Market Roundup
- BoJ DepGov Nakaso – Risks to economic-price outlook skewed to downside, despite bright spots in economy, momentum towards hitting price goal not yet sufficient, mulling hike in long-term rate target premature, reiterates monetary policy does not target FX – Reuters.
- Abe-Trump meeting could launch new economic talks – Nikkei, Reuters.
- Japan Dec core machinery orders +6.7% m/m and y/y, +3.1% and +4.6% forecast, series volatile, Q4 core orders -0.2% q/q, Q1 ’17 forecast at +3.3%.
- MoF flow data week ended Feb 4 – Japanese buy net Y332.8 bln foreign stocks, sell Y126.6 bln bonds, buy Y11.6 bln bills; foreign investors sell net Y248.0 bln Japanese stocks, buy Y239.8 bln JGBs, sell Y788.3 bln bills.
- Japan Jan money supply M2 +4.1% y/y, M3 +3.5%, broadest liquidity +2.2%, continues steady rises, Dec +4.0%, +3.4%, +2.1%.
- China’s changing debt risks drive up bond futures volumes – Reuters.
- China banks start to lower discounts on mortgage rates – China Sec Journal.
- UK Commons gives green light to Brexit process, MPs vote overwhelmingly to approve triggering of Article 50 - Financial Times.
- Australia Dec HIA new home sales +0.2% m/m, Nov +6.1%, Oct weak.
- RBNZ leaves OCR unchanged at 1.75%, as forecast, to hold well into ’18, eyes 2.2% in ’20, TWI forecast at 77.8, annual CPI 1.3% in March ’18, previous 74.4, 1.7%, policy to remain accommodative, uncertainties remain, however, adjustments possible, decline in exchange rate needed.
- Gov Wheeler – Adopted neutral policy bias, risks evenly balanced, hikes may be needed 2 years out or more, economy growing well, protectionism key risk.
- Asst Gov McDermott – Not trying to fake market on NZD with policy outlook, market reaction to rate decision exactly what we wanted – Reuters.
- New Zealand Dec new dwelling consents -7.2% m/m, Nov -9.6%, Dec -13.1% y/y.
Economic Data Ahead
- (0145 ET/0645 GMT) Switzerland Jan unemployment, 3.6% nsa, 3.3% sa forecast; last 3.5%, 3.3%.
- (0200 ET/0700 GMT) Germany Dec trade balance, E21.4 bln surplus forecast; last E21.7 bln surplus.
- (0200 ET/0700 GMT) Norway Q4 GDP, +0.7%, mainland +0.4% forecast; last -0.5%, +0.2%.
- (0830 ET/1330 GMT) United States w/e initial jobless claims, 250k forecast; last 246k.
- (1000 ET/1500 GMT) United States Dec wholesale inventories - rev, +1.0% m/m forecast; prelim +1.0%.
- (1000 ET/1500 GMT) United States Dec wholesale sales, +0.5% m/m forecast; last +0.4%.
Key Events Ahead
- N/A German Chanc Merkel, ECB Pres Draghi meeting in Berlin.
- (0400 ET/0900 GMT) Ireland E1.0-1.25 bln 0.8% 2022, 1.0% 2026 government bond auctions.
- (0530 ET/1030 GMT) UK DMO GBP2.5 bln 1.5% 2047 Gilt auction.
- (0910 ET/1410 GMT) St Louis Fed Bullard presentation in St Louis financial forum.
- (1135 ET/1635 GMT) BoC DepGov Schembri speaks in London.
- (1300 ET/1800 GMT) Chicago Fed Evans speaks at Chicago CFA Society event.
- (1330 ET/1830 GMT) BoE Gov Carney speaks at London BoE reception.
FX Beat
DXY: The dollar edged up versus its major peers, despite U.S. Treasury yields tumbling to multi-week lows. The greenback against a basket of currencies traded 0.1 percent up at 100.31, hovering towards a high of 100.72 hit on Tuesday, it’s strongest since Jan. 30. FxWirePro's Hourly Dollar Strength Index stood at 58.84 (Bullish) by 0500 GMT.
EUR/USD: The euro eased, reversing some of its previous session gains as the greenback attempted a minor recovery amid heightened European political woes. However, the downside in the major was limited as risk aversion kept U.S. Treasury yields near multi-week lows and restrained the dollar's bounce. The European currency traded 0.1 percent lower at 1.0689, having touched a low of 1.0640 on Wednesday, it’s lowest since Jan. 30. FxWirePro's Hourly Euro Strength Index stood at -56.39 (Bearish) by 0400 GMT. Investors’ attention remains on the German trade balance data and the French-German yield differential, ahead of the U.S. jobless claims and Fed officials Evans and Bullard speeches. Immediate resistance is located at 1.0700, a break above targets 1.0730 (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 rose above the 112.00 handle, despite a fall in the U.S. 10-year yields to a three-week low. However, the upside remains capped as investors refrained from placing big bets ahead of Prime Minister Shinzo Abe's meeting with the US President Donald Trump. The pair trades 0.2 percent higher at 112.17, after falling as low as 111.59 on Tuesday, it’s lowest since Nov 29. FxWirePro's Hourly Yen Strength Index stood at 94.96 (Slightly Bullish) by 0400 GMT. Investors will continue to track price action in the treasury yields, ahead of U.S. unemployment claims, wholesale inventories, and speeches from Federal Reserve officials. Immediate resistance is located at 112.50, a break above targets 113.07 (10-DMA). On the downside, support is seen at 111.59 (Feb. 7 Low), a break below could take it near 110.00.
GBP/USD: Sterling eased after rising to a 6-day high in the previous session, as the bid tone around the dollar strengthened amid declining U.S. 10-year treasury yields. Sterling trades 0.2 percent lower at 1.2512, after slumping to a low of 1.2346 on Tuesday, it’s weakest since Jan. 20. FxWirePro's Hourly Sterling Strength Index stood at 134.90 (Highly Bullish) by 0400 GMT. Investors’ focus will remain on the US-UK bond yield spread, ahead of the U.S. weekly initial jobless claims figures that could provide further insights on the strength of the economy. Immediate resistance is located at 1.2550, a break above could take it near 1.2600 (Jan. 30 High). On the downside, support is seen at 1.2430 (21-DMA), a break below targets 1.2400. Against the euro, the pound trades 0.1 percent lower at 85.40 pence, having hit a high of 85.09 on Wednesday, it’s strongest since Feb. 2.
AUD/USD: The Australian dollar declined as the Australian benchmark 10-year government bond yields dropped to the lowest levels since November. Moreover, renewed strength in the greenback and downbeat Australian business confidence numbers, which came in at 5 in the fourth quarter, against 6 in the previous quarter weakened the bid tone around the major. The Aussie trades 0.3 percent down at 0.7622, hovering away from a high of 0.7696 hit last week, it’s strongest since Nov. 10. FxWirePro's Hourly Aussie Strength Index stood at -40.58 (Neutral) by 0400 GMT. Investors will continue to digest Australia's business confidence report, ahead of RBA governor Lowe’s speech, U.S. economic data, and FOMC members’ speech. Immediate support is seen at 0.7600 (Psychological level), a break below could drag it near 0.7565 (21-DMA). On the upside, resistance is located at 0.7653 (5-DMA), a break above targets 0.7696 (Feb. 2 High).
NZD/USD: The New Zealand dollar slumped to a 2-week low below the 0.7200 handle after the Reserve Bank of New Zealand kept rates at a record low of 1.75 percent and slashed prospects of a near-term rate hike. The selling pressure around the major intensified as the New Zealand government bond yields extended losses following the RBNZ rate decision. The Kiwi trades 0.9 percent down at 0.7198, having hit a low of 0.7191 earlier, it’s weakest since Nov. 23. FxWirePro's Hourly Kiwi Strength Index was at -180.57 (Highly Bearish) by 0400 GMT. Investors will continue to track NZ-US yield spread, ahead of U.S. macro fundamental drives and Fed officials speeches. Immediate resistance is located at 0.7234 (23.6 % retracement of 0.7375 and 0.7191), a break above could take it near 0.7286 (10-DMA). On the downside, support is seen at 0.7191 (Session Low) a break below could drag it till 0.7150.
Equities Recap
Asian shares rose to their highest in more than 18 months as investors grew more confident about the Chinese economy, while the dollar bounced modestly on the back of increasing concerns over political instability in Europe.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 percent to their highest since July 2015.
Tokyo's Nikkei fell 0.45 percent to 18,922.54 points, Australia's S&P/ASX 200 index edged up 0.17 percent to 5,660.80 points and South Korea's KOSPI was trading 0.14 percent up at 2,061.95 points.
Shanghai composite index climbed 0.45 percent to 3,181.31 points, while CSI300 index was trading 0.43 percent higher at 3,397.75 points.
Hong Kong’s Hang Seng was trading 0.37 percent higher at 23,572.45 points. Taiwan shares added 0.5 percent at 9,590.18 points.
Commodities Recap
Crude oil prices steadied, after declining to multi-week lows in the previous session, as an unexpected draw of 869,000 barrels last week in the U.S. gasoline inventories strengthened market sentiment. International benchmark Brent crude was trading 0.4 percent higher at $55.38 per barrel by 0355 GMT, having hit a low of $54.43 the prior day, it’s weakest since Jan. 20. U.S. West Texas Intermediate crude rose 0.4 percent at $52.56 a barrel, after falling to a low of $51.20 on Wednesday, its lowest since Jan. 19.
Gold prices held gains near 3-month highs as political uncertainty from elections in Europe and worries over U.S. President Donald Trump's policies boosted the demand for the safe haven metal. Spot gold rose 0.1 percent to $1,241.92 per ounce at 0358 GMT, having hit its highest since Nov. 11 at $1,244.56 on Wednesday. U.S. gold futures rose 0.2 percent to $1,242 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.3469 percent lower by 0.004 bps, while 5-year yield was up by 0.005 bps at 1.8205 percent.
The Australian government bonds witnessed sharp rally for the third straight day, following firmness in the U.S. Treasuries. The yield on the benchmark 10-year Treasury note plunged 5 basis points to 2.64 percent, the yield on 15-year note also slumped 6-1/2 basis points to 3.09 percent and the yield on short-term 2-year fell 2-1/2 basis points to 1.78 percent.
The New Zealand government bonds traded modestly higher after the Reserve Bank of New Zealand (RBNZ) maintained a neutral bias in its monetary policy meeting held late Wednesday. The yield on the benchmark 10-year bond fell 1 basis point to 3.18 percent at the time of closing, the yield on 7-year note also slipped nearly 1 basis point to 2.80 percent and the yield on short-term 2-year note traded 1 basis point lower at 2.16 percent.
Canadian government bond prices were higher across a flatter yield curve in sympathy with Treasuries as longer-dated bonds outperformed. The 2-year rose 3 Canadian cents to yield 0.725 percent and the 10-year climbed 61 Canadian cents to yield 1.619 percent. The 10-year yield touched its lowest intraday since Dec. 7 at 1.607 percent.
