Market Roundup
- DXY firms on day, on track for slight weekly gain. Plays in between 99.113-99.461.
- USD/JPY extends recovery to 118.32 from year's low at 115.97 levels.
- Euro pressured after Draghi signals more easing. EUR/USD trading in between 1.0900-1.0813.
- GBP/USD recovery rally extends to 1.4307 from 7 year 1.4080 low (Thursday).
- Brent up 5.5% to $31.10/barrel. Off this week's 2003 low of $27.10.
- Asia stocks end week rallying off 4-year lows, helped by ECB, oil bounce.
- UK Q4 Retail Sales +1.1% q/q vs previous 0.9%. Strongest calendar quarter since Q4 2014. 3.7% y/y vs 4.9%.
- Euro zone January flash Manufacturing PMI 52.3 vs previous 53.2. 53.0 expected. Flash Service PMI 53.6 vs previous 54.2. 54.2 expected.
- Euro zone January flash Composite PMI 53.5 vs previous 54.3. 54.2 expected.
- PBOC Zhang - China won't easily cut RRR.
- S&P - More oil-exporting countries' sovereign credit ratings could be downgraded.
- Kremlin spokesman - Putin has no emergency meetings planned on rouble, oil situation.
- Germany's Schaeuble warns against overreaction to China, low oil price.
- ECB's Weidman says line between fiscal, monetary policies blurred.
- Draghi says ECB determined, willing to act.
Economic Data Ahead
- (0830 ET/1330 GMT) Federal Reserve Bank of Chicago is due to release National Activity Index for December.
- (0830 ET/1330 GMT) Canada's annual inflation rate is likely to have risen to 1.7 percent in December from 1.4 percent in November. Last month's annual core inflation rate is estimated at 2.1 percent, up from 2 percent the previous month.
- (0830 ET/1330 GMT) Canada's November retail sales likely rose 0.2 percent in comparison to a 0.1 percent gain in October.
- (0945 ET/1445 GMT) The financial firm Markit releases its US manufacturing PMI for January, which is expected to stay at 51.1, slightly down from 51.2 prior month.
- (1000 ET/1500 GMT) The National Association of U.S. Realtors is expected to report existing home sales for December, which likely rose 8.9 percent to an annual rate of 5.20 million units, compared to November's sharp drop of 10.5 percent to an annual rate of 4.76 million units.
- (1000 ET/1500 GMT) The Conference Board will release its Leading Economic Index, which is likely to have dropped 0.1 percent in December, compared with the 0.4 percent rise in November.
- (1300 ET/1800 GMT) Baker Hughes US Oil Rig Count.
Key Events Ahead
- (1045 ET/1545 GMT) FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $1.950 bn).
FX Recap
USD: The dollar rose about 0.3 percent to 99.356 against a basket of currencies as increasing expectations of monetary easing by ECB and BoJ hit the yen and euro while global oil and stock markets strongly recovered. It rose 0.3 percent against the yen at 118.03 yen, pulling away from a one-year trough of 115.97 struck earlier this week against the safe-haven Japanese currency.
EUR/USD: The prospect of looser ECB policy kept the euro under pressure. It traded at $1.0832, down about 0.7 percent on the week, but up from a 2-week low of $1.0776 touched in the wake of Draghi's comments on Thursday. Analysts at Goldman Sachs lowered their year-end euro forecasts below parity to $0.95. The flash manufacturing PMI for France came at 50.0 in January, worsening from the 21-month high reached with December's reading of 51.4. The flash PMI reading for Germany's manufacturing sector posted a decrease to 52.1 points in January. It made intraday high at 1.0876 and low at 1.0813 levels. Short term weakness is only below 1.0800 and break below targets 1.0710/1.06700. On the higher side any break above 1.0940 will take the pair to next target 1.09800/1.1000. Short term bearish invalidation is only above 1.1000 and above that level a jump till 1.0600/1.1100 is possible.
USD/JPY: Preliminary factory index reading reveals Japan's manufacturing sector remained in a solid expansionary state in January though declined slightly from December. The Nikkei-Markit Flash Japan Manufacturing Purchasing Managers Index (PMI) stayed at 52.6 in December, but fell to a preliminary 52.4 in January. Pair made intraday high at 118.31 and low at 117.54 levels. Major resistance is seen at 120.67 and support is seen at 115.74 levels.
GBP/USD: Sterling edged up after the data showed UK government borrowing dropped sharply in December, while retail spending suffered its biggest year-on-year fall in over six years. It initially dropped to $1.4253 after the data from $1.4273 beforehand and bounced back to more than $1.43 briefly before settling at around $1.4285. Against the euro it extended gains to trade up 0.8 percent on the day at 75.91 pence. Pair made intraday high at 1.4305 and low at 1.4204 levels. Major support is seen at 1.3653 and resistance is seen around 1.4750 levels.
NZD/USD: The New Zealand dollar was a major beneficiary of improving risk appetite. It held at $0.6521, from a 4-month trough of $0.6348 set on Wednesday. The Kiwi has gained 0.9 percent this week against the dollar, and around 1.5 percent against the yen and euro. It made intraday high at 0.6551 and low at 0.6482 levels. Initial support is seen at 0.6318 and resistance at 0.6896 levels.
AUD/USD: The Australian dollar stood at $0.6996, having climbed a cent on Thursday. That was a marked turnaround from a 7-year trough of $0.6828 and left the currency on track for the biggest weekly gain since October with an increase of 2 percent. The Aussie regained some ground against the euro and yen with weekly gains seen in excess of 2 percent. The euro dropped 0.4 percent to A$1.5471, having touched a peak of A$1.6072 last week. Against the yen, the Aussie rose to 82.37, up 2.4 percent for the week. Pair made intraday high at 0.7035 levels and low around 0.6986 levels. Initial support is seen at 0.6825 and resistance at 0.7050 levels.
Equities Recap
World stocks jumped on ECB's hints of more monetary easing and bargain-hunting from bruised investors.
The FTSEuroFirst 300 index of leading European shares rose 2.2 percent in early deals, on track to record a weekly gain of around 2 percent. Germany's DAX climbed 2 percent and heading for a weekly gain of 2.2 percent. Britain's FTSE 100 was up 1.8 percent on the day and France's CAC 40 inched higher 2.5 percent.
Japan's Nikkei ended up 5.9 percent, the most in more than four months. Chinese stocks rose 1.3 percent. MSCI's broadest index of Asia-Pacific shares outside Japan jumped 2.4 percent on Friday, the most since Oct.7 last year, after hitting a 4-year low on Thursday.
HK's Hang Seng Index lost 2.3 pct for the week.
Commodities Recap
Oil climbed 5 percent to above $30 in its largest weekly rally in three months, as firmer financial markets paved the way for traders to cash in on record short positions. Brent rose $1.58 at $30.83 a barrel by 0944 GMT, off this week's 2003 low of $27.10 and heading for a more than 6 percent weekly gain. U.S. crude was up $1.35 at $30.88 a barrel, set for a weekly rise of over 4 percent.
Gold dropped as the euro slid after the European Central Bank hinted at further policy easing and weaker growth across emerging economies. Spot gold fell 0.5 percent at $1,096.20 an ounce at 1030 GMT, while U.S. gold futures for February delivery were down 60 cents an ounce at $1,097.60.
Treasuries Recap
U.S. 10-year Treasuries yield rose 4 basis points to 2.06 percent, and the yield curve - the gap between 2- and 10-year yields - steepened from a multi-year low to around 119 basis points.
German 5-year bond yield hit record low at -0.246 percent, while 2-year bond yield hit record low at -0.456 percent.
UK March Gilts edged slightly higher on the UK retail sales data to 119.00.
Australian government bond futures eased, with the 3-year bond contract off 4 ticks at 98.060. The 10-year contract fell 3 ticks to 97.2800, while the 20-year contract lost 3.5 ticks to 96.7800. New Zealand government bonds were slightly firmer with yields down between half and 1.5 ticks.
