the Reserve Bank of Australia (RBA).A rise in the 1.5 percent cash rate is now fully priced in for November compared to December at the start of the week and February 2019 a month ago. The U.S. dollar fell versus a basket of currencies after legislation to stave off an imminent federal government shutdown encountered obstacles in the Senate late on Thursday. President Donald Trump postponed plans to go to his Mar-a-Lago resort in Florida and met at the White House with Senate Democratic Leader Chuck Schumer to try to avert the shutdown, a source familiar with the situation said. Legislation to stave off an imminent federal government shutdown encountered obstacles in the Senate on Thursday night, despite the passage of a month-long funding bill by the House of Representatives hours earlier.
Equities Recap
European shares rose to highs not seen since 2008 as growing confidence in corporate earnings and in the strength of the global economy continued to fuel a bull market, which shrugged off fears of a possible U.S. government shutdown.
UK's benchmark FTSE 100 closed up by 0.4 percent, the pan-European FTSEurofirst 300 ended the day up by 0.46 percent, Germany's Dax ended up by 1.1 percent, France’s CAC finished the day up by 0.6 percent.
Wall Street rose on Friday, led by gains in consumer stocks, even as a possible government shutdown loomed.
Dow Jones closed up by 0.20 percent, S&P 500 ended up by 0.44 percent, Nasdaq finished the day up by 0.54 percent.
Treasuries Recap
Yields on the 10-year U.S. government note hit a three-year high on Friday as weakness in overnight trading led the debt to test key technical support levels, before the higher yields attracted new buyers.
10-year Treasury yields were at 2.635 percent. The two-year's were at 2.056 percent after hitting 2.065 percent earlier in the day, the highest level since September 2008.
Commodities Recap
Oil prices ended down on Friday and broke a four-week winning streak after a rally that had taken benchmarks to three-year highs, as investors sold positions on re-emerging U.S. production concerns.
Brent crude futures fell 70 cents, or 1 percent, to settle at $68.61 a barrel after hitting a session low of $68.28. On Monday, they hit their highest since December 2014 at $70.37.
U.S. West Texas Intermediate (WTI) crude futures settled at $63.37 a barrel, down 58 cents, or 0.9 percent. WTI marked a December-2014 peak of $64.89 a barrel on Tuesday.
Gold prices rose slightly on Friday as the U.S. dollar hovered near a three-year low on heightened fears of a U.S. government shutdown, but the precious metal was still on track for its first weekly drop in six weeks.
Spot gold was up 0.5 percent at $1,334.58 per ounce at 2:06 p.m. EST (1906 GMT), on track for a weekly drop of 0.3 percent, after falling from Monday's four-month highs.
U.S. gold futures for February delivery settled up $5.90, or 0.4 percent, at $1,333.10 per ounce.
