Market Roundup
- EUR/USD bid in Europe. Trading from 1.0843 to 1.0867 levels.
- USD/JPY off Friday's 121.70 peak. Plays in between 121.00 to 121.49 levels.
- GBP/USD knee-jerk 1.5322 high after higher-than-expected manufacturing PMI then lowers.
- Brent marginally negative on the day but a reluctant faller.
- Al Hayat press - Saudi Arabia ready to manage oil market but all must cooperate.
- ECB Nowotny - hopes for more rational approach by markets in March.
- ECB Nowotny - China's economic struggles are of particular concern to Europe.
- ECB's Coeure suggests EU Commission treasury for euro zone.
- Euro zone January Markit Manufacturing final PMI 52.3 vs previous 52.3. 52.3 expected.
- UK January Markit/CIPS Manufacturing PMI 52.9 vs previous 52.1 revised. 51.7 expected.
- UK December BOE Consumer Credit 1.169bln vs previous 1.479bln revised. 1.300bln expected.
- UK December Mortgage Lending 3.204bln vs previous 3.755bln. 3.700bln expected.
- UK December Mortgage Approvals 70.837k vs previous 70.424k revised. 69.600k expected.
- Switzerland January Manufacturing PMI 50.0 vs previous 50.4 revised. 50.9 expected.
- SNB domestic deposits rise to CHF 407.335bln fm previous 403.135 weekly January 29.
Economic Data Ahead
- (0830 ET/1330 GMT) US Personal Income (Dec), market expectation +0.2% m/m, previous +0.3% m/m.
- (0830 ET/1330 GMT) Consumption Expenditures (Dec) market expectation +0.1% m/m, previous +0.3% m/m.
- (0830 ET/1330 GMT) Core PCE Price Index (Dec) prev 1.3% y/y.
- (0945 ET/1445 GMT ) Markit Manufacturing PMI (final Jan) previous 52.7.
- (1000 ET/1500 GMT) ISM Manufacturing PMI (Jan) market expectation 48.0, previous 48.2.
- (1000 ET/1500 GMT) Construction Spending (Dec) ) market expectation +0.6% m/m, previous -0.4% m/m.
- (1300 ET/1800 GMT) Dallas Fed Trimmed Mean PCE previous +1.6% y/y.
Key Events Ahead
- (1145 ET/1645 GMT) Fed Trade Operation 30-Year Ginnie Mae (max $1.000 bn).
- (1200 ET/1700 GMT) Fed vice Chair Fischer on "Recent Monetary Policy" at CFR luncheon; NY.
FX Recap
USD: The dollar index has once again made a high of 99.82 and started to decline from that level. It was trading around 99.39 with major support at 98.50 (55 day EMA). It has made a low of 98.42 (28 th Jan 2016) and recovered from that level, but struggling to close above 100. The minor support is around 99 and break below targets 98.50. Any break below 98.50 will take the index till 97.75/97.15/96.75.
EUR/USD: The Euro once again recovered after making a low of 1.08099 and was trading around 1.08605. The major resistance is around 1.1000 and break above 1.100 will take it to next level around 1.1060/1.1100 in short term. The minor resistance is around 1.0880/1.0950/1.0980. Overall bearish invalidation is only above 1.1000. On the lower side minor support is around 1.0780 (25th Jan low) and break below targets 1.07100/1.06700.
USD/JPY: The yen steadied after its biggest one-day fall in over a year, it tumbled 2 percent against the dollar after the BOJ's shock move on Friday. But after the data showed China's factory activity contracted for an 11th straight month in January, the yen recovered from earlier losses and traded flat at 121.15 against the dollar and 131.40 to the euro. The pair should close above 121.45 (200 day MA) for further bullishness. Any break above 121.45 will take it till 122/122.50. The short term trend is slightly bullish as long as support 119.90 holds. The major support is around 119.90 and break below targets 119.50/119.
GBP/USD: The concerns over increased public support for Brexit weighed on the Sterling, despite a strong reading of manufacturing sentiment. It recovered till 1.43175 after making a low of 1.4140 and was trading around 1.43630. It was flat against the euro at 76.03 pence. On the higher side any break above 1.4330 will take the pair to next level around 1.4370/1.4420. The Cable is facing short term support around 1.4240 and break below will drag it further down till 1.4180/1.4140/1.4070 level.
NZD/USD: The New Zealand dollar traded at $0.6476, having been as low as $0.6451. The kiwi was at 78.50 yen, holding onto Friday's near 2.0 percent rally.
AUD/USD: The Australian dollar touched a session low of $0.7043 as investors gave both commodity currencies a wide berth in the face of yet more disappointing data out of China. It has since drifted back to $0.7067, down 0.2 percent on the day. It was trading around 0.7650 and the short term trend is slightly bullish as long as support 0.7000 holds. On the higher side major resistance is around 0.7170 and break above targets 0.7250/0.7300. The minor support is around 0.7020 and break below will drag the pair till 0.7000/0.6920/0.6820. The Aussie fetched 85.65 yen.
USD/CHF: The pair has broken major resistance 1.0200 and jumped till 1.0256. It was trading around 1.0218 and the Short term trend is bullish as long as support 1.0160 (7 day EMA) holds. Any break below 1.0160 will drag it down till 1.0100/1.005. On the higher side, the resistance is around 1.0255 and break above 1.0250 will take the pair till 1.0300/1.0335.
Equities Recap
The European shares dropped after surveys showed price cutting failed to save euro zone from slowing factory growth and the data showed Chinese manufacturing slowed last month at its fastest pace in more than three years.
Europe's FTSEurofirst 300 was down 0.1 pct, Euro Stoxx 50 fell 0.5 pct, Germany's DAX dropped 0.4 pct and France's CAC inched 0.4 percent lower.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up a modest 0.1 percent, after losing 8 percent in January. Australian and Japan stocks posted gains of 0.8 and 2 percent, respectively. Chinese stocks slipped 1.5 to 1.7 percent after the weak factory data.
Commodities Recap
Oil dropped 2 percent as weak economic data from China weighed on prices and an OPEC source played down talk of an emergency meeting to stem the decline. Brent April crude futures were down 1.8 percent, or 64 cents, at $35.35 a barrel at 0905 GMT. U.S. West Texas Intermediate was down 2 percent, or 68 cents, at $32.94 a barrel.
Spot gold rose up 0.3 percent at $1,120.66 an ounce by 0641 GMT. U.S. gold for April delivery rose 0.4 percent to $1,121.10 an ounce.
Treasuries Recap
US 10-year Treasury yield last stood at 1.9831, up 0.01 pct.
UK Gilts are around 6 ticks lower on the January Markit/CIPS Manufacturing PMI data at 120.07. The data was forecast to continue its declining run in the face of slowing global growth with a reading of 51.7 (prev 52.1). The actual reading was a bit of surprise of 52.9 as output from heavy industry underpinned.
JGB prices were sharply higher. But JGBs in the 7-yr and longer zone lost some of their earlier gains, as the BoJ did not offer to buy super-long. JGBs yields on the current 2-yr JGBs are down 7.5bp at -0.155%, after moving between -0.085% and -0.16%, while the 5s are down 3bp at -0.10%, vs -0.07% earlier. The 10s are down 3.5bp at 0.06%, vs 0.05% earlier, JGB futures are up 0.17 at 150.59, after hitting a fresh record high of 150.78 earlier.
German 5-year bond yields hit record lows of -0.318 percent as markets expected major central banks to be stuck in a race to the bottom on interest rates for the foreseeable future. 2-year yields fell as low as -0.486 percent, within a whisker of their record low. 10-year Bund yields fell to 0.236 percent. While 10-year Portuguese yields were 2 basis points lower at 2.67 percent. Greece yields were little changed at 9.80 percent.
Australian bond yields dropped with the 10-year reaching a 3-month low of 2.6 percent. Reflecting the lower yields, bond futures rose with the 10-year contract putting on 2.5 ticks to 97.390. The 3-year bond contract gained 1 tick to 98.140. New Zealand government bond yields were 1.5 basis points lower at the short end and 4 basis points lower at the long end.
