Market Roundup

• China says trade talks with U.S. set foundation to resolve concerns
   
• U.S. Fed may be open to changes to balance sheet plan, minutes show
   
• Trump storms out of talks on shutdown, bemoans 'total waste of time'
   
• China's Xi nudges N.Korea, U.S. to meet half way as second summit planned
   
• Rosenstein, overseeing U.S. Russia probe, set to depart post
   
• Britain's Hammond says no-deal Brexit would harm its people
   
• UK retailers suffer worst Christmas in a decade - BRC
   
• BoJ mulls unpleasant policy options if Fed puts rate hikes on hold
   
• Japan Nov Current Account NSA JPY, 567.6 bln f'cast, 1,309.9 bln prev
   
• China Dec PPI YY, 0.9%, 1.6% f'cast, 2.7% prev
   
• China Dec CPI YY, 1.9%, 2.1% f'cast, 2.2% prev
   

Economic Data Ahead

• (0245 ET/0745 GMT) France Nov Industrial Output MM, 0.0% f'cast, 1.2% prev

Key Events Ahead

• (0730 ET/1230 GMT) The European Central Bank publishes the minutes of the December policy meeting in Frankfurt .
   
• (0830 ET/1330 GMT) Federal Reserve Bank of Philadelphia issues historical revisions to Manufacturing Business Outlook Survey in Philadelphia
   
• (0835 ET/1335 GMT) Fed's Tom Barkin speaks in North Carolina to the Greater Raleigh Chamber of Commerce at its 2019 Economic Forecast event in Raleigh, N.C., United States
   
• (1230 ET/1730 GMT) Fed's James Bullard gives presentation on the U.S. economy and monetary policy before the Little Rock Chamber of Commerce Power Up Little Rock event in Little Rock, Ark.
   
• (1230 ET/1730 GMT) French Central Bank Governor Francois Villeroy de Galhau gives speech on economic prospects for Europe in 2019, with Luxembourg central bank chief also in attendance in Luxembourg.
   
• (1245 ET/1745 GMT) Fed's Jerome Powell speaks before the Economic Club of Washington in Washington D.C.
   
• (1300 ET/1800 GMT) Fed's Charles Evans speaks on current economic conditions and monetary policy before event, Milwaukee Business Journal Economic Forecast in Milwaukee, United States
   
• (1320 ET/1820 GMT) Fed's Neel Kashkari speaks on immigration and economic growth before a Jewish Community Relations Council luncheon in Minneapolis, Minnesota.
   

FX Beat

DXY: The dollar index plunged to a near 3-month low, amid growing expectations the Federal Reserve will pause its rate tightening cycle this year. The greenback against a basket of currencies trades 0.05 percent down at 95.10, having touched a low of 95.03 earlier, its lowest since Oct. 16. FxWirePro's Hourly Dollar Strength Index stood at -41.53 (Neutral) by 0500 GMT.

EUR/USD: The euro rallied to a near 3-month peak, as the greenback slumped to multi-month lows amid rising expectations the U.S. Federal Reserve will keep interest rates steady this year. The European currency traded 0.1 percent up at 1.1556, having touched a high of 1.1569 earlier, its highest since Oct. 17. FxWirePro's Hourly Euro Strength Index stood at 76.13 (Slightly Bullish) by 0500 GMT. Investors’ attention will remain on a series of data from the Eurozone economies, and ECB monetary policy meeting, ahead of the U.S. unemployment benefit claims, and speeches from Fed officials. Immediate resistance is located at 1.1599 (October 11 High), a break above targets 1.1621 (October 16 High). On the downside, support is seen at 1.1517 (October 11 Low), a break below could drag it till 1.1463 (October 4 Low).

USD/JPY: The dollar declined below the 108.00 handle, as investors cautiously awaited more news on U.S.-China trade talks that have raised hopes of a deal to avert a trade war between both the economies. The major was trading 0.2 percent down at 107.90, having hit a low of 104.65 last week, its lowest since March 26. FxWirePro's Hourly Yen Strength Index stood at -42.33 (Neutral) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims, and speeches from Fed officials. Immediate resistance is located at 109.08 (January 8 High), a break above targets 109.46 (April 26 High). On the downside, support is seen at 107.65 (April 23 Low), a break below could take it lower 107.35 (April 20 Low).

GBP/USD: Sterling edged down, as British Prime Minister Theresa May must secure a win in parliament to get her Brexit deal approved or risk seeing Britain's exit from the European Union descend into chaos. The major traded 0.05 percent down at 1.2783, having hit a high of 1.2803 on Wednesday; it’s highest since December 31. FxWirePro's Hourly Sterling Strength Index stood at -90.75 (Slightly Bearish) 0500 GMT. Investors’ attention will remain on developments surrounding Brexit deal, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2815 (December 31 High), a break above could take it near 1.2884 (November 19 High). On the downside, support is seen at 1.2706 (January 8 Low), a break below targets 1.2680 (December 31 Low). Against the euro, the pound was trading 0.2 percent down at 90.40 pence, having hit a low of 90.44 earlier, it’s lowest since January 3.

AUD/USD: The Australian dollar steadied near a 3-week peak after China's commerce ministry stated that the talks with the United States this week were extensive, and helped establish a foundation for the resolution of each others' concerns. The Aussie trades 0.2 percent up at 0.7187, having hit a high of 0.7193 on Wednesday; it’s highest since December 19. FxWirePro's Hourly Aussie Strength Index stood at 91.05 (Slightly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7085 (December 20 Low), a break below targets 0.7016 (December 27 Low). On the upside, resistance is located at 0.7200 (December 19 High), a break above could take it near 0.7268 (November 22 High).

NZD/USD: The New Zealand dollar eased from a 3-week high as U.S.-China trade talks ended without any clarity on when, or whether, a deal might be secured. The Kiwi trades 0.1 percent down at 0.6782, having touched a high of 0.6809 on Wednesday, its highest level December 19. FxWirePro's Hourly Kiwi Strength Index was at -56.91 (Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6817 (Dec. 17 High), a break above could take it near 0.6880 (Dec. 18 High). On the downside, support is seen at 0.6726 (Jan. 7 Low), a break below could drag it below 0.6691 (Dec. 31 Low).

Equities Recap

Asian shares tumbled after data out of China showed the country's consumer prices and factory-gate inflation both increased less than expected in December.

MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.2 percent.

Tokyo's Nikkei eased 1.3 percent to 20,164.71 points, Australia's S&P/ASX 200 index gained 0.3 percent to 5,795.30 points and South Korea's KOSPI plunged 0.1 percent to 2,063.27 points.

Shanghai composite index declined 0.05 percent to 2,543.28 points, while CSI300 index traded 0.2 percent up at 3,084.06 points.

Hong Kong’s Hang Seng traded 0.05 percent lower at 26,452.79 points. Taiwan shares shed 0.2 percent to 9,720.69 points.

Commodities Recap

Crude oil prices declined by 1 percent amid rising U.S. supply, however, hopes the United States and China may soon end trade disputes limited downside. International benchmark Brent crude was trading 0.5 percent down at $60.94 per barrel by 0505 GMT, having hit a high of $61.66 on Wednesday, its highest since December 14. U.S. West Texas Intermediate was trading 0.6 percent lower at $51.83 a barrel, after rising as high as $52.56 on Wednesday, its highest since the December 14.

Gold prices rose, hovering towards a near 7-month high hit last week, as the dollar eased on rising expectations the U.S. Federal Reserve will keep interest rates steady this year. Spot gold was trading 0.2 percent up at $1,295.55 per ounce at 0511 GMT, having touched a high of $1,298.42 on Friday, its highest level since June 15. U.S. gold futures rose 0.1 percent to $1,293.20 per ounce.

Treasuries Recap

The Australian government bonds gained during the Asian session, tracking a similar movement in the U.S. Treasuries on hopes of fewer interest rate hikes by the Federal Reserve. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2-1/2 basis points to 2.305 percent, the yield on the long-term 30-year bond fell 1-1/2 basis points to 2.825 percent and the yield on short-term 2-year traded nearly 1 basis point lower at 1.895 percent.

The New Zealand government bonds rallied, with yields down around 7 basis points at the longer end of the curve.

The Canadian government bond prices were lower across the yield curve, with the 10-year falling 18 Canadian cents to yield 1.989 percent. The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 3.2 basis points to a spread of 65.1 basis points in favor of the U.S. bond.