Market Roundup
- U.S. House passes short-term spending bill, Senate fight erupts.
- Fed's Mester says further rate hikes in 2018, 2019 'appropriate'.
- Fed's Williams under consideration for No. 2 Fed post –WSJ.
- China's Q4 GDP growth backed by continued strength in services, agriculture.
- China Q4 services +8.3% (vs Q3 8.0%).
- Big trade surpluses help fuel protectionism, IMF boss tells Germany.
- German union backs SPD bid to start formal coalition talks.
- U.S. fund investors pulled $3.1 bln from junk bonds during the latest wk-Lipper.
- U.S. muni bond funds post $1.2 bln in inflows-Lipper.
- Foreign CB US debt holdings +$3.973 bln to $3.355 trln Jan 17 week.
- Treasuries +$3.833 bln to $3.02 trln, agencies -$151 mln to $261.819 bln.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Dec Producer Prices MM f'cast 0.2%, 0.1% last
- (0200 ET/0700 GMT) Germany Dec Producer Prices YY f'cast 2.3%, 2.5% last
- (0430 ET/0930 GMT) Great Britain Dec Retail Sales MM f'cast -0.6%, 1.1% last
- (0430 ET/0930 GMT) Great Britain Dec Retail Sales YY f'cast 3.0%, 1.6% last
- (0430 ET/0930 GMT) Great Britain Dec Retail Sales Ex-Fuel MM f'cast -0.8%, 1.2% last
- (0430 ET/0930 GMT) Great Britain Dec Retail Sales Ex-Fuel YY f'cast 3.0%, 1.5% last
Key Events Ahead
- (0845 ET/1345 GMT) Fed’s Raphael Bostic participates in an informal discussion on "Thoughts on the Economy" before a National Regional public affairs forum in Nashville.
- (1300 ET/1800 GMT) Fed’s Randal Quarles speaks on "Bank Regulation" before the American Bar Association Banking Law Committee Annual Meeting in Washington.
- (1330 ET/1830 GMT) Fed’s John Williams speaks at the Bay Area Council Economic Institute's 11th Annual Forecast Conference: "Visualizing the Future of the Bay" in San Francisco.
- N/A German Chancellor Angela Merkel and IMF Managing Director Christine Lagarde meet for informal talks in Berlin.
FX Beat
DXY: The dollar index declined after the U.S. House of Representatives passed a bill to fund government operations through Feb. 16 and avoid agency shutdowns this weekend, however, the bill still needs an approval by the Senate, where it faces an uncertain future. The greenback against a basket of currencies traded 0.1 percent down at 90.42, having touched a low of 90.11 the day before, its lowest since January 2015. FxWirePro's Hourly Dollar Strength Index stood at -43.44 (Neutral) by 0500 GMT.
EUR/USD: The euro rose, extending previous session gains, as investors speculated the European Central Bank will edge towards ending its bond purchase programme later this year. The European currency traded 0.2 percent up at 1.2262, having touched a high of 1.2322 on Wednesday, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at 51.94 (Bullish) by 0400 GMT. Investors’ attention will remain on Eurozone current account, ahead of U.S. Michigan consumer sentiment index and Fed's Quarles speech. Immediate resistance is located at 1.2300, a break above targets 1.2370. On the downside, support is seen at 1.2120 (50.0% retracement of 1.1916 and 1.2322), a break below could drag it lower 1.2072 (38.2% retracement).
USD/JPY: The dollar extended previous session losses on fears over a possible U.S. government shutdown. The major was trading 0.2 percent down at 110.87, having hit a low of 110.19 on Wednesday, its lowest since Sept 15. FxWirePro's Hourly Yen Strength Index stood at -96.07 (Slightly Bearish) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. Michigan consumer sentiment index and Fed's Quarles speech for further momentum. Immediate resistance is located at 111.78 (50.0% retracement of 110.19 and 113.38), a break above targets 112.16 (61.8% retracement). On the downside, support is seen at 110.19 (Jan. 17 Low), a break below could take it lower 110.00.
GBP/USD: Sterling steadied above the 1.3900 handle and was on track for a fifth consecutive week of gains on the back of broad dollar weakness and optimism that Britain will reach a favorable divorce deal with the EU. The major traded 0.2 percent up at 1.3915, having hit a high of 1.3941 on Wednesday, it’s highest since June 2016. FxWirePro's Hourly Sterling Strength Index stood at 139.08 (Highly Bullish) by 0400 GMT. Investors’ focus will remain on the UK retail sales, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3950, a break above could take it near 1.4000. On the downside, support is seen at 1.3805 (5-DMA), a break below targets 1.3757 (61.8% retracement of 1.3458 and 1.3941). Against the euro, the pound was trading 0.1 percent down at 88.12 pence, having hit a high of 88.01 pence the day before, it’s highest since Dec. 19
AUD/USD: The Australian dollar traded just below a 4-month peak, supported by Thursday's jobs report which led the market to bring forward the likely timing of a rate hike from the Reserve Bank of Australia. The Aussie trades 0.3 percent up at 0.8017, having hit a high of 0.8022 on Wednesday; it’s highest since Sept. 21. FxWirePro's Hourly Aussie Strength Index stood at 126.23 (Highly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7978 (78.6% retracement of 0.7807 and 0.8022), a break below targets 0.7942 (61.8% retracement). On the upside, resistance is located at 0.8050, a break above could take it near 0.8100.
NZD/USD: The New Zealand dollar held firm near 4-month highs as the greenback declined on fears of a US. .government shutdown. The Kiwi trades flat at 0.7299, having touched a high of 0.7331 on Wednesday, its highest level since Sept. 25. FxWirePro's Hourly Kiwi Strength Index was at 23.57 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7340, a break above could take it near 0.7390. On the downside, support is seen at 0.7236 (10-DMA), a break below could drag it lower 0.7133 (Jan 10 Low).
Equities Recap
Asian shares rose to record highs, while the greenback eased on worries over a possible U.S. government shutdown.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent.
Tokyo's Nikkei gained 0.2 percent to 23,796.97 points, Australia's S&P/ASX 200 index fell 0.2 percent to 6,005.80 points and South Korea's KOSPI climbed 0.1 percent to 2,518.79 points.
Shanghai composite index rose 0.6 percent to 3,493.54 points, while CSI300 index was trading 0.8 percent up at 4,304.76 points.
Hong Kong’s Hang Seng was trading 0.3 percent higher at 32,203.70 points. Taiwan shares added 0.7 percent to 11,150.85 points.
Commodities Recap
Crude oil prices declined by 1 percent to a 10-day as a bounce-back in U.S. production outweighed ongoing declines in crude inventories. International benchmark Brent crude was trading 0.8 percent down at $68.58 per barrel by 0414 GMT, having hit a low of $68.28 earlier, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.8 percent up at $63.16 a barrel, after easing as low as $62.82, its lowest since Jan. 9.
Gold prices rose, supported by a weaker dollar and worries about a possible U.S. government shutdown. Spot gold was up 0.4 percent at $1,331.48 an ounce by 0419 GMT, having touched its weakest level since Jan. 12 at $1,324.15 on Thursday. U.S. gold futures were up 0.1 percent at $1,327.90.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.629 percent higher by 0.019 bps, while 5-year yield was 0.019 bps up at 2.423 percent.
The Japanese government bonds remained flat in muted trading session Friday as investors are curiously eyeing the Bank of Japan’s (BoJ) monetary policy decision, scheduled to be held early next week for further detailed insight into the debt market. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.08 percent, the yield on the long-term 30-year note edged nearly 1/2 basis point lower at 0.84 percent and the yield on short-term 2-year traded nearly flat at -0.13 percent.
The Australian 10-year government bond yields hit a near 4-month high on the last trading day of the week, tracking similar sound in the U.S. counterpart, following a possibility of a re-shuffling in the United States Federal Reserve. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, flaunted 6-1/2 basis points at 2.85 percent (highest since October 2017), the yield on the long-term 30-year note jumped a little over 8 basis points to 3.50 percent and the yield on short-term 2-year climbed 4-1/2 basis points to 2.12 percent.
The Canadian government bond prices were lower across much of the yield curve, with the two-year down 4 Canadian cents to yield 1.809 percent and the 10-year falling 11 Canadian cents to yield 2.219 percent. The 10-year yield touched its highest intraday since September 2014 at 2.232 percent.
