Market Roundup
- EUR/GBP at marginal new high 0.7928, GBP/USD plays 1.39-1.3964 range.
- Germany Mar GfK Consumer Sentiment 9.5 vs 9.4 previous, 9.3 expected.
- Germany Final Jan HICP 0.4% y/y vs 0.4% previous, 0.4% expected.
- EZ Final Jan Inflation 0.3% y/y vs 0.4% previous, 0.4% expected.
- Swiss Q4 Industrial Orders -7.7% y/y vs revised -6.7% (-5.1) previous.
- EZ Jan M3 5.0% vs 4.7% previous, 4.7% expected.
- UK Second release Q4 GDP +1.9% y/y vs 1.9% previous, 1.9% expected.
- UK Second release Q4 GDP +0.5% q/q vs 0.5% previous, 0.5% expected.
- UK Q4 Business inv. +2.4% y/y vs revised 4.5% (5.8%) previous.
- Kuroda to tell G20 money policy not aimed at weakening currency.
- BoJ Policy Board Kiuchi - Negative rates could destabilize economy.
- China Fin Min Lou - Proposal to devalue CNY not on G20 agenda.
- Vice Fin Min - CNY managed float to continue, aiming for stability.
- China ICBC Chairman Jiang - No basis for continued CNY devaluation.
- IMF urges G20 to prepare global economic stimulus plan.
Economic Data Ahead
- (0830 ET/1330 GMT) The U.S. Commerce Department is expected to report that orders for durable manufactured goods rebounded 2.5 percent in January after plunging 5 percent in December. Goods orders excluding transportation are likely to have gained 0.2 pct after sliding 1.2 pct in the previous month. Core capital goods orders are expected to rise 1 percent after plummeting 4.3 percent in December.
- (0830/1330) The number of Americans filing for state jobless benefits are likely to have risen 8,000 to a seasonally adjusted 270,000 for the week endedFeb. 29. The continuing claims as at the week ending Feb 12 likely dropped to 2.260M from 2.273M.
- (0900 ET/1400 GMT) The Federal Housing Finance Agency's House Price Index is likely to remain flat at 0.5 pct in December.
- (1000 ET/1500 GMT) Mexico's current account deficit is likely to have reached $7.9 billion in the fourth quarter, narrowing from $8.856 billion in the previous quarter.
- (1030 ET/1530 GMT) EIA reports Natural Gas Storage Change for the week ending Feb 19.
- (1100 ET/1600 GMT) The Federal Reserve Bank of Kansas City releases its manufacturing activity for Feb.
Key Events Ahead
- (0815 ET/1315 GMT) Federal Reserve Bank of Atlanta President Dennis Lockhart gives welcome remarks before the 2016 Banking Outlook Conference hosted by the Federal Reserve Bank of Atlanta.
- (1145 ET/1645 GMT) FedTrade Ops 30-yr Ginnie Mae max $850mln.
- (1200 ET/1700 GMT) Federal Reserve Bank of San Francisco President John Williams will speak on the economic outlook before an event hosted by the New York University Stern School of Business. Williams, a centrist and an ally of Fed Chair Janet Yellen, will likely stick to his view that the U.S. economy will stand firm in the face of overseas weakness and will likely be able to absorb tighter policy.
- (1500 ET/2000 GMT) N.York Fed releases tentative Agency MBS operation schedule.
FX Recap
USD: Against the basket of currencies, the dollar was up 0.02 pct at 97.435. It has slightly retreated after making a high of 97.91 and was hovering around 97.43. The short term trend is slightly bullish as long as minor support 97 holds. The minor support is around 97 and break below targets 96.50/96.25/95.50.
EUR/USD: The euro is on the defensive against many other currencies this week, on fears a British EU exit could mean more uncertainty for Europe. But there was more attention on Thursday on a fall in inflation expectations, which bodes ill for the ECB's battle to refloat the economy. The single currency has recovered till 1.10458 after making a low of 1.09575, it was trading around 1.10212. The short term trend is weak as long as resistance 1.10550 holds. Any break above 1.10550 will take the pair till 1.1088/1.1100 in short term. On the lower side any break below 1.0980 will drag it till 1.0920/1.0890/1.0835.
USD/JPY: The Japanese yen slightly recovered after making a low of 111.04 and was trading around 112.18. The short term trend is slightly weak as long as resistance 112.85 holds. On the lower side major support is around 110.90 and break below targets 110/108.85. The minor resistance is around 112.85 and break above targets 113.60 /114.50.
GBP/USD: The Sterling steadied after falling all the week on 'Brexit' fears; it was up 0.2 percent at $1.3953 and 78.95 pence per euro respectively. It is down more than 3 percent this week against the dollar, with a test of its 2009 low of $1.35 within sight. The short term trend is still weak as long as resistance 1.4200 holds. On the lower side major support is around 1.3880 and any break below targets 1.3826/1.3800 level. The major resistance is around 1.4020 and break above targets 1.4080/1.4195. The short term bearish invalidation is only above 1.4200.
USD/CHF: The pair has retreated till 0.9850 after making a high of 0.9999 and was trading around 0.99072. On the higher side it is facing resistance around 0.9960 and break above targets 1.000/1.0035/1.00729. The short term trend is slightly bullish as long as support 0.9850 holds. Any break below 0.9850 will drag it till 0.9800/0.9720.
AUD/USD: The Australian dollar lost some ground after a disappointing reading on business spending plans for the next fiscal year offered speculators an excuse to short the currency. It dropped around a third of a U.S. cent to $0.7158, away from a seven-week peak of $0.7259 touched this week. It was trading around 0.7173 at the time of writing. The short term trend is slightly bearish as long as resistance 0.7250 holds. On the higher side major resistance is around 0.7250 and break above targets 0.7300/0.7380. The pair's major support is around 0.7150 and break below will drag it till 0.7100/0.7075. The Aussie still held hefty gains against the battered pound which stood at A$1.9413.
NZD/USD: The New Zealand dollar was trading higher 0.23 pct at $0.6667 after edging down overnight from $0.6668. The pound stood at NZ$2.0909, a whisker away from a low of NZ$2.0853 hit on Wednesday.
Equities Recap
The European shares bounced 1.3 percent after dropping 4 pct in the last two days, UK's FTSE was up 0.6 pct, France's CAC rose 1.5 pct and Germany's DAX gained 1.2 pct in early deals.
Tokyo's Nikkei closed up 1.41 pct at 16,140.34, MSCI's broadest index of Asia-Pacific shares outside Japan ended down 0.5 percent. China's CSI300 Index plunged 6.1 pct at 2,918.75 points, Shanghai Composite Index lost 6.4 pct at 2,741.25 points, while HK's Hang Seng Index closed down 1.6 pct at 18,888.75 points.
Commodities Recap
Crude oil prices slipped as downward pressure from global overproduction and slowing economic growth outweighed strong gasoline demand and lower U.S. crude output. Brent was trading at $33.95 per barrel and U.S. West Texas Intermediate (WTI) crude dropped 40 cents at $31.75 per barrel.
Gold erased early losses on Thursday as volatility in stock markets fuelled safe-haven demand, with bullion funds seeing fresh buying from investors. Spot gold had risen 0.7 percent to $1,237.00 an ounce after earlier falling as much as 0.7 percent.
Treasuries Recap
The 10-year U.S. Treasury yield last stood at 1.7260, down 16 bps, while the yield on benchmark German 10-year securities stayed at about 0.1 percentage point from its record low.
JGBs finished the choppy morning session mixed, with mid-term notes very heavy while ultra long-end bonds remained solid. The market started with decent selling in the mid-term sector, where the 5-year JS126 softened to -0.18 pct within 20 minutes after the market opened. After softening to 0.605 pct early, the 20-year surged to 0.57 pct at one stage, breaking below the 0.60 pct line and setting a new record high (in price). 30-year bonds followed suit, firming to 0.88 pct which is also a record high. The yield on the 40-year dipped below 1% to 0.99 pct.
UK Gilts opened 2 ticks lower than the close of 122.17 after a choppy overnight session. The 10-year cash is operating in a narrow 3 bps range and dealers are cautious ahead of the G20 summit tomorrow. Gilts are around 6 ticks higher on GDP data release at 122.21.
Australian government bond futures were quiet, with the 3-year bond contract up 1 tick at 98.260. The 10-year contract was unchanged at 97.5950, while the 20-year contract shed half a tick to 97.0600. New Zealand government bonds eased, sending yields 1.5 basis points higher along most of the curve.
