Market Roundup
- Japan ChiefCabSec Suga – Japan closely monitoring FX, commodity, and yield moves, all affect current account balance – Reuters.
- BoJ Policy Board Jan 30-31 meeting minutes – Inflation to rise as output gap tightens but will take time to accelerate, no significant rise in expectations, momentum not firm, prudence in policy changes needed, hasty changes anathema, some concerns on ability to control yield curve, one member saw JGB 10-year target around zero too low, daily ops have no implications on future policy stance, uncertainties related to new US administration, Brexit.
- Japan Dec c/a surplus Y1.1122 trillion, Y1.2945 trillion forecast, ’16 surplus of Y20.6 trillion largest since ’07, investment income windfall.
- MoF January flow data – Japanese buy net Y519.5 bln foreign stocks, sell Y1.6210 trillion bonds, buy Y92.6 bln bills; foreign investors sell net Y119.2 bln Japanese stocks, buy Y1.6841 trillion JGBs, Y2.4541 trillion bills.
- Japan Jan economy watchers’ survey service worker DI 49.8, -1.6 pt from Dec.
- Japan Jan bank loans +2.5% y/y, rise steady, Dec +2.6%, Nov +2.4%.
- Japan Jan TDB bankruptcies – 591 cases, -12.8% y/y, debt involved Y114.4 bln.
- Japan’s Sharp may begin construction on $7 bln US plant before June 30.
- NZ FinMin Joyce – RBNZ concerned over household debt levels as house prices rocket, to carry out analysis – Reuters.
- Global dairy prices up on tight supply, strong China demand, NZ Fonterra GDP price index +1.3%, volumes drop at auction.
Economic Data Ahead
- (0230 ET/0730 GMT) France Jan BdF business sentiment index, 103 forecast; last 102.
- (0300 ET/0800 GMT) Spain Dec industrial output, +2.9% y/y forecast; last +3.2%.
Key Events Ahead
- N/A BoE MPC Forbes speaks in Yorkshire and The Humber.
- N/A Riksbank Executive Board meeting.
- N/A Finland 5/30-yr bond syndication via BAML, BNP Paribas, Citi, JPM et al.
- (0430 ET/0930 GMT) Portugal E1.0-1.25 bln 2.2% 2022, 5.65% 2024 govt bond auctions.
- (0500 ET/1000 GMT) Greece E875 mln 13-week treasury bill auction.
- (0530 ET/1030 GMT) Germany E3 bln 0.25% 2027 Bund auction.
- (0700 ET/1200 GMT) OECD Sweden survey, OECD Gurria/Sweden FinMin Andersson presser follows.
- (0800 ET/1300 GMT) BoE DepGov Cunliffe speaks in Birmingham.
- (1500 ET/2000 GMT) RBNZ policy announcement, no change in 1.75% OCR, policy forecast.
- (1600 ET/2100 GMT) RBNZ Gov Wheeler press conference.
FX Beat
DXY: The dollar weakened versus its major peers, as hawkish comments from Fed’s Harker failed to boost U.S. Treasury yields. The greenback against a basket of currencies traded flat at 100.40, after rising as high as 100.72 in the previous session, its strongest since Jan. 30. FxWirePro's Hourly Dollar Strength Index stood at 89.84 (Bullish) by 0500 GMT.
EUR/USD: The euro steadied after declining to a 1-week low in the previous session, as the bid tone around the dollar weakened on softer U.S. Treasury yields. However, the major continues to remain under pressure amid political woes in Europe, with elections in the Netherlands, Germany, and France. The European currency traded flat at 1.0685, having touched a low of 1.0656 on Tuesday, it’s lowest since Jan. 30. FxWirePro's Hourly Euro Strength Index stood at -66.62 (Bearish) by 0400 GMT. Investors’ attention remains on the US-German 2-year yield spread and political developments in the Eurozone, amid a lack of relevant economic data from both the continents. Immediate resistance is located at 1.0700, a break above targets 1.0735 (10-DMA). On the downside, support is seen at 1.0657 (Jan-26 Low), a break below could drag it lower 1.0650.
USD/JPY: The dollar declined, reversing some of its previous session gains, despite the Bank of Japan purchased JPY 400 billion worth of bonds in order to suppress the yields. The major failed to benefit from hawkish comments from Fed’s Harker, as risk-off market sentiment across the financial markets continued to boost the safe-haven Japanese yen. The pair trades 0.1 percent down at 112.22, after falling as low as 111.59 on Tuesday, it’s lowest since Nov 29. FxWirePro's Hourly Yen Strength Index stood at 131.29 (Highly Bullish) by 0400 GMT. Investors will continue to track price action in the treasury yields, amid a lack of relevant macro fundamental drivers from the U.S. docket. Immediate resistance is located at 112.77 (Feb 6 High), a break above targets 113.00. On the downside, support is seen at 112.00, a break below could take it near 111.59 (Previous Session Low).
GBP/USD: Sterling eased after recovering from a 2-week low hit in the previous session on signs of increasing pressure on the government to give parliament a greater say on Brexit. Sterling trades down at 1.2500, after slumping to a low of 1.2346 in the previous session, it’s weakest since Jan. 20. FxWirePro's Hourly Sterling Strength Index stood at 69.74 (Bullish) by 0400 GMT. Investors’ will continue track overall market sentiment, ahead MPC member Cunliffe speech. Immediate resistance is located at 1.2545 (10-DMA), a break above could take it near 1.2600. On the downside, support is seen at 1.2413 (21-DMA), a break below targets 1.2400. Against the euro, the pound trades 0.1 percent down at 85.41 pence, having hit a low of 86.44 on Monday, it’s weakest since Jan. 24.
AUD/USD: The Australian dollar rose, halting its 2-day losing streak, as the broad-based U.S. dollar rally paused as the treasury yields ignored hawkish comments from Fed’s Harker. Philadelphia Fed President Patrick Harker stated that March meeting should be considered for raising interest rates, as growth in US jobs and wages continued. The Aussie trades 0.06 percent up at 0.7630, within the sight of a high of 0.7696 hit last week, it’s strongest since Nov. 10. FxWirePro's Hourly Aussie Strength Index stood at -53.33 (Bearish) by 0500 GMT. In absence of economic data from both the continents, investors will continue track board based market sentiment. Immediate support is seen at 0.7599 (10-DMA), a break below could drag it near 0.7577 (Feb 2 Low). On the upside, resistance is located at 0.7650, a break above targets 0.7700.
NZD/USD: The New Zealand dollar declined, extending previous session losses, as investors remained cautious ahead of the Reserve Bank of New Zealand's monetary policy decision. The RBNZ is widely expected to keep rates at record lows of 1.75 percent, however, traders will scrutinize statement for any guidance on the future course of policy. The Kiwi trades 0.1 percent down at 0.7291, having hit a peak of 0.7375 on Tuesday, it’s strongest since Nov. 9. FxWirePro's Hourly Kiwi Strength Index was at -20.60 (Neutral) by 0500 GMT. Investors will continue to digest hawkish comments from Fed, ahead of New Zealand's central bank meeting. Immediate resistance is located at 0.7350, a break above could take it near 0.7375 (Previous Session High). On the downside, support is seen at 0.7270 (Jan 31 Low), a break below could drag it lower 0.7250.
Equities Recap
Asian shares tumbled, while the euro remained under pressure as an election looming in France and concerns over the policies of U.S. President Donald Trump weakened market sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.3 percent.
Tokyo's Nikkei rose 0.27 percent to 18,961.11 points, Australia's S&P/ASX 200 index edged up 0.51 percent to 5,650.40 points and South Korea's KOSPI was trading 0.64 percent down at 2,061.95 points.
Shanghai composite index climbed 0.02 percent to 3,153.58 points, while CSI300 index was trading 0.03 percent higher at 3,366.84 points.
Hong Kong’s Hang Seng was trading 0.17 percent higher at 23,371.07 points. Taiwan shares shed 0.1 percent at 9,543.25 points.
Commodities Recap
Crude oil prices slumped, extending losses from the previous session, as a huge increase in U.S. fuel inventories and a drop in Chinese demand indicated that global crude markets remain oversupplied despite OPEC and non-OPEC led efforts to cut output. International benchmark Brent crude was trading 0.2 percent lower at $54.55 per barrel by 0406 GMT, having hit a low of $54.74 earlier in the session, it’s weakest since Jan. 20. U.S. West Texas Intermediate crude fell 0.3 percent at $51.52 a barrel, after falling to an early low of $51.20, its lowest since Jan. 19.
Gold prices held gains near three-month highs touched in the previous session, as political and economic uncertainty in the United States and Europe strengthened the bid tone around the safe-haven metal. Spot gold edged up to $1,234.16 per ounce by 0411 GMT, having touched its highest since Nov. 11 at $1,235.59 on Tuesday. U.S. gold futures were mostly unchanged at $1,236.30 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.3932 percent higher by 0.004 bps, while 5-year yield was up by 0.005 bps at 1.8485 percent.
The Australian government bonds continued to witness gains following a decline in energy prices amid a silent trading session that witnessed data of little economic significance. The yield on the benchmark 10-year Treasury note tumbled 1 basis point to 2.70 percent, the yield on 15-year note also fell slightly over 1 basis point to 3.15 percent and the yield on short-term 2-year too fell 1 basis point to 1.80 percent.
The New Zealand government bonds jumped at the time of closing ahead of the Reserve Bank of New Zealand’s (RBNZ) first monetary policy decision of 2017, scheduled to be held on Thursday. The yield on the benchmark 10-year bond plunged 5-1/2 basis points to 3.28 percent at the time of closing, the yield on 7-year note also slumped over 5 basis points to 2.90 percent and the yield on short-term 2-year note traded 3-1/2 basis points lower at 2.24 percent.
Canadian government bond prices were mixed across the maturity curve, with the 2-year price down half a Canadian cent to yield 0.740 percent and the benchmark 10-year up 9 Canadian cents to yield 1.690 percent.
