Market Roundup
- CFTC IMM CTA data - Specs reduce USD bets more, Japan net longs highest since March ’08 but EUR net shorts largest since early February.
- Sources - BOJ to debate exempting $90 billion in short-term funds from negative rates – Reuters.
- Japan Jan core machinery orders +15.0% m/m, +8.4% y/y, +3.0% and -3.6% forecast.
- PBOC Gov Zhou – Signs financial markets returning to normal, trend to continue, no need to use FX to support trade, monetary policy prudent, will provide reasonable-ample liquidity, no need for excessive stimulus – Reuters.
- China SAFE – Cross-border capital outflows easing – Reuters.
- China Jan/Feb industrial output +5.4% y/y, retail sales +10.2%, touch weaker than +5.6% and +10.8% forecast, fixed asset investment +10.2%, +9.5% forecast, slower output growth due to seasonals, structural adjustments.
- IMF Lagarde – Growth-supportive monetary/fiscal policies urged in Asia –RTRS.
- RBNZ Gov Wheeler: Rates cut no mystery - Liam Dann, NZ Herald.
- RBNZ – Inflation expectations fall shows need for low rates, further declines would prompt RBNZ to reconsider interest rate outlook – Reuters.
- New Zealand Feb PSI +1.5 pts to 56.9, all five sub-indices up, employment rebound.
Economic Data Ahead
- (0500 ET/1000 GMT) Eurozone Jan industrial output, +1.7% m/m, +1.4% y/y forecast; last -1.0%, -1.3%.
Key Events Ahead
- N/A ECB/BdF Villeroy in Tokyo.
- N/A Buba Dombret speaks at Frankfurt roundtable.
- N/A Germany E3 bln 6-mo Bubill, Norway NOK8 bln 12-mo NST34 bill auctions.
- N/A France E3.3-3.7/1.1-1.5/1.2-1.6 bln 3/6/12-month BTF note auctions.
FX Beat
USD: The dollar steadied against the euro and yen on Monday following last week's large swings, as the market braced for Japanese and U.S. central bank policy meetings that could provide investors with fresh incentive. Against a basket of currencies, the dollar index was steady at 96.17 after shedding 1.2 percent last week.
EUR/USD: The euro trades 0.17 percent higher at 1.1163, not far from a 1-month high of $1.1218 set on Thursday after the European Central Bank eased extensively but also signaled that it may limit future interest rate cuts. Post ECB easing, the euro bulls manage to regain control over the pair, with Fed decision ahead in the week. Despite persistent risk-off market profile, the euro touched a sessions high of 1.1176. Traders are likely to be bullish on the pair as the Fed is expected keep its interest rate on hold this week. The EUR calendar remains absolutely data-empty today, with the exception of the Euro zone industrial production data. Immediate resistance is seen at 1.1209 (Previous Session High), break above could take the pair to 1.1218 (Mar 10 High). On the downside, support is located at 1.1097 (5-DMA).
USD/JPY: The dollar was nearly flat at 113.75 yen having gained 0.6 percent on Friday. The greenback rose from a low of 112.22 to as high of 114.44 versus the safe-haven yen last week, following an improvement in risk appetite on the back of rising equities and crude oil. Markets seem to overlook stronger than expected Japanese machinery orders data, which rose 15.0% m/m in January, better than the 3.0% increase forecast and compared to the 4.2% rise in orders in December. Markets attention now remains on the BOJ decision due tomorrow, however, the central bank is anticipated to stand pat. Dollar bulls are expecting the Fed will signal an intention to hike more than once this year, in the upcoming policy meet on Wednesday. Earlier in the session, the pair made a high of 114.00 and a low of 113.64. Immediate support is located at 113.49 (10-DMA), while resistance is seen at 114.44 (Mar 10 High).
AUD/USD: The Australian dollar hit an 8-month high on Monday, boosted by the relatively high yields offered by local debt and broad U.S. dollar weakness on the back of expectations the U.S. Federal Reserve may draw out its tightening cycle. The Aussie has showed remarkable resilience to disappointing data out of China, its key export market, as well as volatility in iron ore prices. The pair trades at 0.7588 levels, after making a high of 0.7593, a level last seen in July 2015. Market sentiments will be the key driver for the major today, as economic data calendar is absolutely data empty today. Traders are likely to remain bullish as the pair continues to hover towards session high. Immediate resistance is seen at 0.7593 (Session's High), while support is located at 0.7504 (5-DMA).
NZD/USD: The New Zealand dollar was steady at 0.6745, well above last week's low of 0.6619. The Kiwi declined last week after the central bank surprised markets by cutting interest rates 25 basis points and signaled more to come. The pair rose from the low on the back of recent gains in crude oil and overall improvement in global risk sentiment. Markets now await New Zealand current account report and Q4 gross domestic product data, scheduled later in the day. Traders are likely to continue the previous two days bullish trend, ahead of Fed policy meet, as they expect the central bank to stay pat. On the upside, immediate resistance is located at 0.6773 (Previous Session High), while on the down side, Support is seen at 0.6709 (5-DMA).
USD/CNY: The yuan was flat against the dollar on Monday as the central bank kept the exchange rate steady against any negative impact from recent economic data. The PBoC set the midpoint rate at 6.4913 per dollar prior to market open, only 0.01 percent weaker than the previous fix at 6.4905. The spot market was trading at 6.4930 by midday, unchanged from the open and the previous close, while the offshore yuan was trading 0.09 percent stronger than the onshore spot at 6.4871 per dollar. China's Industrial production and retail sales were weaker than expected. January industrial production declined to 5.4 percent from 5.9 percent, while retail sales dropped to 10.12 percent from 11.10 percent.
Equities Recap
Asian shares began a central-bank focused week on firm trading on Monday, buoyed by gains on Wall Street and glimmers of strength in weekend data from China.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1 percent. CSI300 index rose 2.7 percent, while the Shanghai Composite Index gained 2.6 percent, after both had lost more than 2 percent last week. Taiwan stocks climbed 0.5 pct at 8,747.90 points.
Australia's S&P/ASX 200 index closed up 0.29 pct at 5,181.30 points, while Nikkei advanced 1.74 pct at 17,233.75, with Seoul shares edged up 0.09 pct.
Commodities Recap
Gold bounced back on Monday, inching closer to last week's 13-month high as the dollar remained under pressure ahead of the U.S. Federal Reserve's policy meeting. Spot gold edged up 0.5 percent to $1,254.70 an ounce by 0212 GMT, while U.S. gold eased 0.3 percent to $1,256 an ounce.
Oil prices were stable in early trading on Monday, with global oversupply and slowing economic growth weighing on markets but prospects of falling production lending some
support. U.S. crude futures were trading at $38.41 per barrel at 0239 GMT, down 10 cents from their last settlement. But international Brent futures were up 6 cents at $40.45 a barrel.
Treasuries Recap
The 10-year U.S. Treasury yield stood at 1.980 percent versus previous close of 1.977 percent.
Japanese government bond prices gained on Monday, helped by buyback after a market correction over the last three sessions, and ahead of the Bank of Japan's policy meeting
outcome on Tuesday. The 10-year JGB yield declined 3.5 basis points to minus 0.050 percent, slipping from 3-week high of plus 0.015 percent touched on Friday. The 20-year JGB yield dropped 4.5 basis points to 0.480 percent. The benchmark 10-year JGB futures rose 0.39 point in price to 151.92.
Australian government bond futures hovered near multi-week lows, with the 3-year bond contract off 4.5 ticks at 97.905. The 10-year contract was unchanged at 97.3175, while
the 20-year contract shed 1 tick to 96.7825. Yields on 2-year government bonds rose to a 3-month peak of 2.1 percent, the same as their New Zealand counterparts.
New Zealand government bonds eased, sending yields 2.5 basis points higher across much of the curve. The spread between 10-year New Zealand and Australian government bonds has shrunk to 34 basis points, having fallen to 32 basis points on Friday, the smallest in two years.
Canadian government bond prices were lower across the maturity curve, with the benchmark 10-year falling 55 Canadian cents to yield 1.361 percent, while the 2-year price down 4 Canadian cents to yield 0.586 percent. The 10-year yield touched it’s highest since Jan. 8.
