Market Roundup
- US retail sales end 2015 with a whimper (Dec -0.1 vs +0.4 in Nov), retail control -0.3 vs +0.5 in Nov.
- US IP points to softer growth down 0.4 in Dec, PPI falls 0.2% in Dec; warm weather/cheap gas blamed.
- Fed's Dudley: Negative interest rate is potential policy tool, not seriously considered right now.
- Fed's Dudley: concerned about downside risk on U.S. inflation, downplays risk of US recession says current expansion a bit long in the tooth, not concerned over diverging outlook of Fed & markets.
- Fed's Williams: Economy still needs help from low rates, Gradual is key word for monetary policy this year.
- Fed's Williams: No sign asset values are depressed, expects moderate growth, declining unemployment.
- Fed's Kaplan: Fed can wait to see if market volatility has US economy implications.
- Rate rise calls evaporate as markets plunge, CME Fedwatch sees 37% chance of March hike.
- Report paving way for Iran sanctions relief likely on Saturday, Report is precondition for sanctions relief.
- Dollar slumps on poor US data; AUD, CAD & MXN drop on oil (-5+%).
- Sterling slumps under USD 1.43 for first time since May 2010.
- Bond prices gain on weak data, plunging oil, gold rallies USD10 on safe haven flows.
Looking Ahead - Economic Data (GMT)
- 22:30 Australia New Motor Vehicle Sales m/m* Dec 1%-previous
- 23:30 Australia TD-MI Inflation Gauge* Dec 0.1%-previous
- 02:00 New Zealand RBNZ Offshore Holdings* Dec 64.1%-previous
- 04:30 Japan Industrial Output Rev*Nov -1%-previous
- 04:30 Japan Capacity Utility Index Change MM* Nov 1.3%-previous
Looking Ahead - Events, Other Releases (GMT)
- --:-- Japan- Bank of Japan to hold quarterly meeting of regional branch managers.
- Governor Haruhiko Kuroda to speak BOJ will release a report assessing regional economic and price conditions
Currency summaries
EUR/USD is likely to find support at 1.0850 levels and currently trading at 1.0909 levels. The pair has made session high at 1.0983 and hit lows at 1.0908 levels. The dollar declined sharply against euro to hit 2-1/2-week trough on Friday, the dollar was hammered by a combination of poor risk appetite arising from a renewed drop in oil prices and weak U.S. economic data. U.S. economic data on Friday was not encouraging, as an unexpected drop in retail sales and industrial output declining again in December, underscoring a worsening outlook for fourth-quarter economic growth. The downbeat economic numbers along with the meltdown in oil and stocks could further postpone Federal Reserve's e interest rates hike plan any time soon. The dollar index, which measures the greenback against a basket of six other major currencies, was down 0.2 percent at 98.933. The euro rose to $1.0984, its highest since Dec. 29, and was last at $1.0913, up 0.5 percent.
GBP/USD is supported in the range of 1.4200 and currently trading at 1.4258 levels. It reached session high at 1.4366 and hit low at 1.4256 levels. Sterling declined to fresh 5-1/2 year low below $1.43 on Friday and was heading for its eighth consecutive week of falls against the euro, its worst run in five years as investors worried about Britain's economic outlook, after minutes from the Bank of England's policy meeting on Thursday failed to address the concerns related to soft data and falling oil prices which will gradually have impact on interest rate hike by BoE. Sterling fell 0.9 percent to $1.4279 on Friday, the lowest since May 2010. Worries about a referendum on Britain's EU membership have intensified and weighed on the pound, which has declined more than 6 percent against the dollar recently. Prime Minister David Cameron has promised a referendum by the end of 2017, though it may come as early as June this year.
USD/JPY is supported around 116.00 levels and currently trading at 117.03 levels. It peaked to hit session high at 117.25 and made session lows at 116.48 levels. Dollar sharply decline against Japanese yen on Friday, after data showed on Friday that U.S. retail sales fell in December as warm weather in US kept the customers from buying winter apparel and cheaper gasoline weighed on receipts at service stations. U.S. producer prices were also lower last month due to weak energy costs, while the country's industrial output declined for a third straight month. The Commerce Department said retail sales declined 0.1 percent after increasing 0.4 percent in November. In another report from the Commerce Department data showed business inventories fell 0.2 percent in November its the largest drop since September 2011 following the poor U.S. economic data. In late US trading hours, the dollar fell to 116.51 yen the lowest since Aug. 24. It was last at 117.02 yen, down 0.9 percent.
USD/CAD is supported at 1.4395 levels and is trading at 1.4521 levels. It has made session high at 1.4551 and lows at 1.4414 levels. The Canadian dollar slipped to fresh 12-year low against its U.S. counterpart as the oil-correlated Canadian dollar was pressured by a deeper dive in crude oil prices and increased bets that the Bank of Canada will cut rates next week. Furthermore declines in U.S. stock indexes added further pressure on the risk-sensitive commodity currency, while bond yields were hammered lower as soft U.S. retail sales data lessened the renewed expectations for more interest rate hikes by U.S. Federal. On the data front, existing homes in Canada fell in December from November as weakness in Alberta and parts of Ontario offset gains in other markets, a report from the Canadian Real Estate Association showed on Friday. Sales activity was down 0.6 percent last month from November. Actual sales for December, not seasonally adjusted, rose 10 percent from December 2014. The currency's strongest level of the session was C$1.4418, while it hit its weakest since April 2003 at C$1.4547.
Equities Recap
European shares ended on Friday at their lowest since mid-December 2014, hit by losses in commodity-related stocks as BHP Billiton announced a major write down and oil fell below $30 a barrel.
Britain's blue-chip FTSE 100 index declined 2.1 percent, France's benchmark CAC-40 index was down 2.63 percent, Germany's DAX ended down 2.85 percent, meanwhile the pan-European FTSEurofirst 300 index lost 3.05 percent.
US stocks declined sharply on Friday, with the S&P 500 slipping to its lowest level since October 2014 and the Dow losing more than 500 points as oil prices sank below $30 per barrel.
Dow Jones closed down by 2.39 percent, S&P 500 ended down by 2.17 percent, Nasdaq finished the day down by 2.75 percent.
Treasuries Recap
U.S. Treasury prices rallied on Friday after weaker-than-expected economic data added to skepticism about the strength of the U.S. economy and as plunging oil prices shook global equity markets, increasing investor appetite for safe-haven U.S. government debt.
Benchmark 10-year notes were last up 21/32 in price to yield 2.026 percent, down from 2.098 percent late on Thursday.
The 30-year bond rose 1-24/32 in price to yield 2.805 percent, down from 2.892 percent on Thursday.
Commodities Recap
Gold rose nearly 2 percent on Friday, as a weaker dollar and falling equity markets underpinned demand for assets perceived as safer.Spot gold rose 1.8 percent to a session high of $1,097.20 an ounce and was up 1.1 percent at $1,089.40 at 2:11 p.m. EST (1911 GMT).
U.S. gold futures for February delivery settled up 1.6 percent at $1,090.70 an ounce.
Oil prices slipped 6 percent on Friday to close below $30 a barrel for the first time in 12 years, resuming this year's breathtaking rout as Chinese stock markets fell further and traders braced for an imminent rise in Iran's exports.
Brent settled down $1.94, or 6.3 percent, at $28.94 a barrel, sticking below the pivotal $30 a barrel mark after briefly dipping below that level in the previous two days. It fell as far as $28.82, the lowest since February 2004.
U.S. crude ended $1.78, or 5.7 percent, lower at $29.42, after hitting a contract low of $29.13, its lowest since November 2003, earlier in the session.
