Market Roundup
- PBOC fixes yuan at 6.4757, fresh 4 ½-year low.
- China SAFE - China Nov commercial bank net FX sales $54.8 bln, Oct $20.1 bln.
- China Nov non-financial outbound direct investment +12.6% y/y to $8.92 bln.
- NZ FinMin English -NZD/USD to fall gradually in response to Fed hike - RTRS.
- Economists see next Fed rate hike in Q1 '16 - Reuters poll.
- Q3 - GPIF sold Y618.2 bln JGBs, bought Y925.9 bln stks, Y954.1 bln for-bonds.
- Japan household assets fall from record high on stock sell-offs - Kyodo.
- NZ Q3 output-based GDP +0.9% q/q, +2.3% y/y, +0.8% and +2.3% forecast AR +2.9% vs +2.7%, expenditure-based GDP +1.2% q/q, +0.8% forecast, data strong.
- Japan PM Abe could delay tax rise, call snap poll - again - Reuters.
- EconMin Amari - Government needs to intervene to spur wage rises - Reuters.
- CabSec Suga - Fed hike shows US economy recovering, positive for Japan -RTRS.
- Japan Nov trade deficit Y379.7 bln, Y446.2 bln forecast, exports -3.3% y/y, imports -10.2%, -1.5% and -8.3% forecast, exports to China -8.1%m Asia -8.7%, US +2.0%, export fall at fastest pace since Dec '12, to China at fastest pace since Feb, to Asia since July '12, export to US weakest in 19-months.
- MoF flow data week-ended Dec 12 - Japanese buy net Y21.8 bln foreign stocks, Y319.4 bln bonds, Y62.6 bln bills; foreign investors sell net Y488.0 bln Japanese stocks, buy Y384.5 bln bonds, trln bills.
Economic Data Ahead
- (0330 ET/0830 GMT) Sweden Nov unemployment, 6.6% nsa, 7.1% sa forecast; last 6.7%, 7.2%.
- (0400 ET/0900 GMT) Germany Dec Ifo business climate index, 109.0 forecast; last 109.0.
- (0400 ET/0900 GMT) Germany Dec Ifo current conditions index, 113.4 forecast; last 113.4.
- (0400 ET/0900 GMT) Germany Dec Ifo expectations index, 105.0 forecast; last 104.7.
- (0400 ET/0900 GMT) Italy Oct trade balance - global; last bln surplus.
- (0400 ET/0900 GMT) Italy Oct trade balance - EU; last E 760 mln surplus.
- (0430 ET/0930 GMT) Great Britain Nov retail sales, +0.5% m/m, +3.0% y/y forecast; last -0.6%, +3.8%.
- (0430 ET/0930 GMT) Great Britain Nov - ex-fuel, +0.6% m/m, +2.3% y/y forecast; last -0.9%, +3.0%.
- (0500 ET/1000 GMT) Eurozone Q3 wages, labor costs; last +1.9%, +1.6% y/y.
- (0830 ET/1330 GMT) United States Dec Philly Fed business sentiment index, 1.5 forecast; last 1.9.
- (0830 ET/1330 GMT) United States Q3 c/a balance, $118 bln deficit forecast; last $109.7 bln deficit.
- (0830 ET/1330 GMT) United States w/e initial jobless claims, 275k forecast; last 282k.
- (1000 ET/1500 GMT) United States Nov leading indicators index, +0.1% m/m forecast; last +0.6%.
- (1600 ET/2100 GMT) France Dec business climate index, 101.0 forecast; last 102.0.
Key Events Ahead
- N/A BoJ Policy Board begins two-day meeting.
- N/A European Council, ECB Governing/General Council meetings (final day).
- (0400 ET/0900 GMT) ECB economic bulletin.
- (0400 ET/0900 GMT) Norges Bank policy announcement, 25 bp cut in depo rate to 0.5% forecast.
- (0430 ET/0930 GMT) Spain E2-3 bln 1.15/4.4/4.9% 2020/23/40 Bono auctions.
- (0530 ET/1030 GMT) UK DMO GBP700 mln 1.25% 2032 index-linked Gilt auction.
FX Beat
USD: The dollar gained against the euro and yen on Thursday, rising after the Federal Reserve's decision to hike interest rates for the first time since 2006 lifted risk appetite. The dollar index gained 0.9 percent to 98.839 against a basket of major currencies, and looked set for another test of stiff resistance around the 100.00 mark.
EUR/USD: The euro dropped 0.6 percent lower after going as high as $1.1011 on Wednesday, in the wake of the Fed's statement. The pair continues to remain under pressure as is it trades 0.57% lower at 1.0848 after touching fresh sessions low of 1.0832. It remains in deep red as USD bulls react to the interest rate hike by 25bps for the first time in almost a decade. Minor support is around 1.0880 and any break below 1.0880 will drag the pair till 1.0830/1.0780. On the higher side resistance is around 1.0970 and any indicative break above will take the pair till 1.100/1.10600/1.1100. Overall bearish invalidation only above 1.1100.
USD/JPY: The dollar edged up 0.2 percent to 122.43 yen after rising 0.5 percent overnight. The greenback momentarily dropped to as low as 121.38 as volatility briefly followed after the Fed took a step towards normalizing monetary policy late on Wednesday. It is currently trading at 122.47 after having touched sessions high of 122.64 and is likely to retreat as the greenback is expected to remain strongly on the bids, with markets favouring the US currency after the Fed rate hike. The pair on track to test trendline resistance at 123.35 and further gains could see test of 125 levels. Having closed above 200 DMA (121.57) in Tuesday's trade, which is now a strong support on the downside.
AUD/USD: The Australian dollar trades at 0.7181 levels after hovering to 0.7162 levels fresh session low. Selling pressure is likely to intensify on the Aussie, with drop in commodity prices and the USD bulls riding higher against its major competitors on Fed rate hike. The pair is holding above daily cloud, breaks below cloud top at 0.07159 could drag the pair lower, tests of 0.7085 (trendline support) then likely. Double bottom at 0.7160 is strong support on the downside ahead of 0.7157 (61.8 % Fib of .7016/0.7386), with resistance located at 0.7280 levels (Dec 16 High).
NZD/USD: The Kiwi faces selling pressure even after third-quarter gross domestic product rose 0.9 percent on the quarter, versus the market consensus for 0.8 percent. The US dollar remains broadly higher, responding to the overnight rate hike decision by the Fed, and thus, adds to further downside in the pair. Currently it trades at 0.6728 levels after falling to a low of 0.6717 levels. Support is seen at 0.6702 levels (Dec 11 Low), with immediate resistance located at 0.6800 levels, above which it could extend gains to 0.6834 (Dec 16 High).
Equities Recap
Asian stock markets climbed on Thursday as investors chose to take an historic hike in U.S. interest rates as a mark of confidence in the world's largest economy, lifting the dollar and piling on the pain for oil prices.
MSCI's broadest index of Asia-Pacific shares outside Japan firmed 0.9 percent, while Shanghai put on 1.1 percent.
Australia's S&P/ASX 200 Index closed up 1.64 pct at 5,110.70 points, while Nikkei climbed up 1.59 pct at 19,353.56 with Seoul shares edged up 0.20 pct.
Commodities Recap
Gold dropped on Thursday, trading choppy as the dollar surged after the Federal Reserve hiked U.S. interest rates for the first time in nearly a decade. Spot gold dropped 0.5 percent to $1,066.80 an ounce by 0326 GMT. The metal had rallied before the Fed decision on Wednesday and managed to hold most of those gains after the central bank statement, ending the day up 1.2 percent.
Crude futures dropped in Asian trade on Thursday, adding to sharp losses the previous session after the Federal Reserve raised rates for the first time in nearly a decade and official figures showed a surprise build in U.S. inventories.
West Texas Intermediate for January delivery, the front-month contract, was down 12 cents to $35.40 a barrel by 0248 GMT after finishing down nearly 5 percent on Wednesday. Brent eased 10 cents to $37.27 a barrel, after shedding $1.16 on Wednesday as U.S. crude inched up 2 cents to $35.54.
Treasuries Recap
U.S. 10-Year Treasuries yield stood at 2.262 percent down by 0.025 versus previous close of 2.289 percent on Wednesday, while the 2-year treasury yield touched 1.021 percent on Wednesday, its highest in five years.
Canadian government bond prices were mixed across the maturity curve, with the 10-year benchmark rose 12 Canadian cents to yield 1.476 percent while the 2-year price down 4 Canadian cents to yield 0.538 percent. The curve flattened in sympathy with U.S. Treasuries, as the spread between the 2-year and 10-year yields narrowed by 3.2 basis points to 93.8 basis points, indicating outperformance for longer-dated maturities.
