Market Roundup
- CFTC IMM CTA data – Specs up USD bets to early January level, JPY net shorts largest since December ’15, but EUR net shorts lowest since mid-October.
- Non-OPEC producers agree to cut oil output - Financial Times.
- Trump to name Goldman Sachs vet Gary Cohn to head Nat’l Econ Council - WP.
- Trump says China, others devalue currencies as US economy improves – Reuters.
- Trump says the US not necessarily bound by “one China” policy – Reuters.
- BIS – Market paradigm shift may be under way, breaking free from dependence on central banks, more volatility likely, uncertainties hang over emerging economies including strong USD, high yields, FX market shrinking – Reuters.
- ECB/Buba Weidmann – Can’t exclude state joining Italy bank rescues - Reuters.
- ECB/BdF Villeroy – French growth 1.3% ’16 and ’17, to rise to 1.7%, threat of deflation lifted, growth can’t be boosted by spending – Reuters, Les Echos.
- Japan Oct core machinery orders +4.1% m/m, -5.6% y/y, +1.0% and -4.5% eyed.
- Japan Nov domestic corp goods prices +0.4% m/m, -2.2% y/y, +0.3% and -2.3% eyed, y/y decline 20th straight.
- China State Info Center – For 6.5% growth target for ’17 – China Sec Journal.
- PBOC fixes CNY at 6.9086 vs USD.
- Moody’s – NY half-year budget shows strong finances, NZ will remain among fastest growing economies in AAA-rate universe.
- New Zealand Nov REINZ median house prices -0.2% m/m, +13% y/y.
- New Zealand Q3 wholesale sales +1% q/q, +2.4% y/y, Q2 +1.7% q/q.
- New Zealand posts strong permanent visitor arrivals in October.
- New Zealand Fonterra confirms forecast farmgate milk price of NZ$6.00/kg – Reuters.
Economic Data Ahead
- (0200 ET/0700 GMT) Sweden Nov unemployment; last 7.6%.
Key Events Ahead
- (0500 ET/1000 GMT) Italy E4.75 bln 12-month BOT auction.
- (0530 ET/1030 GMT) Netherlands E1-2 bln 3 and 6-month DTC auctions.
- (0850 ET/1350 GMT) France E2.6-3.0 bln and 1.1-1.5 bln 3 and 6-month BTF note auctions.
FX Beat
DXY: The dollar inched higher ahead of the U.S. Federal Reserve's meeting, where it is expected to deliver an interest rate hike as well as provide hints on future monetary policy. The greenback against a basket of currencies traded flat at 101.54, having touched an early high 101.78, its strongest since Nov. 30. FxWirePro's Hourly Dollar Strength Index stood at 95.64 (Slightly Bullish) by 0500 GMT.
EUR/USD: The euro declined for the third consecutive session, after the European Central Bank extended its bond-buying program longer than anticipated last Thursday, and reduced its monthly asset buys to 60 billion euros starting in April from current 80 billion euros. Divergent monetary policy between the Federal Reserve and the ECB, coupled with concerns over the Italian and European banking crisis will continue to hurt the euro bulls. The U.S. Fed is widely expected to hike interest rates at this week's policy meeting, while focus also on the central bank’s economic projections, after Donald Trump’s surprise victory increased market expectations of larger fiscal stimulus that could boost economic growth and inflation. The European currency trades lower at 1.0551, having touched a 1-week low of 1.0525 earlier in the session. Investors’ will continue to track overall market sentiment, amid a lack of relevant macro-fundamental drivers from both the continents. FxWirePro's Hourly Euro Strength Index stood at -113.48 (Highly Bearish) by 0400 GMT. Immediate resistance is located at 1.0585 (Nov-24 High), a break above targets 1.0600. On the downside, support is seen at 1.0504 (Dec-5 Low), a break below could drag it till 1.0455.
USD/JPY: The dollar extended gains above the 115.00 handle, on increasing expectations that the Federal Reserve would hike interest rates for the first time in 2016 at its meeting that begins on Tuesday. Investors’ attention will also remain on the Fed's economic projections and clues to future monetary policy, after Donald Trump's surprise victory in the U.S. presidential election. Moreover, persisting risk-on sentiment, triggered by weekend’s OPEC and non-OPEC oil output deal agreement boosted the bid tone around the major. The pair trades 0.3 percent up at 115.50, having hit a fresh 10-month high of 115.61 earlier in the session. FxWirePro's Hourly Yen Strength Index stood at -26.48 (Neutral) by 0400 GMT. Immediate resistance is located at 116.00, a break above targets 116.50. On the downside, support is seen at 114.47 (5-DMA), a break below could take it near 114.00.
GBP/USD: Sterling gained, halting its 4-day losing streak amid prevalent risk-on sentiment, spurred by oil producers’ output deal agreement. On Friday, the major fell to a near 8-day low of 1.2552, after British lawmakers said they would follow Prime Minister Theresa May's timetable on Brexit. Sterling trades 0.1 percent to 1.2584, attempting to take out the 1.2600 handle. FxWirePro's Hourly Sterling Strength Index stood at -25.07 (Neutral) by 0400 GMT. The major will remain at the mercy of dollar price action, amid data-empty economic calendar across the globe. Immediate resistance is located at 1.2609 (5-DMA), a break above could take it over 1.2650. On the downside, support is seen at 1.2548 (Dec 8- Low), a break below targets 1.2519 (21-DMA)/ 1.2500. Against the euro, the pound trades up at 83.89 pence, having hit a 1-week high of 83.62 pence earlier in the session.
AUD/USD: The Australian dollar gained, recovering after falling in the previous two sessions, as an overnight rally in oil prices after an output cut deal reached between the OPEC and non-OPEC producers on Saturday, boosted the bid tone around the major. However, the upside seems capped as the greenback remains strong in anticipation that the U.S. Federal Reserve will hike interest rates this week. The Aussie trades 0.1 percent higher at 0.7452, retreating from an early low of 0.7430. FxWirePro's Hourly Aussie Strength Index stood at 48.85 (Neutral) by 0500 GMT. The major will be driven by board based market sentiment, ahead of the Australia's house price index and NAB's business sentiment report due tomorrow. Immediate support is seen at 0.7428 (Dec 8 Low), a break below could drag it near 0.7400. On the upside, resistance is located at 0.7480, a break above targets 0.7500.
NZD/USD: The New Zealand dollar retreated after declining to a 5-day low earlier in the session following OPEC and other producers’ first deal since 2001 over the weekend to jointly reduce output. The major was also supported by upwards revisions to the New Zealand growth and inflation estimates by the NZIER forecast from economists. However, further gains look limited as markets turn cautious ahead of the Federal Reserve policy meeting this week. The Kiwi trades 0.2 percent up at 0.7143, having touched an early low of 0.7115, it’s lowest since Dec 7. FxWirePro's Hourly Kiwi Strength Index was at -14.73 (Neutral) by 0500 GMT. The pair will continue to track overall market sentiment, ahead of tomorrow’s Chinese data and upcoming Fed interest rates decision. Immediate resistance is located at 0.7170, a break above could take it over 0.7200. On the downside, support is seen at 0.7100, a break below could drag it till 0.7069/ 0.7032.
Equities Recap
Asian shares traded on a mix note, as investors turned cautious over a rise in outflows from emerging markets and inflows towards U.S. markets, ahead of FOMC meeting later in the week.
MSCI's broadest index of Asia-Pacific shares outside Japan traded flat after posting its biggest weekly rise in nearly 3-months last week.
Tokyo's Nikkei advanced 0.96 percent at 19,175.66 points, Australia's S&P/ASX 200 index gained 0.12 percent at 5,567.50 points and South Korea's KOSPI was trading 0.12 percent higher at 2,026.51 points.
Shanghai composite index declined 2.13 percent to 3,163.36 points, while CSI300 index was trading 2.42 percent lower at 3,408.98 points.
Hong Kong’s Hang Seng was trading 1.06 percent down at 22,520.43 points. Taiwan shares shed 0.2 percent at 9,349.94 points.
Commodities Recap
Crude oil prices rallied by more than 4 percent to their highest level since early 2015 after OPEC and non-OPEC producers over the weekend reached their first deal since 2001 to jointly reduce output in order to balance oversupply. International benchmark Brent crude was 4.3 percent higher at $56.64 per barrel by 0408 GMT, having hit a 17-month high of $57.50 earlier in the session. U.S. West Texas Intermediate crude rose 4.8 percent at $53.93 a barrel, after rising as high as $54.48 earlier, the highest since July 2015.
Gold prices hit their lowest in over 10 months, weighed down by increasing expectations of a possible U.S. rate hike this week which would dampen demand for the safe-haven asset. Spot gold declined 0.15 percent to $1,158.13 an ounce by 0414 GMT, having hit its lowest since Feb. 5 at $1,154.38 an ounce. It shed about 1 percent on Friday. U.S. gold futures were also at 10-month lows, easing to $1,161.20 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.4932 percent higher by 0.029 bps, while 5-year yield was up by 0.03 bps at 1.9123 percent.
The Australian government bonds witnessed a heavy sell-off as investors moved away from safe-haven buying amid rising crude oil prices that lifted inflation expectations. The yield on the benchmark 10-year Treasury note rose nearly 3 basis points to 2.86 percent, the yield on 15-year note jumped 3-1/2 basis points to 3.32 percent and the yield on short-term 2-year bounced nearly 2 basis points to 1.88 percent.
The New Zealand government bonds closed modestly higher after witnessing a heavy sell-off in the early trading session on Monday, following a rally in crude oil prices. The yield on the benchmark 10-year bond closed 1 basis point lower at 3.33 percent, the yield on 7-year note ended down 1 basis point to 2.89 percent and the yield on short-term 2-year note slid 1/2 basis point to 2.22 percent.
