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Asia Roundup: Kiwi steady near 3-week peak ahead of RBNZ meeting, greenback rallies as U.S.-China trade talks resume, Asian shares ease amid holiday-thinned trading - Monday, February 11th, 2019

Market Roundup

  • Talks collapse on border deal as U.S. gov't shutdown looms
     
  • UK's May rejects pivot towards Brexit customs union compromise
     
  • UK's May to promise new Brexit debate in push for more negotiating time
     
  • Britain and Switzerland to sign post-Brexit trade agreement
     
  • Italy's populist leaders pledge to replace central bank's top brass
     
  • U.S.-China trade talks resume this week, focus on intellectual property
     
  • Advisers float Mar-a-lago summit as Trump plots next moves with Xi - Axios
     
  • New Zealand central bank to hold rates at record low as global risks grow-POLL
     

Economic Data Ahead

  • (0430 ET/0930 GMT) Great Britain Q4 GDP Preliminary YY, 1.4% f'cast, 1.5% prev
     
  • (0430 ET/0930 GMT) Great Britain Q4 GDP Preliminary QQ, 0.2% f'cast, 0.6% prev
     
  • (0430 ET/0930 GMT) Great Britain Dec GDP Estimate 3M/3M, 0.3% f'cast, 0.3% prev
     
  • (0430 ET/0930 GMT) Great Britain Dec Manufacturing Output MM, 0.2% f'cast, -0.3% prev
     
  • (0430 ET/0930 GMT) Great Britain Dec Manufacturing Output YY, -1.1% f'cast, -1.1% prev
     
  • (0430 ET/0930 GMT) Great Britain Dec Industrial Output MM, 0.2% f'cast, -0.4% prev
     
  • (0430 ET/0930 GMT) Great Britain Dec Industrial Output YY, -0.4% f'cast, -1.5% prev
     
  • (0430 ET/0930 GMT) Great Britain Dec GDP Estimate YY, 1.4% f'cast, 1.4% prev
     

Key Events Ahead

  • N/A ECB's Mario Draghi participates in Eurogroup meeting - Brussels
     
  • (0330 ET/0830 GMT) ECB's Luis de Guindos speaks at Deusto Business School - Madrid

FX Beat

DXY: The dollar index surged to a 5-1/2 month peak as investors now look ahead to trade talks this week with a delegation of U.S. officials travelling to China for the next round of negotiations. The greenback against a basket of currencies trades 0.1 percent up at 96.70, having touched a high of 96.71 earlier, its highest since January 3. FxWirePro's Hourly Dollar Strength Index stood at 115.82 (Highly Bullish) by 0400 GMT.

EUR/USD: The euro declined, extending losses for the sixth straight session, as core European government debt yields touched their lowest in over two years. On Thursday, the European Commission sharply cut its forecasts for eurozone economic growth for this year and next, amid growing global trade tensions and domestic challenges. The European currency traded 0.05 percent down at 1.1318, having touched a low of 1.1313 earlier, its lowest since Jan. 25. FxWirePro's Hourly Euro Strength Index stood at -42.24 (Neutral) by 0400 GMT. Immediate resistance is located at 1.1373 (5-DMA), a break above targets 1.1410 (January 18 High). On the downside, support is seen at 1.1300 (Jan. 25 Low), a break below could drag it till 1.1269 (Dec. 14 Low).

USD/JPY: The dollar rallied, halting a 2-day losing streak, despite the Federal Reserve taking a dovish stance at its policy meeting in January. Trading activity remained subdued as Japanese markets are closed for a public holiday. The major was trading 0.2 percent up at 109.95, having hit a high of 110.16 last week, its highest since December 31. FxWirePro's Hourly Yen Strength Index stood at -11.15 (Neutral) by 0400 GMT. Immediate resistance is located at 110.08 (Feb. 7 High), a break above targets 110.47 (Dec. 31 High). On the downside, support is seen at 109.16 (Jan. 28 Low), a break below could take it lower at 108.80 (Jan. 30 Low).

GBP/USD: Sterling eased, extending previous session losses, amid heightened political uncertainty over the Brexit process. Investors continue to remain cautious as Britain is due to exit the European Union with less than two months and no obvious path to a deal in sight. The major traded 0.1 percent down at 1.2927, having hit a low of 1.2854 on Thursday; it’s lowest since January 22. FxWirePro's Hourly Sterling Strength Index stood at -0.94 (Neutral) 0400 GMT. Investors’ attention will remain on UK prelim gross domestic product, trade balance, manufacturing and industrial production, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3001 (January 17 High), a break above could take it near 1.3047 (November 13 High). On the downside, support is seen at 1.2879 (November 14 Low), a break below targets 1.2827 (November 12 Low). Against the euro, the pound was trading 0.1 percent down at 87.54 pence, having hit a low of 88.21 on Tuesday, it’s lowest since Jan. 22.

AUD/USD: The Australian dollar rebounded from a 1-month low touched in the previous session, boosted by a rally in prices for iron ore, the country's top export earner. On Friday, the major tumbled to multi-week lows as traders narrowed the odds on future rate cuts after the RBA changed its tune on policy. The Aussie trades 0.1 percent up at 0.7093, having hit a low of 0.7060 last week; it’s lowest since January 4. FxWirePro's Hourly Aussie Strength Index stood at -126.18 (Highly Bearish) by 0400 GMT. Immediate support is seen at 0.7044 (Dec. 26 Low), a break below targets 0.7016 (Dec. 27 Low). On the upside, resistance is located at 0.7166 (January 24 High), a break above could take it near 0.7234 (January 11 High).

NZD/USD: The New Zealand dollar steadied near 3-week trough hit in the prior session, amid growing speculation the Reserve Bank of New Zealand might sound more amenable to a rate cut at its policy meeting on Feb. 13. The Kiwi trades 0.3 percent up at 0.6757, having touched a low of 0.6729 on Friday, its lowest level Jan. 22. FxWirePro's Hourly Kiwi Strength Index was at -113.56 (Highly Bearish) by 0400 GMT. Immediate resistance is located at 0.6798 (Jan. 23 High), a break above could take it near 0.6832 (Jan. 14 High). On the downside, support is seen at 0.6706 (Jan. 22 Low), a break below could drag it below 0.6671 (Jan. 4 Low).

Equities Recap

Asian shares eased, having plunged from a 4-month peak in the previous session amid worries about global growth, U.S. politics and the U.S.-China trade war.

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

Trading volumes remained light with Japan on a public holiday.

Australia's S&P/ASX 200 index declined 0.2 percent to 6,060.80 points and South Korea's KOSPI rallied 0.05 percent to 2,178.12 points.

Shanghai composite index gained 0.8 percent to 2,638.67 points, while CSI300 index traded 1.2 percent up at 3,286.77 points.

Hong Kong’s Hang Seng traded 0.2 percent higher at 27,994.82 points. Taiwan shares added 0.7 percent to 10,004.25 points.

Commodities Recap

Crude oil prices declined by around 1 percent as drilling activity in the United States increased and financial markets were weighed down by trade concerns. International benchmark Brent crude was trading 0.9 percent down at $61.48 per barrel by 0422 GMT, having hit a low of $60.58 on Thursday, its lowest since February 1. U.S. West Texas Intermediate was trading 1.3 percent higher at $51.99 a barrel, after falling as low as $51.77 on Thursday, its lowest since the January 28.

Gold prices eased, halting a 2-day rally, weighed down by a strong dollar, however, worries over a slowdown in global economic growth and uncertainties around U.S.-China trade war limited downside. Spot gold was 0.2 percent down at $1,311.28 per ounce by 0425 GMT, having touched a low of $1,302.71 on Thursday, its lowest level since Jan. 29. U.S. gold futures fell 0.2 percent to $1,316.50 per ounce.

Treasuries Recap

The Australian government bonds started the week on disappointing note across the curve during Asian trading session despite worries surrounding the U.S.-China trade war and slowing global economic growth. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose about 1/2 basis point to 2.098 percent, the yield on the long-term 30-year bond also climbed 1/2 basis point to 2.66 percent and the yield on short-term 2-year jumped 2-1/2 basis points to 1.74 percent.

The yields on New Zealand government bonds rose 1-2.5 basis points across the curve.

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