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Asia Roundup: Aussie rallies on upbeat employment report, dollar index slumps despite rising U.S. Treasury yields, Asian shares surge amid holiday-thinned trading - Thursday, February 15th, 2018

Market Roundup

  • Japan Dec core machinery orders -11.9% m/m, -5.0% y/y, -2.3% and +2.2% eyed
     
  • Japan Core orders in Q4 -0.1% q/q, +0.6% eyed in Q1 ’18, Dec down most in 3 yrs
     
  • Japan DepPM/FinMin Aso – No plan now to respond to JPY moves, intervene
     
  • Japan's Abe, Trump agree to keep up pressure on N.Korea
     
  • Australia Jan Employment, 16.0k vs 34.7k (33.5k rvsd),15.0k f’cast
     
  • Australia Jan Unemployment, 5.5% vs 5.5% (5.6% rvsd), 5.5% f’cast
     
  • Australia Jan Participation rate, 65.6% vs 65.7, 65.6% f’cast
     
  • New Zealand housing market continues recovery in January but headwinds loom
     
  • Zuma quits, ending scandal-plagued term as South African president
     
  • Germany's SPD vows to clash with "down for the count" Merkel
     
  • UK's Johnson keeps hard Brexit stance in speech aimed at mending fences
     
  • Northern Ireland talks collapse, London says deal still possible
     
  • U.S. Senate showdown over 'Dreamer' immigrants seen Thursday

Economic Data Ahead

  • (0300 ET/0800 GMT) Spain Jan CPI, -1.1% m/m, 0.5% y/y eyed; 0.0%, 1.1% prev
     
  • (0300 ET/0800 GMT) Spain Jan HICP, -1.5% m/m, 0.7% y/y eyed; 0.0%, 0.7% prev

Key Events Ahead

  • (0315 ET/0815 GMT) ECB board member Yves Mersch speaks in Paris
     
  • (0440 ET/0940 GMT) Spain E4.0-5.0 bln for 4 year auction
     
  • (0455 ET/0955 GMT) France E7.0-8.0/E7.0-8.0/E7.0-8.0 bln for 3/5/8 year auction
     
  • (0535 ET/1035 GMT) Great Britain Stg 5.0 bln for 19 year auction
     
  • (0545 ET/1045 GMT) ECB's Peter Praet speaks in Paris
     
  • (0555 ET/1055 GMT) France E1.5-2.0/E1.5-2.0/E1.5-2.0 bln for 7/9/29 year auction
     
  • (0700 ET/1200 GMT) ECB's Sabine Lautenschlager speaks in Amsterdam, Netherlands

FX Beat

DXY: The dollar index continued to decline despite a stronger-than-expected rise in U.S. consumer prices in January bolstering bets that the Federal Reserve might raise interest rates four times in 2018.  The greenback against a basket of currencies traded 0.2 percent down at 88.88, having touched a low of 88.84, its lowest since Feb. 2. FxWirePro's Hourly Dollar Strength Index stood at -84.54 (Slightly Bearish) by 0500 GMT.

EUR/USD: The euro rallied to a 10-day high as the greenback slumped to a 2-week low after a Reuters poll showed the U.S. government was wrong to cut taxes at this stage of the business cycle given the economy is near full employment. The European currency traded 0.1 percent up at 1.2457, having touched a high of 1.2473 earlier, its highest since Jan. 5. FxWirePro's Hourly Euro Strength Index stood at 29.24 (Neutral) by 0500 GMT. Investors’ attention will remain on Eurozone trade balance and ECB officials' speeches, ahead of U.S. producer price index, unemployment benefit claims and industrial production report. Immediate resistance is located at 1.2523, a break above targets 1.2555. On the downside, support is seen at 1.2356 (10-DMA), a break below could drag it lower 1.2245 (Feb 7 Low).

USD/JPY: The dollar slumped to a fresh 15-month low against the Japanese yen as market participants brace for further near-term weakness in the U.S. currency. The major was trading 0.4 percent down at 106.57, having hit a low of 106.30 earlier, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at 98.00 (Slightly Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. producer price index, unemployment benefit claims and industrial production report for further momentum. Immediate resistance is located at 107.21 (78.6% retracement of 110.48 and 106.30), a break above targets 107.90 (61.8% retracement). On the downside, support is seen at 106.10, a break below could take it lower 105.80.

GBP/USD: Sterling rose to a 1-week high as Britain foreign minister Boris Johnson's speech did not deliver any major surprises or bad news. The major traded 0.1 percent up at 1.4007, having hit a high of 1.4021 earlier, it’s highest since Feb 8. FxWirePro's Hourly Sterling Strength Index stood at -4.02 (Neutral) by 0500 GMT.  Investors’ focus will remain on the U.S. fundamental drivers, amid a lack of economic data from the UK docket. Immediate resistance is located at 1.4067 (Feb 8 High), a break above could take it near 1.4150 (Feb 5 High). On the downside, support is seen at 1.3892 (5-DMA), a break below targets 1.3764 (Feb 9 Low). Against the euro, the pound was trading flat at 88.92 pence, having hit a low of 89.19 pence the day before, it’s lowest since Jan. 12.

AUD/USD: The Australian dollar surged to a 10-day high as domestic employment recorded the longest streak of gains in January, while unemployment fell a tick and female participation in the workforce climbed to an all-time high. The economy added 16,000 net new jobs, while the unemployment rate edged down to 5.5 percent, from an upwardly revised 5.6 percent in December. The Aussie trades 0.1 percent up at 0.7934, having hit a high of 0.7946 earlier; it’s highest since Feb 5. FxWirePro's Hourly Aussie Strength Index stood at 30.24 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7900, a break below targets 0.7847 (5-DMA). On the upside, resistance is located at 0.7994, a break above could take it near 0.8049.

NZD/USD: The New Zealand dollar advanced to a near 2-week peak as a return of risk appetite helped offset a sharp rise in U.S. bond yields. The Kiwi trades 0.2 percent up at 0.7377, having touched a high of 0.7395, its highest level since Feb. 2. FxWirePro's Hourly Kiwi Strength Index was at 110.39 (Highly Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7400, a break above could take it near 0.7420. On the downside, support is seen at 0.7340 a break below could drag it near 0.7308 (21-DMA).

Equities Recap

Asian shares gained after Wall Street rose on strong U.S. inflation data, while the dollar extended its losses against the yen to hit a fresh 15-month low on the U.S. economy's strength concerns.

MSCI's broadest index of Asia-Pacific shares outside Japan surged 0.1 percent.

Tokyo's Nikkei rose 1.4 percent to 21,441.30 points, Australia's S&P/ASX 200 index gained 1.2 percent to 5,909.00 points.

Hong Kong’s Hang Seng was trading 1.9 percent higher at 31,115.43 points.

Commodities Recap

Crude oil prices rose to a 1-week peak, boosted by a weak dollar and by comments from Saudi Arabia that it would rather see an undersupplied market than end a deal with OPEC and Russia to withhold production. International benchmark Brent crude was trading 0.7 percent up at $64.78 per barrel by 0439 GMT, having hit a high of $64.95 earlier, its highest since Jan. 8. U.S. West Texas Intermediate was trading 0.8 percent up at $61.16 a barrel, after rising as high as $61.38 earlier, its strongest since Jan. 8.

Gold prices steadied near a 2-1/2-week high hit in the previous session, supported by a weaker dollar and as investors bet on higher U.S. inflation after a faster-than-expected rise in consumer prices last month. Spot gold inched up 0.3 percent to $1,354.15 an ounce by 0445 GMT, after touching its highest level since Jan. 26 at $1,355.37 on Wednesday. U.S. gold futures were down 0.2 percent to $1,355 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.913 percent higher by 0.001 bps, while 5-year yield was 0.016 bps up at 2.655 percent.

The Japanese government bonds remained flat in a silent trading session ahead of the Chinese Lunar New Year, as investors have largely shrugged-off the higher-than-expected industrial production for the month of December, released early today. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.06 percent, the yield on the long-term 30-year note remained flat at 0.79 percent and the yield on short-term 2-year steadied around -0.15 percent.

The Australian bonds slumped following stronger-than-expected January employment report, boosting confidence among investors that the health of the economy is in good shape. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 8-1/2 basis points to 2.919 percent, the yield on the long-term 30-year note also surged 8-1/2 basis points to 3.552 percent and the yield on short-term 2-year up 4 basis points to 2.046 percent.

The Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year was down 8.5 Canadian cents to yield 1.829 percent and the 10-year declined 27 Canadian cents to yield 2.374 percent.

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