Market Roundup
- Oil declines as U.S. crude stockpiles increase
- Gold steady as U.S.-Iran conflict risk ease
- German engineering orders fall 15% y/y in November
- German industrial production posts biggest increase in 1-1/2 years
Economic Data Ahead
- (0815 ET/1315 GMT) Canada Housing Starts s.a (YoY) (Dec)
- (0830 ET/1330 GMT) U.S. Initial Jobless Claims (Jan 3)
- (0830 ET/1330 GMT) U.S. Building Permits (MoM) (Nov)
Key Events Ahead
- (0800 ET/1300 GMT) Fed's Clarida speech
- (0930 ET/1430 GMT) Fed's Kashkari speech
- (1045 ET/1545 GMT) ECB's Lane speech
- (1130 ET/1630 GMT) Fed's Williams speech
- (1400 ET/1900 GMT) BoC's Governor Poloz speech
- (1410 ET/1910 GMT) German Buba President Weidmann speech
FX Beat
DXY: The dollar index surged to a 2-week peak amid growing expectations that the United States and China will sign a trade deal next week. The greenback against a basket of currencies traded 0.1 percent up at 97.41, having touched a high of 97.50 earlier, its highest since Dec. 27.
EUR/USD: The euro plunged to a near 2-week low after industry data showed German exports slumped well below expectations, indicating that demand for goods remained fragile. The European currency traded down at 1.1104, having touched a low of 1.1096 earlier, its lowest since December 27. Immediate resistance is located at 1.1132 (21-DMA), a break above targets 1.1156. On the downside, support is seen at 1.1082, a break below could drag it below 1.1062.
USD/JPY: The dollar rallied to a 10-day peak as the United States and Iran backed away from further conflict, while investors returned to riskier assets on firmer hopes of a U.S.-China trade deal. The major was trading 0.3 percent up at 109.41, having hit a high of 109.45 earlier, its highest since Dec. 27. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims and Fed Kashkari's speech. Immediate resistance is located at 109.52, a break above targets 109.70. On the downside, support is seen at 108.85 (10-DMA), a break below could take it near at 108.51 (5-DMA).
GBP/USD: Sterling slumped to a 2-week low after Bank of England chief Mark Carney said that there could be a relatively prompt response from the bank if it looked like weakness in the economy will persist. The major traded 0.4 down at 1.3042, having hit a low of 1.3017 earlier, it’s lowest since Dec. 27. Investors’ attention will remain on the development surrounding Brexit deal, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3181, a break above could take it near 1.3229. On the downside, support is seen at 1.2989, a break below targets 1.2957. Against the euro, the pound was trading 0.5 percent lower at 85.18 pence, having hit a high of 84.54 on Wednesday, it’s highest since Dec. 17.
USD/CHF: The Swiss franc fell to a 10-day low as risk sentiment improved after President Donald Trump said the United States did not necessarily have to respond militarily to Iran’s attack on U.S. troops in Iraq, while Iranian Foreign Minister Mohammad Javad Zarif said the strikes concluded Tehran’s response to the killing of commander Qassem Soleimani. The major trades up at 0.9738, having touched a high of 0.9748 earlier, it’s highest since December 30. On the higher side, near-term resistance is around 0.9778 (21-DMA) and any break above will take the pair to the next level till 0.9818. The near-term support is around 0.9710 (5-DMA), and any close below that level will drag it till 0.9693.
Equities Recap
European shares touched a record high after the United States and Iran backed away from further military escalation.
The pan-European STOXX 600 index surged 0.5 percent at 420.28 points, while the FTSEurofirst 300 rallied 0.5 percent to 1,644.06 points.
Britain's FTSE 100 trades 0.7 percent up at 7,625.03 points, while mid-cap FTSE 250 rose 0.1 to 21,670.13 points.
Germany's DAX rose 1.3 percent at 13,491.50 points; France's CAC 40 trades 0.4 percent higher at 6,057.18 points.
Commodities Recap
Crude oil prices declined after the Energy Information Administration stated that crude oil stocks were up by 1.2 million barrels in the week ended Jan. 3 to 431.1 million barrels. International benchmark Brent crude was trading 0.7 percent lower at $65.43 per barrel by 1012 GMT, having hit a high of $71.31 on Wednesday, its highest since May 22. U.S. West Texas Intermediate was trading 0.5 percent down at $59.64 a barrel, after rising as high as $65.62 on Wednesday, its highest since April 25.
Gold prices plunged to a near 1-week low as the chances of an escalation in U.S.-Iran conflict waned after the two sides softened their stance. Spot gold was trading 0.6 percent down at $1,546.07 per ounce by 1015 GMT, having touched a high of $1611.27 on Wednesday, its highest since March 2013. U.S. gold futures were flat at $1,559.80.
Treasuries Recap
The U.S. Treasuries flat during the afternoon session ahead of the country’s weekly initial jobless claims, scheduled to be released today by 13:00GMT and speeches by FOMC members Kashkari and Williams and Chicago Fed President Evans later in the day. Also, the 30-year auction, due today at 18:00GMT shall add further direction in the debt market. The yield on the benchmark 10-year Treasury yield hovered around 1.872 percent, the super-long 30-year bond yield remained tad down at 2.354 percent and the yield on the short-term 2-year remained steady at 1.585 percent.
The United Kingdom’s gilts edged tad lower during European trading hours after investors’ risk appetite returned to markets following de-escalation of political crisis in the Middle East. The yield on the benchmark 10-year gilts, fell 1-1/2 basis points to 0.802 percent, the 30-year yield also lost close to 1-1/2 basis points to 1.270 percent and the yield on the short-term 2-year plunged 4-1/2 basis points to 0.591 percent.
The German bunds suffered during European trading session even as the country’s trade balance for the month of November came in lower than market expectations, albeit still in surplus. The German 10-year bond yield, which moves inversely to its price, jumped 2-1/2 basis points to -0.233 percent, the yield on 30-year note also surged 2-1/2 basis points to 0.316 percent while the yield on short-term 2-year slipped nearly 1-1/2 basis points to -0.609 percent.
The Australian bonds slumped during Asian trading session tracking its U.S. counterpart after President Donald Trump confirmed that there have been no casualties from the Iranian attack on Iraq-based U.S. troops, making the scenario less dreadful than gauged. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 4-1/2 basis points to 1.230 percent, the yield on the long-term 30-year bond also surged 4-1/2 basis points to 1.859 percent and the yield on short-term 2-year gained 2 basis points to 0.797 percent.
