Market Roundup
- The UK set to choose a sharp break from European Open – Sunday/New York Times.
- UK’s May to urge national unity amid reports of “hard Brexit” – Reuters.
- UK likely to leave single market unless May performs a volte face –M.Wolf FT.
- Trump says Brexit to be a great thing, wants quick trade deal with the UK
- Baker McKenzie - UK M&A to drop sharply in ’17 as investors await Brexit clarity - Reuters.
- CFTC IMM CTA data – Specs trim net USD longs latest week, EUR shorts 65.8k smallest since June, MXN shorts 71.7k, largest since Oct, JPY shorts 79.8k.
- BoJ Kuroda at branch managers meeting – Nothing new, economy to continue to recover moderately, inflation to remain negative or around zero for now, QQE and yield curve control for as long as needed, ready to act again to ensure inflation-economy grows – Reuters.
- Japan Nov core machinery orders -5.1% m/m, +10.4% y/y, -1.7% and +8.1% forecast, m/m fall largest since April ’16, series very volatile.
- Japan Dec domestic corporate goods prices +0.6% m/m, -1.2% y/y, +0.3% and -1.5% forecast, Nov +0.4% and -2.2%, Oct -0.1% and -2.7%.
- Beijing will take off the gloves if Trump continues on Taiwan – China Daily.
- China CASS Xiao - Should stop intervening in FX and let CNY float – China Securities Journal.
- SoKorea Vice FinMin Choi – Watching FX volatility closely – Reuters.
- ESM Regling – Brexit bigger problem for the UK than rest of Europe – Reuters.
- SNB ViceChair Zurbruegg – Negative rates key for monetary policy, will help head off excessive CHF appreciation - NZZ am Sonntag.
- Swiss BizMibn Schneider-Ammann – EUR/CHF rate of 1.15 would be welcome – NZZ.
- New Zealand December food prices -0.8% m/m, +0.6% y/y.
Economic Data Ahead
- (1000 ET/1500 GMT) Eurozone Nov trade balance, E22.0 bln surplus forecast; last E20.1 bln surplus.
Key Events Ahead
- United States Martin Luther King, Jr day holiday.
- (0300 ET/0800 GMT) ECB ChiefEcon Praet, ECB/BdF Villeroy speak at BdF conference.
- (0500 ET/1000 GMT) Slovakia E1 bln 0.625% 2026 government bond auction.
- (0530 ET/1030 GMT) Netherlands E1-2 bln 3 and 6-month DTC auctions.
- (0730 ET/1230 GMT) ECB Mersch speaks at Helsinki BoF ceremony.
- (0850 ET/1350 GMT) France E3.0-3.4/1.2-1.6/1.0-1.4 bln 3/6/12-month BTF auctions.
- (1330 ET/1830 GMT) BoE Gov Carney speaks at LSE.
FX Beat
DXY: The dollar gained versus most its major peers, amid U.S. treasury yields and Hard-Brexit uncertainty. The greenback against a basket of currencies traded 0.25 percent up at 101.44, recovering from a low of 100.72 hit last week, it’s lowest since Dec. 8. FxWirePro's Hourly Dollar Strength Index stood at -131.69 (Highly Bearish) by 0500 GMT.
EUR/USD: The euro declined, halting its three-day winning streak as the greenback recovered most of its previous session losses on the back of higher treasury yields. The major failed to benefit from cross-driven strength, with EUR/GBP advancing more than 1 percent amid Hard-Brexit concerns. The European currency trades 0.03 percent lower at 1.0608, having hit a peak of 1.0684 last week, its highest since Dec 8. FxWirePro's Hourly Euro Strength Index stood at 38.48 (Neutral) by 0400 GMT. Investors’ attention remains on the Eurozone's trade balance data amid holiday-thinned trading, as the U.S. markets remain closed in observance of Martin Luther King Day. Immediate resistance is located at 1.0650, a break above targets 1.0700. On the downside, support is seen at 1.0575 (9-EMA), a break below could drag it lower 1.0550.
USD/JPY: The dollar slumped against the safe-haven yen, extending losses for the sixth consecutive session, as renewed risk-aversion wave, triggered by re-emergence of Hard-Brexit concerns boosted Japanese yen's safe-haven appeal. Moreover, weaker sentiments in the global equity markets and uncertainty over U.S. President-elect Donald Trump's economic policies added to the ongoing weakness in the major. The pair trades 0.1 percent lower at 114.25, after falling as low as 113.75 on Thursday, it’s lowest since Dec. 8. FxWirePro's Hourly Yen Strength Index stood at 66.00 (Bullish) by 0400 GMT. Investors will continue to track board based market sentiment, amid subdued trading, as the U.S. markets remain shut in observance of Martin Luther King Day. Immediate resistance is located at 114.91 (10-DMA), a break above targets 115.50 (Jan 12 High). On the downside, support is seen at 113.97 (Session Low), a break below could take it till 113.50.
GBP/USD: Sterling tumbled over 1 percent, hitting a fresh 3-month low below the 1.2000 handle on media reports that the British government is set to make a "hard" Brexit, reviving fears about the impact of the imminent move. Sterling trades 1.3 percent lower at 1.2034, having hit a low of 1.1992 earlier in the session, its lowest since Oct. 7. FxWirePro's Hourly Sterling Strength Index stood at -58.25 (Bearish) by 0400 GMT. Investors will continue track development surrounding Brexit, ahead of Bank of England Governor Carney's speech for further clues on the major. Immediate resistance is located at 1.2068 (23.6% retracement of 1.2312 and 1.1992), a break above could take it near 1.2100. On the downside, support is seen at 1.9048 (Oct 7 Low), a break below targets 1.1900. Against the euro, the pound trades 1.1 percent down at 88.20 pence, having hit a low of 88.50 earlier in the day, its lowest since Nov. 9.
AUD/USD: The Australian dollar eased despite upbeat Australian inflation figures, as a fresh bout of risk aversion across the financial markets weighed on the sentiments around the Aussie. The economy's MI Inflation gauge showed consumer price index rose to an annualized rate of 1.8 percent in December, surpassing previous 1.5 percent, while on monthly basis it stood at 0.5 percent, beating prior reading of 0.1 percent. The major's trades 0.22 percent down at 0.7477, after hitting a high of 0.7518 on Thursday, it’s highest since Dec. 14. FxWirePro's Hourly Aussie Strength Index stood at 77.45 (Slightly Bullish) by 0500 GMT. Investors will continue to track board based market sentiment, amid holiday-thinned trading. Immediate support is seen at 0.7452 (5-DMA), a break below could drag it till 0.7402 (9-EMA). On the upside, resistance is located at 0.7524, a break above targets 0.7600.
NZD/USD: The New Zealand dollar tumbled below the 0.7100 handle, after rising to a fresh 1-month earlier in the session, as higher U.S. treasury yields and renewed concerns surrounding a Hard-Brexit weakened the demand around the Kiwi. Moreover, prevalent risk-off sentiment in the market will continue to weigh on the major. The Kiwi trades 0.4 percent down at 0.7098, having hit a high of 0.7147 earlier in the day, it’s strongest since Dec. 14. FxWirePro's Hourly Kiwi Strength Index was at 87.31 (Slightly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of New Zealand's Business Confidence figures due later in the day. Immediate resistance is located at 0.7147 (Session High), a break above could take it till 0.7200. On the downside, support is seen at 0.7059 (7-DMA), a break below could drag it lower 0.7050.
Equities Recap
Asian shares tumbled as concerns over Britain's exit from the European Union and the U.S. policy uncertainty ahead of President-elect Donald Trump's inauguration triggered a fresh bout of risk aversion.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.5 percent.
Tokyo's Nikkei fell 0.86 percent to 19,121.89 points, Australia's S&P/ASX 200 index declined 0.42 percent to 5,745.20 points and South Korea's KOSPI was trading 0.57 percent down at 2,064.95 points.
Shanghai composite index slumped 0.71 percent to 3,090.62 points, while CSI300 index was trading 0.4 percent lower at 3,305.31 points.
Hong Kong’s Hang Seng was trading 0.9 percent lower at 22,718.11 points. Taiwan shares shed 0.9 percent at 9,292.33 points.
Commodities Recap
Crude oil prices edged up supported by expectations that OPEC and other producers will cut output as part of an agreement to restrain global oversupply. International benchmark Brent crude was trading 0.1 percent up at $55.64 per barrel by 0406 GMT, having hit a low of $53.57 last week, its lowest since Dec. 15. U.S. West Texas Intermediate crude rose 0.06 percent at $52.54 a barrel, after declining as low as $50.69.
Gold rose, extending gains for the sixth consecutive session, as uncertainty over U.S. policy ahead of President-elect Donald Trump's inauguration and concerns over Britain's exit from the European Union weighed on market sentiment. Spot gold advanced 0.5 percent to $1,202.77 per ounce by 0410 GMT, having hit a high of $1,206.83 on Thursday, its strongest since Nov. 23. U.S. gold futures were up 0.6 percent at $1,203.60 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.3982 percent, while 5-year yield was up at 1.8986 percent.
Australian bonds traded narrowly mixed in thin trading activity during a relatively quiet session that witnessed data of little significance. The 10-yield on the benchmark 10-year Treasury note hovered around 2.71 percent, the yield on 15-year note remained steady at 3.13 percent and the yield on short-term 2-year moved down 1/2 basis point to 1.86 percent.
The New Zealand government bonds closed modestly higher after recent economic data showed that the country’s food prices fell in December ahead of the fourth-quarter consumer inflation data, which is scheduled for release next week. The yield on the benchmark 10-year bond ended 1 basis point lower at 3.15 percent, the yield on 7-year note also closed down 1 basis point to 2.82 percent and the yield on the short-term 2-year note moved down 1 basis point to 2.20 percent.
