Market Roundup
- USD/JPY -1.0%, GBP/USD +1.0%, EUR/USD +0.7%
- DXY -0.9%, DAX -0.9%, Brent +1.25%, Iron +0.25%, Gold +1.2%
- UK Dec CPI +1.6% y/y vs 1.2% previous, 1.4% expected
- UK Dec Core Output Prices +2.1% y/y vs 2.3% previous, 2.2% expected
- Germany Jan ZEW Sentiment 16.6 vs 13.8 previous, 18.3 expected
- Germany Jan ZEW Current Conditions 77.3 vs 63.5 previous, 65.0 expected
- Theresa May to lay out clean break from EU – FT
- Britain will not seek half in-half out EU deal
- May prepares EU migration curbs, at expense of single market membership – FT
- BBC-Scottish parliament to debate Brexit this afternoon (GMT)
- Holyrood debate: Protecting interests in negotiating future Europe relationship
- DAVOS- Trump adviser –need to be careful about rising Dollar
- DAVOS-China Pres. Inequality in global economy is worrying
- Chinese President says will not devalue Renminbi or start trade war
- Short-term stimulus has proved ineffective in boosting economic growth
Economic Data Ahead
- (0830 ET/1330 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State grew 9 in January after posting a similar gain in December.
- (0930 ET/1430 GMT) The Conference Board releases Britain's Leading Economic Index for the month of December. The index edged up 0.1 percent in the prior month.
- (1000 ET/1500 GMT) The Investor's Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of January. The indicator rose to 54.8 in December.
- (1830 ET/2330 GMT) The Faculty of Economics and Commerce Melbourne Institute will release Australia's Westpac consumer confidence for the month of January. The index fell 3.9 percent in December.
Key Events Ahead
- (0845 ET/1345 GMT) Federal Reserve Bank of New York President William Dudley speaks on "Evolving Consumer Behavior: A View from the Federal Reserve Bank of New York" before the Retail's BIG Show 2017 hosted by the National Retail Federation in New York.
- (1000 ET/1500 GMT) Federal Reserve Board Governor Lael Brainard speaks on monetary and fiscal policy before the Brookings Institution in Washington.
- (1000 ET/1500 GMT) The U.S. Treasury Secretary Jack Lew's speech
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(1145 ET/1645 GMT) FedTrade operation 30-year Ginnie Mae max $1.425 bln
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(1430 ET/1930 GMT) FedTrade operation 15-year Fannie Mae/Freddie Mac max $775 mln
- (1800 ET/2300 GMT) San Francisco Fed President John Williams delivers an economic outlook speech in Sacramento.
FX Beat
DXY: The dollar tumbled to a 6-week low versus the yen, as concerns over U.S. President-elect Trump's fiscal policies and uncertainty over hard Brexit boosted safe-haven assets. The greenback against a basket of currencies traded 0.9 percent down at 100.64, having hit an early low of 100.63, it’s lowest since Dec. 8. FxWirePro's Hourly Dollar Strength Index stood at -100.77 (Highly Bearish) by 1100 GMT.
EUR/USD: The euro rose, hovering towards a 5-week high, as a fall in the U.S. Treasury yields weighed down the greenback. Markets seem to have ignored downbeat Eurozone’s ZEW- Survey, which showed that the economic sentiment improved below expectations for the month of January. The indicator came in at 23.2 against estimates of 24.2, however, surpassing previous reading of 18.1. The European currency trades 0.6 percent higher at 1.0661, drifting closer to a high of 1.0684 hit last week, its highest since Dec 8. FxWirePro's Hourly Euro Strength Index stood at -22.54 (Neutral) by 1000 GMT. The pair should close above 1.06850 for further bullishness and any close above 1.06850 will take it till 1.08700. The major support is around 200- HMA at 1.05800 and any violation below will drag it till 1.0503 (20- day SMA)/1.04800/1.04500 (Jan 11 Low).
USD/JPY: The dollar slumped to a fresh 6-week low, as persistent concerns over hard Brexit and uncertainty over President-elect Donald Trump's fiscal stimulus plans triggered a fresh wave of risk aversion across global financial markets, which boosted the Japanese Yen's safe-haven appeal. The major trades 0.8 percent lower at 113.21, after slumping as low as 113.00 earlier in the day, it’s lowest since Dec. 5. FxWirePro's Hourly Yen Strength Index stood at 119.03 (Highly Bullish) by 1000 GMT. The major resistance is around 114.25 (23.6% retracement of 118.61 and 113) and any break above will take the pair till 115.22 (30- day EMA). On the lower side, minor support is around 112.85 (60- day EMA) and any break below targets 112.
GBP/USD: Sterling rallied above the 1.2100 handle, retreating from 3-month low after data showed Britain's inflation figures rose more-than-expected in the month of December. The economy's consumer price index increased at an annualized rate of 1.6 percent, while core consumer prices came in at 0.5 percent, against a forecast of 1.4 percent and 0.3 percent, respectively. However, concerns over the UK PM Theresa May’s Brexit speech limited gains. Sterling trades 0.8 percent higher at 1.2145, having hit a high of 1.2188 earlier in the session. FxWirePro's Hourly Sterling Strength Index stood at -13.60 (Neutral) by 1000 GMT. The upside remains capped by 1.2200 (support turned into resistance) and any break above will take the pair till 1.2309 (30- day EMA)/ 1.24325 (Jan 5 High). On the lower side, short term support stands at 1.2000 and any break below will drag it down till 1.19048 Brexit low. Against the euro, the pound trades 0.1 percent down at 87.79 pence, having hit a low of 88.51 the day before, it’s lowest since Nov. 9.
USD/CHF: The Swiss franc rose to a 6-week high against the dollar, as a fresh bout of risk aversion in the financial markets boosted the appeal of safe-haven assets. The major trades 0.6 percent lower at 1.0044, having hit a low of 1.0031 earlier in the day, its lowest since Dec. 8. FxWirePro's Hourly Swiss Franc Strength Index stood at 21.73 (Neutral) by 1000 GMT. The pair should close below 1.0033 for further bearishness to continue and any break below 1.0033 level will drag the pair down till 1.0000 /0.9945 (50% retracement of 0.9550 and 1.0344). On the higher side, near term resistance is around 1.0150 and any break above 1.0150 will take it to next level till 1.0175 (61.8% retracement of 1.0248 and 1.00561)/1.0200/1.0250 (Jan 11 High).
AUD/USD: The Australian dollar advanced to a fresh 2-month peak above the 0.7500 handle, as a broadly weaker greenback coupled with a rise in the crude oil prices strengthened the bid tone around the Aussie. However, growing uncertainties over Trump's fiscal stimulus measures and UK PM May’s Brexit speech capped the upside in the major. The pair trades 0.9 percent higher at 0.7541, after hitting an early high of 0.7548, it’s strongest since Nov. 16. FxWirePro's Hourly Aussie Strength Index stood at 38.12 (Neutral) by 1000 GMT. On the higher side, any close above 0.7545 (61.8% retracement of 0.7778 and 0.71599) will take it to next level till 0.7600/0.7645. The minor support is around 0.7435 (89-day EMA) and break below will drag it till 0.7407 (60- day EMA)/0.7359 (30- day EMA).
NZD/USD: The New Zealand dollar rose by more than 1 percent to hit a fresh 5-week high, as the U.S. dollar declined across the board amid global political uncertainties. Moreover, investors' now eye the Global Dairy Trade price auction, which is likely to show a mild improvement after declining 3.9 percent in the previous auction. The Kiwi trades 1.2 percent higher at 0.7185, having rallied as high as 0.7188, it’s strongest since Dec. 14. FxWirePro's Hourly Kiwi Strength Index was at 65.63 (Bullish) by 1000 GMT. Immediate resistance is located at 0.7200, a break above could take it till 0.7238 (Dec 14 High). On the downside, support is seen at 0.7075 (9-DMA), a break below could drag it till 0.7050.
Equities Recap
European shares tumbled, weighed down by mining and automobile stocks, while gold rallied to a 7-week high as investors turned cautious ahead of a speech on Brexit from British Prime Minister Theresa May.
MSCI's benchmark index of global stocks fell 0.2 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent.
The pan-European STOXX 600 index decreased 0.37 percent to 361.63 points, while the FTSEurofirst 300 index slumped 0.3 percent to 1,429.82 points.
Britain's FTSE 100 trades dropped 0.34 percent at 7,301.71 points, while mid-cap FTSE 250 tumbled 0.37 percent at 18,239.76 points.
Germany's DAX declined 0.67 percent at 11,477.09 points; France's CAC 40 trades 0.5 percent lower at 4,857.21 points.
Tokyo's Nikkei fell 1.48 percent to 18,813.53 points, Australia's S&P/ASX 200 index lost 0.89 percent to 5,697.20 points and South Korea's KOSPI advanced 0.37 percent to 2,071.87 points.
Shanghai composite index rose 0.2 percent at 3,108.77 points, while CSI300 index gained 0.2 percent at 3,326.36 points. Hong Kong’s Hang Seng added 0.5 percent at 22,840.97 points.
Commodities Recap
Crude oil prices rose by more than 1 percent after Saudi Arabia said it would firmly stick to a commitment to cut output. International benchmark Brent crude was trading 1.4 percent higher at $56.45 per barrel by 0953 GMT, pulling away from a low of $53.57 hit last week, its weakest since Dec. 15. U.S. West Texas Intermediate crude gained 1.5 percent at $53.18 a barrel, after declining as low as $50.69 on Jan. 11.
Gold prices gained, hitting their highest in more than 7-weeks, as cautious tone ahead of British Prime Minister Theresa May speech on Brexit boosted safe-haven buying. Spot gold advanced 1.1 percent to $1,216.88 per ounce by 0958 GMT, having hit a high of $1,217.83, its highest since Nov. 22. U.S. gold futures were up 1.3 percent at $1,211.80 per ounce.
Treasuries Recap
The U.S. Treasuries opened Tuesday on a firmer note post a long holiday, as markets remain keenly observant for the upcoming speech by the United Kingdom’s Prime Minister Theresa May. Also, investors await the FOMC members Dudley and Williams’ speech later today. The yield on the benchmark 10-year Treasury fell 4-1/2 basis points to 2.33 percent, the super-long 30-year bond yield plunged 5 basis points to 2.92 percent and the yield on short-term 2-year note slid nearly 3 basis points to 1.16 percent.
The UK gilts held gains on rising fears of a hard Brexit and in the run up to the United Kingdom Prime Minister Theresa May’s speech, scheduled for later in the day. Also, investors have largely shrugged off the upbeat consumer price inflation reading for December. The yield on the benchmark 10-year gilts, fell 3 basis points to 1.28 percent, the super-long 30-year bond yields also plunged 3-1/2 basis points to 1.95 percent while the yield on short-term 2-year rose 1 basis point to 0.16 percent.
The German bunds gained, following renewed fears of a hard Brexit and in the run up to the United Kingdom Prime Minister Theresa May’s speech, scheduled for today. Also, investors are curiously eyeing the European Central Bank’s (ECB) first monetary policy of 2017, scheduled to be held on January 19. The yield on the benchmark 10-year bond, which fell over 3-1/2 basis points to 0.29 percent, the long-term 30-year bond yields also plunged 5-1/2 basis points to 1.02 percent and the yield on short-term 2-year bond slid 1/2 basis point to -0.74 percent.
The Japanese government bonds traded nearly flat as investors remain sidelined in any big deal as major market participants are eyeing to focus on the United Kingdom’s Prime Minister Theresa May’s speech scheduled later in the day for further guidance in the debt market. The benchmark 10-year bond yield, hovered around 0.05 percent, the long-term 30-year bond yields stood flat at 0.74 percent and the yield on the 3-year note remained steady at -0.17 percent.
The New Zealand government bonds closed higher as investor speculations remain cloudy ahead of the United Kingdom’s Prime Minister Theresa May's Brexit speech. The yield on the benchmark 10-year bond, ended 2 basis points lower at 3.14 percent, the yield on 7-year note also closed down 1 basis point to 2.81 percent and the yield on the short-term 2-year note also moved down 1 basis point to 2.20 percent.
The Australian bonds traded nearly flat in thin trading activity during a relatively quiet session that witnessed data of little significance. Also, markets await the United Kingdom’s Prime Minister Theresa May's Brexit speech. The 10-yield on the benchmark 10-year Treasury note, hovered around 2.70 percent, the yield on 15-year note remained steady at 3.14 percent and the yield on short-term 2-year stood flat at 1.86 percent.
