Market Roundup
- EUR/USD continues tight with bull bias, trading in between 1.0904 to 1.0936 levels.
- GBP/USD better bid after PMI data. Trading in between 1.4385 to 1.4487 levels.
- USD/JPY soggy within 119.23-120.04 range.
- Germany January Service PMI 55.0 vs 55.4 expected. 55.4 previous.
- Euro zone January Final Service PMI 53.6 vs 53.6 expected. 53.6 previous.
- UK January Service 55.6 PMI vs 55.3 expected. 55.5 previous.
- Euro zone December Retail Sales 1.4% y/y vs 1.5% expected, 1.4% previous.
- BoJ Gov Kuroda - No limits to easing steps, will do whatever it takes.
- BoJ Policy Board December 17-18 minutes - Govt clearly pressured for more ease.
- Japan PM Abe - to continue to work with BOJ to hit price target.
- Japan Fin Min suspends 10-year JGB sales to individuals.
- UK NIESR - Growth of 2.3% eyed in '16 despite global upheaval.
- UK January BRC shop prices -1.8% y/y vs December -2.0%, food prices up.
- Australia December trade deficit A$3.535 bln, A$2.5 bln eyed, exp -5% m/m, imp -1%.
Economic Data Ahead
- (0815 ET/1315 GMT) The Payrolls Processor ADP is likely to report that private employers added 195,000 jobs in January, lower than the 257,000 reported in December.
- (0945 ET/1445 GMT) The financial firm Markit is set to release its U.S. services PMI for Jan, which is likely to stay flat at 53.7.
- (1000 ET/1500 GMT) The ISM is expected to report that its non-manufacturing sector index slipped to 55.1 in January from 55.3 in December.
- (1030 ET/1530 GMT) EIA reports its crude oil stocks change for the week ending Jan 29, which is expected to stay at 4.733M vs 8.383M reported in the previous week.
Key Events Ahead
- (1145 ET/1645 GMT) Fed Trade Ops 30-Year Ginnie Mae(max $1.000 bn.
FX Recap
USD: The U.S. dollar recovered some lost ground, it was trading steady at 120 yen, below a six-week high of 121.70 yen hit on Friday after the Bank of Japan shocked the markets by slashing one of its main interest rates below zero. The dollar index was flat against a backdrop of falling 10-year U.S. Treasury yields to 1.828 percent on Wednesday.
EUR/USD: The euro dropped 0.1 percent to $1.0910 and has recovered till 1.09400. It was trading around 1.09249, the major resistance is around 1.1000 and break above 1.100 will take the pair to next level around 1.1060/1.1100 in short term. The minor resistance is around 1.0950/1.0980. Overall bearish invalidation is only above 1.1000. On the lower side minor support is around 1.0870 (200 day HMA) and break below targets 1.0800/1.07800.
USD/JPY: The Japanese yen was 0.2 percent stronger on the day at 119.71 per dollar. It hit a six-week low of 121.70 per dollar after the BOJ's policy meeting on Friday. The pair has broken major support 120 and declined till 119.22 at the time of writing. It should close below 119.20 (200 day 4H MA) for further weakness. Any break below 119.20 will take the pair till 118.60/118. Short term trend is slightly weak as long as resistance 120.10 holds. The minor resistance is around 120.10 and break above targets 120.50/121.
GBP/USD: The Sterling climbed to a 3-week high against the dollar after a survey showed UK's services sector was little scathed by worries about the global economy, growing at a faster pace last month than expected. It initially stayed flat after the PMI data, then jumped to $1.4467, up from $1.4430 just before its release and leaving the currency up 0.4 percent on the day. The major resistance is at 1.4450 (trend line joining 1.43626 and 1.44074), it is trading around 1.44815 at the time of writing. On the higher side any break above 1.4450 will take the pair to next level around 1.4505/1.4570 (161.8% retracement of 1.4149). The support is around 1.4370 and break below targets 1.4300/1.4240. Against the euro, Sterling strengthened to 75.455 pence, from 75.59 pence beforehand.
USD/CHF: The pair has formed a temporary top around 10256 and started to decline from that level. It was trading around 1.0160. The short term trend is slightly weak as long as resistance 1.0256 holds. On the lower side major support is around 1.0160. Any break below 1.0160 will drag the pair down till 1.0100/1.005. On the higher side the resistance is around 1.0255 and break above 1.0250 will take it till 1.0300/1.0335.
AUD/USD: The slight recovery in oil lifted the Australian dollar 0.3 percent to $0.7062. The support was found at $0.6950, a break of which could see a retracement to the seven-year low of $0.6827 touched mid-January. The short term trend is slightly weak as long as resistance 0.7170 holds. On the higher side minor resistance is around 0.7085 and break above targets 0.7130/0.7170. The pair's minor support is around 0.7000 and break below will drag it till 0.6920/0.6820. The Aussie dropped further to 83.87 yen, having skidded nearly 2 percent on Tuesday.
NZD/USD: The New Zealand dollar stood tall against the greenback following a strong jobs report. It was back at $0.6533, from a low of $0.6462 and pulling away from a four-month trough touched in January. The kiwi nursed losses at 78.13 yen, having fallen 1.3 percent in the last session.
Equities Recap
European shares dropped as weak earnings from some leading companies weighed on markets, with the pan-European FTSEurofirst 300 index sliding 0.8 percent by 1043 GMT. The euro zone's blue-chip Euro STOXX 50 index and Germany's DAX both retreated by 1.2 percent. Britain's FTSE 100 was off 0.6 percent.
Japan's Nikkei closed down 3.2 percent, hit by weak oil and a strong yen, losing out almost all the gains it made after the BOJ's action. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7 percent. China's CSI300 Index and Shanghai Composite Index both dropped 0.4 percent.
Commodities Recap
Oil climbed from earlier losses after fresh comments from Russia about its willingness to talk with OPEC over output cuts offered hopes that the world's largest producers could act to boost prices. Brent for April delivery rose 40 cents to $33.12 a barrel by 0930 GMT, pulling away from a session low of $32.30. U.S. crude futures rose 46 cents to $30.34, off a session low of $29.40.
Gold was flat at $1,127.65 an ounce, not far below Tuesday's peak of $1,130.30, its strongest since Nov. 3. U.S. gold for April delivery was up 0.2 percent at $1,128.90 an ounce.
Treasuries Recap
US 10-year Treasury yield stood at 1.8671, up 0.003 pct.
The benchmark 10-year JGB yield hit a record low of 0.045 percent on Wednesday amid a rout in the Tokyo stock market. JGB prices remained firmer in very volatile trading. Results of today's JGB buying operations were mixed. Today, the BoJ purchased JPY450bn of JGBs in the 5-yr to 10-yr zone, JPY260bn of JGBs in the 10-yr to 25-yr zone, and JPY180bn of JGBs in the 25-yr and longer zone under its massive JGB purchase program. Yields on the current 5-yr JGBs are down 3bp from yesterday at -0.135%, while the new 10s are down 1.5bp at 0.06%, after hitting a fresh record low of 0.045% in late morning trading. In the super-long zone, the 20s are down 3bp at 0.775%, after moving in a 0.76%-0.78% range, while the 30s are down 1.5bp at 1.06.
Germany's 2-year Schatz yield dropped to -0.49 percent, taking its falls this year to 15 basis points. The 10-year yield was down 1 basis point at 0.31 percent, while 30-year German yields fell to an eight-month low at 1.029 percent. Italy's 10-year bond yield was 2.7 basis points higher at 1.52 percent, while Spanish 10-year bond yields rose 3 basis points to 1.62 percent.
UK March Gilts were seen skeptical that they would seem with screens a couple of ticks higher than before the services PMI data at 120.47. January Markit/CIPS Services PMI came in at 55.6 (exp 55.3, prev 55.5) in contrast to the smaller manufacturing factory sector defying forecasts by rising earlier in the week.
Australian government bond futures climbed to near 4-month peaks, with the 3-year bond contract up 4 ticks at 98.180. The 10-year contract jumped 7 ticks to 97.4500, while the 20-year contract was steady at 96.9300. New Zealand government bonds jumped in line with a global rally in safe-haven assets, sending yields 7 basis points lower at the long end of the curve.
