Market Roundup
- GBP/USD near 2010 low before UK inflation data. Recovers to 1.4340 from 1.4239.
- China Q4 GDP growth 6.8 pct y/y, in line with forecasts.
- Offshore Yuan slipped around 0.2% vs USD to trade at 6.60.
- USD/JPY up 0.5% to 118.03 from 117.23.
- Iran boosts oil output, orders oil production increase of 500,000 bpd.
- IEA says oil market to remain oversupplied until late 2016.
- IMF Obstfeld - Market Yuan fears could be quelled by clear basket communication.
- IMF cuts global growth forecast as China, falling oil prices weigh.
- Parliament in Azerbaijan approves measures to support manat currency.
- Euro zone November current account NSA 29.8bln vs previous 27.5bln revised. SA 26.4bln vs previous 25.6bln revised.
- Euro zone November Net Investment Flow 45.2bln vs previous 23.4bln revised.
- Euro zone December inflation final 0.0% m/m, 0.2% y/y vs previous -0.1%/0.1% revised. 0.0%/0.2% expected.
- UK December CPI 0.1% m/m, 0.2% y/y vs previous 0.0%/0.1%. 0.0%/0.1% expected.
- UK December Core CPI 0.3% m/m, 1.4% y/y vs previous 0.0%/1.2%. 0.1%/1.2% expected.
- UK December RPI 0.3% m/m, 1.2% y/y vs previous 0.1%/1.1%. 0.2%/1.1% expected.
- Switzerland December Producer/import price -0.4% m/m, -5.5% y/y vs previous 0.4%/5.5%.
- Germany January ZEW Economic Sentiment 10.2 vs 16.1 previous, 8.2 expected.
- Germany January ZEW Current Condition 59.7 vs 55.00 previous, 54.0 expected.
Economic Data Ahead
- (0830 ET/1330 GMT) Statistics Canada releases its data on Canadian investments in foreign investments and foreign portfolio investments in Canadian securities.
- (1000ET/1500 GMT) National Association of U.S. Home Builders releases its housing market index for January which likely remained flat at 61.00.
Key Events Ahead
- No key events scheduled for the day.
FX Recap
USD: The dollar rose 0.5 percent against the Japanese yen to 117.92 yen in anticipation of further action by Beijing, possibly as soon as next month. Against a basket of currencies it rose 0.2 percent.
EUR/USD: The euro dropped 0.1 percent to $1.0887. It has broken minor trend line support around 1.0875 which confirms minor weakness, decline till 1.0800 is possible. The euro zone's CPI ticked higher to 0.0% month-on-month in December, from -0.1% previously, whilst the yearly print came out unchanged at 0.2%. In addition, the core gauge stayed at 0.9% year-on-year, Eurostat informed market participants on Tuesday. Moreover, Germany's ZEW Survey for the current situation unexpectedly improved from 55.0 to 59.7 in January and the economic sentiment subindex deteriorated notably to 10.2 from 16.1 previously. It made intraday high at 1.0904 and low at 1.0859 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: Japan's yen rose to make up some of its earlier losses, as China's economic growth rate triggered massive risk aversion on the foreign exchange market. Market sentiment has been the main driver for the Japanese yen in 2016 and the poor Chinese economic growth will likely force investors to seek safe-havens such as the yen. Pair made intraday high at 118.06 and low at 117.23 levels. Major resistance is seen at 120.67 and support is seen at 116.54 levels. It is facing minor resistance around 118 and was trading around 117.95. Any break above 118 will take the pair to next level around 118.60/119.30. Its minor support is around 117.60 and break below targets 117.20/116.60.
GBP/USD: The Sterling inched higher from a 5-1/2-year low against the dollar after data showed UK's ultra-low inflation rose to its highest rate in almost a year in December, beating economists' expectations. It rose to $1.4340 after the data, having traded at $1.4320 just before its release, before easing back to $1.4324. Any break above 1.4360 will take the pair till 1.4400/1.4500. Bearish invalidation is only above 1.4500 level. A break above 1.4500 targets 1.4600/1.4650. On the lower side any break below 1.4300 will drag the pair till 1.4250/1.4230 level. Against the euro, it strengthened to 75.825 pence, up from 76 pence just before the data, and up 0.9 percent on the day. Pair made intraday high at 1.4339 and low at 1.4237 levels. Initial support is seen at 1.4226 and resistance is seen around 1.4750 levels.
NZD/USD: The New Zealand dollar slipped to $0.6425 in the early Asian session, from $0.6443, pulling close to a recent three-month low of $0.6382. It reversed gains made after a quarterly report from the New Zealand Institute of Economic Research showed business confidence rebounded in the fourth quarter. It made intraday high at 0.6507 and low at 0.6415 levels. Initial support is seen at 0.6383 and resistance at 0.6896 levels.
AUD/USD: The Australian dollar advanced against its American counterpart after oil futures hiked, erasing losses created by China's GDP data. The Australian dollar rose rose 0.8 percent to $0.6918. It has broken minor resistance 0.6930 and jumped till 0.69428 at the time of writing. Any break above 0.6930 will take the pair till 0.7000/0.7025. The pair's major support is around 0.6820 and break below will drag it till 0.6760/0.6590. Overall trend is still bearish as long as resistance 0.7025. Pair made intraday high at 0.6927 levels and low around 0.6834 levels. Initial support is seen at 0.6825 and resistance at 0.7050 levels.
USD/CHF: The pair sees major resistance at 1.0880 (trend line joining 1.0124 and 1.0106) and intraday support at 1.00350 (7 day EMA). Any break above trend line resistance 1.0880 will take the pair to next level around 1.0125/1.018/1.0250. On the lower side major support is around 1.00350 and break below will drag it till 1/0. minor support is around 1.0055. Overall bullish invalidation is only below 0.9920.
Equities Recap
The China's slow growth data drove European and Asian shares higher prompting investors to expect more measures to boost growth.
European shares started higher, led by miners after metals prices rose following the Chinese data. The pan-European FTSEurofirst 300 index rose 1.5 percent. The STOXX Europe 600 Basic Resources added 4.1 percent, while Germany's DAX rose 2.1 pct and France's CAC climbed 1.9 pct.
Tokyo's Nikkei index ended 0.6 percent higher. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.5 percent, rebounding from a 4-year low touched earlier. Chinese shares rose on strengthened expectations of more stimulus. The CSI 300 index ended up 3.0 percent while the Shanghai Composite gained 3.2 percent, after hitting a 13-month low on Monday.
Commodities Recap
Oil prices climbed more than 3 percent on China's weak growth data, Brent crude futures traded up $1.09, or 3.8 percent, at $29.64 a barrel at 1028 GMT. U.S. crude futures were up 34 cents at $29.76 a barrel, maintaining their unusual premium over Brent.
Gold steadied as equities rebounded after China recorded the weakest economic growth prompting investors towards risky assets. Spot gold was little changed at $1,089.96 an ounce by 0710 GMT, it touched a session high of $1,090.40 soon after China's GDP data was out, benefiting from the risk-off environment.
Treasuries Recap
The benchmark US 10-year Treasury yield stood at 2.0679, up 0.03 pct.
The gains in stock markets nudged yields on low-risk German government bonds higher. Ten-year yields rose 1.3 basis points to 0.48 percent.
The British 10-year bond yields rose 4 bps at 1.73 percent, March Gilts dropped 15 ticks on the December CPI data to post a day low of 118.86, but are already bouncing as scepticism remains. Bank of England Governor Dr Mark Carney is due to make his first major speech of the year when he delivers the 50th Anniversary Peston Lecture at Queen Mary University in London at 12:00 GMT.
Australian government bond futures inched higher, with the 3-year bond contract up 2 ticks at 98.130. The 10-year contract also gained 2 ticks to 97.3300, while the 20-year contract eased half a tick to 96.8050. New Zealand government bonds eased slightly.
