Market Roundup
- Foreign CB US debt holdings +$13.847 bln to $3.153 trln Dec 14 wk, Treasury holdings +$13.995 bln to $2.827 trln, agencies -$82 mln to $265.446 bln.
- NY Fed– Swaps with foreign CBs $1.476 bln Dec 14 week, BoJ $11 mln, rest ECB.
- US Oct net overall capital inflow $18.8 bln, rev $154.4 bln outflow in Sept, Japan tops China as largest holder of US Treasuries, $1.132 vs $1.116 trln.
- Lipper – Rotation from US-based bond funds to stocks accelerates, stock funds attract $6.8 bln in latest week, stock ETFs in particular rake in cash.
- Foreigners bought $19 bln Japan stocks since Trump victory – Barron’s blog.
- Japan Toyota shooting for record group output in ’17 - Nikkei.
- Nissan CEO Ghosn – ’17 to be see record sales, eyes FX-oil-material prices Volatile next year – Reuters.
- China – No need to worry about Fed’s impact on CNY – People’s Daily.
- PBOC fixes CNY at 6.9508 vs USD, weakest since May ’08.
- China bars banks from funding coal, steel, “zombie” firms – Reuters.
- PBOC presses Chinese banks to help with funds after interbank lending freezes – Caixin.
- China CNY12/10 bln 3/6-mo bill auction misses, only CNY10.35/9.37 bln sold.
- EU Summit- Germany Merkel, ECB Draghi, et al discussed Trump prospects.
- Foreign holdings of New Zealand government debt 60.6% in November, Oct 61.0%.
- New Zealand Dec ANZ/RM consumer confidence index 124.5, Nov 127.2, still high.
Economic Data Ahead
- (0245 ET/0745 GMT) France Dec business climate index, 103.0 forecast; last 103.0.
- (0400 ET/0900 GMT) Italy Oct trade balance – global; last E3.67 bln surplus.
- (0400 ET/0900 GMT) Italy Oct trade balance – EU; last E 780 mln surplus.
- (0500 ET/1000 GMT) Eurozone Oct trade balance, E29.0 bln surplus forecast; last E26.5 bln surplus.
- (0500 ET/1000 GMT) Eurozone Nov inflation – final, -0.1% m/m, +0.6% y/y forecast; flash +0.2%, +0.6%.
- (0500 ET/1000 GMT) Eurozone Nov – ex-food/energy, -0.2% m/m, +0.8% y/y forecast; flash +0.1%, +0.7%.
- (0830 ET/1330 GMT) United States Nov housing starts, 1.23 mln AR forecast; last 1.32 mln, +25.5% m/m.
- (0830 ET/1330 GMT) United States Nov bldg permits, 1.24 mln AR forecast; last 1.26 mln, +2.9% m/m.
Key Events Ahead
- N/A Norges Bank Gov Olsen speaks in Kongsvinger, Norway.
- N/A Norges Bank DepGov Nicolaisen speaks in Oslo, DepGov Matsen in Trondheim.
- (0600 ET/1100 GMT) UK DMO GBP1.0/1.5/2.5 bln 1/3/6-month treasury bill auctions.
- (0700 ET/1200 GMT) Riksbank General Council meeting.
- (0715 ET/1215 GMT) ECB VP Constancio speaks at BoS Madrid ceremony.
- (0830 ET/1330 GMT) Canada October securities flows data.
- (1230 ET/1730 GMT) Richmond Fed Lacker in panel discussion at Charlotte conference.
FX Beat
DXY: The dollar held hefty gains versus its major peers after the Fed raised interest rates by 25 basis points and signaled three more hikes in 2017. The greenback against a basket of currencies traded 0.1 percent down at 102.99, having hit a 14-year high of 103.56 in the previous session. FxWirePro's Hourly Dollar Strength Index stood at 99.42 (Slightly Bullish) by 0500 GMT.
EUR/USD: The euro recovered after declining at a 14-year low, as markets repositioned for a faster pace of rate hikes by the Federal Reserve over the next year. The major strengthened slightly after data released on Thursday showed U.S. consumer prices moderated in November. The European currency trades 0.2 percent up at 1.0430, retreating from a low of 1.0366, its lowest since Jan. 2003 and was down 1.4 percent so far for the week. FxWirePro's Hourly Euro Strength Index stood at -34.52 (Neutral) by 0400 GMT. Investors now await Eurozone's consumer price index, which is expected to rise 0.6 percent y/y in November. Focus will also remain on U.S. housing starts and building permit figures due later in the day. Immediate resistance is located at 1.0483 (61.8% retracement of 1.0366 and 1.0671), a break above targets 1.0500. On the downside, support is seen at 1.0400, a break below could drag it lower 1.0366.
USD/JPY: The dollar edged up, hovering just below a 10-month high hit on Thursday, as markets continued to cheer on Federal Reserve interest rate hike decision and a faster pace of rate increases in 2017. Moreover, the divergence between the Fed and BoJ, combined with a rally in the stock markets and rebounding commodity prices, weighed on the Japanese safe-haven yen. The major trades higher at 118.21, having touched a high of 118.66, its strongest since early Feb. FxWirePro's Hourly Yen Strength Index stood at -54.04 (Bearish) by 0400 GMT. The major will be driven by board based market sentiment, ahead of the U.S. housing starts and building permits data. Immediate resistance is located at 118.60, a break above targets 119.00. On the downside, support is seen at 116.72 (5-DMA), a break below could take it near 116.02 (9-EMA).
GBP/USD: Sterling steadied above the 1.2400 handle after declining to a 3-week in the previous session as the U.S. dollar continued to remain strong across the board amid Fed’s hawkishness. The Bank of England on Thursday kept interest rates unchanged at a record low 0.25 percent and failed to give any clear explicit tightening bias, indicating that interest rates could move in either direction next. Sterling trades flat at 1.2420, after declining as low as 1.2376 the prior day, its lowest since Nov. 23. FxWirePro's Hourly Sterling Strength Index stood at 18.01 (Neutral) by 0500 GMT. Markets will closely watch the UK CBI Industrial Trends Survey Orders, ahead of BoE quarterly bulletin for further momentum on the major. Immediate resistance is located at 1.2468, a break above could take it over 1.2500. On the downside, support is seen at 1.2380, a break below targets 1.2350. Against the euro, the pound trades 0.2 percent lower at 83.96 pence, having hit a 10-day high of 83.13 pence the day before.
AUD/USD: The Australian dollar nudged up after falling to a 3-week low in the previous session, amid broad U.S. dollar consolidation after the recent upsurge. The major attempted a minor recovery around the 0.7350 level as a rebound in commodities, especially gold, copper and oil prices, provided some relief to the Aussie bulls. The major trades flat at 0.7357, retreating from a low of 0.7337 hit on Thursday, it’s lowest since Nov. 21 and was set for a weekly loss of 1.4 percent. FxWirePro's Hourly Aussie Strength Index stood at 38.15 (Neutral) by 0500 GMT. Investors' will continue to closely follow the USD price action, ahead of the U.S. housing data and building permits for further direction on the pair. Immediate support is seen at 0.7337 (Previous Session Low), a break below could drag it near 0.7311. On the upside, resistance is located at 0.7400, a break above targets 0.7428 (21-DMA).
NZD/USD: The New Zealand dollar tumbled, extending losses for the third consecutive session, as the prospect of more rate hikes from the Federal Reserve sent the U.S. dollar surging, The major continues to remain under pressure, as hawkish Fed stance boosted treasury yields to multi-month highs, dampening the demand for the emerging market currency. The Kiwi trades 0.1 percent lower at 0.7029, after falling to a low of 0.7010 in the previous session, it’s lowest since Nov. 25. FxWirePro's Hourly Kiwi Strength Index was at -114.87 (Highly Bearish) by 0500 GMT. Investors’ will continue to track overall market sentiment, ahead of the U.S. housing data for further clues on the pair. Immediate resistance is located at 0.7085, a break above could take it over 0.7100. On the downside, support is seen at 0.7000, a break below could drag it lower till 0.6970.
Equities Recap
Asian shares struggled for traction as global financial markets continued to adjust to Federal Reverse’s interest rate hike.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent after falling 1.8 percent on Thursday, while the broader emerging market stock index was down 1.6 percent.
Tokyo's Nikkei advanced 0.72 percent at 19,411.82 points, Australia's S&P/ASX 200 index fell 0.45 percent to 5,513.40 points and South Korea's KOSPI was trading 0.2 percent up at 2,040.34 points.
Shanghai composite index rose 0.07 percent to 3,119.96 points, while CSI300 index was trading 0.14 percent higher at 3,344.75 points.
Hong Kong’s Hang Seng was trading 0.03 percent up at 22,071.04 points. Taiwan shares shed 0.4 percent at 9,326.78 points.
Commodities Recap
Crude oil prices edged up, extending previous session gains, on news that Kuwait was prepared to cut supplies by more than initially expected from January as part of a planned production cut to restrain a global glut. International benchmark Brent crude was 0.3 percent higher at $54.29 per barrel by 0406 GMT, having hit a 1-week low of $53.13 in the previous session. U.S. West Texas Intermediate crude rose 0.3 percent at $51.21 a barrel, after falling as low as $49.93 on Thursday, it’s lowest since Dec 8.
Gold prices steadied after declining to its weakest level in 10-1/2 months, as the U.S. dollar rallied to multi-year highs after the Federal Reserve raised interest rates and projected further hikes in 2017. Spot gold was up 0.2 percent at $1,130.31 an ounce by 0409 GMT, after hitting its weakest level since Feb. 2 at $1,122.64 on Thursday. The metal dropped nearly 1.4 percent in the previous session, recording its biggest percentage decline in three weeks. U.S. gold futures were up 0.3 percent at $1,132.90 an ounce, after falling nearly 3 percent the day before.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.5731 percent lower by 0.005 bps, while 5-year yield was up by 0.007 bps at 2.0738 percent.
The Australian government bonds were drifting between small gains and losses in quiet trading ahead of the Christmas holiday. The yield on the benchmark 10-year Treasury note hovered around 2.86 percent, the yield on 15-year note dipped 1/2 basis point to 3.33 percent and the yield on short-term 2-year stood flat at 1.92 percent.
The New Zealand government bonds closed nearly flat as investors remain sidelined in any big deal ahead of the Christmas holidays. The yield on the benchmark 10-year bond closed ½ basis point lower at 3.43 percent, the yield on 7-year note ended flat at 2.97 percent and the yield on short-term 2-year note slid 1/2 basis point to 2.26 percent.
Canadian government bond prices fell across the yield curve, with the 2-year down 3 cents to yield 0.824 percent and the benchmark 10-year falling 30 Canadian cents to yield 1.830 percent. The 2-year yield fell 2 basis points below its U.S. equivalent to a spread of -45.2 basis points.
