Market Roundup
- CHF hits 1-year low vs EUR at 1.1080 amid speculation of SNB helping hand.
- USD/JPY rises to 118.94 but off Wednesday's 119.08 peak.
- EUR/USD firms from 1.0870 to 1.0927 levels.
- GBP/USD also up from Asian 1.4233 low to 1.4298.
- Brent more constructive, up to $33.97/barrel vs Wednesday's $33.49 high.
- Japan Amari says stepping down as economy minister.
- Japan Amari - Did not take money from Construction Company and put directly in pocket.
- Japan governor to name ex-LDP executive Ishihara as econ minister.
- SNB's Zurbruegg - Swiss economy holding up, no deflation risk.
- Kremlin spokesman - nothing to talk about in practical sense re coordination with OPEC.
- UK Q4 GDP prelim 0.5% q/q, 1.9% y/y vs previous 0.4%/2.1%. 0.5%/1.9% expected.
- UK January CBI Distributive Trades +16 vs previous 19. 18 expected.
- Euro zone January Economic Sentiment 105.0 vs previous 106.7 revised. 106.4 exp. Industrial Sentiment -3.2 vs -2.0. -2.4 expected.
- Euro zone January Consumer Confidence final -6.3 vs previous -5.7. -6.3 expected.
Economic Data Ahead
- (0830 ET/1330 GMT) The U.S. Commerce Department releases durable goods orders for December. Orders for long-lasting U.S. manufactured goods likely slipped 0.6 percent in December after being unchanged in November, as the sector struggling to face the strong dollar and slowing global demand. Ongoing efforts by businesses to reduce an inventory overhang and spending cuts in the energy sector are also undermining factory activity. Orders excluding transportation likely to remain unchanged at -0.1 percent.
- (0830 ET/1330 GMT) The U.S. Labor Department report is expected to show new applications for jobless benefits dropped to 282,000 last week from 293,000 the prior week.
- (1000 ET/1500 GMT) The National Association of Realtors will release Pending Home Sales Index for December which is likely to have risen 0.8 percent, compared with a 0.9 percent slip in November.
- (1030 ET/1530 GMT) EIA releases its Natural Gas Storage Change for the week ending Jan 22.
- (1100 ET/1600 GMT) The Federal Reserve Bank of Kansas City releases its manufacturing activity for January.
Key Events Ahead
- No major events scheduled for the day.
FX Recap
USD: The dollar index has once again retreated after making a high of 99.79. It is currently trading around 98.82.
EUR/USD: The euro was broadly flat at $1.0898 with a minor resistance at 1.0880 (trend line joining 1.09147 and 1.0971). The pair has broken minor trend line resistance 1.0880 and jumped till 1.09062 at the time of writing. It was trading around 1.09017 and a break above 1.0880 will take it to next level around 1.09490/1.09800 in short term. Overall bearish invalidation is only above 1.1000. On the lower side minor support is around 1.0860 (200 day HMA) and break below targets 1.08200/1.07800.
USD/JPY: The resignation of Japan's economy minister sent the yen higher slightly against the dollar, with Japanese policymakers currently struggling with the effects of a firmer yen and worries about a weakening global economy. The yen traded 0.1 percent lower against the dollar at 118.28. The pair has broken minor resistance 118.85 and jumped till 119.06 at the time of writing. The short term trend is slightly bullish as long as support 118 holds. The major support is around 118 and break below targets 117.50/116.80/116. On the higher side the minor resistance is around 119.40 and break above will take the pair till 120/120.90.
GBP/USD: The sterling climbed against the dollar and the euro after the data showed UK economy is growing in line with expectations in the fourth quarter, offering some comfort to the battered pound. It rose 0.5 percent to the day's high of $1.4298, up from around $1.4263 beforehand. It is facing strong resistance around 1.4370 and any further bullishness only above that level. On the top resistance is at 1.4370 and break above will take the pair to next resistance 1.4400/1.4500. It will be facing psychological support at 1.4300 (55 day 4H EMA) and break below targets 1.4270/1.4250. Short term weakness is only below 1.4250. The euro slipped 0.2 percent at 76.38 pence, compared with 76.60 pence beforehand.
NZD/USD: The New Zealand dollar was just under half a percent higher, held back by signals from the RBNZ that further easing of interest rates may be required in the face of a poorer global economic outlook.
AUD/USD: The Australian dollar surged as oil traded back above $33 a barrel, its highest levels in almost three weeks. It gained almost 0.8 percent to $0.7081 in early trade in Europe, nearing 3-week highs hit a day earlier. The Aussie has broken a major resistance 0.7060 and this confirms minor trend reversal a jump till 0.7170 is possible. Short term trend is slightly bullish as long as support 0.7000 holds. On the higher side major resistance is around 0.7105 and break above targets 0.7170/0.7250. The minor support is around 0.7000 and break below will drag the pair till 0.6920/0.6820.
USD/CHF: The pair retreated after making a high of 1.01980 and was trading around 1.01325. Short term trend is bullish as long as support 1.0500 holds. Any break above 1.0200 will take the pair till 1.02501.0300 is possible. On the lower side minor support is around 1.0080 and break below will drag the pair till 1.0050/0.9990. Short term bullish is invalidation only below 0.9990 levels. The Swiss franc fell to its lowest against the euro since the Swiss National Bank abandoned its currency peg last January, prompting talk in the foreign exchange market that the central bank was intervening to weaken the currency. It fell to 1.10805 franc per euro.
Equities Recap
The uncertainty over the Fed's rate path weighed on European shares with the FTSEurofirst 300 index falling 0.2 percent in early deals. Britain's FTSE was down 0.3 pct, France's CAC fell 0.4 pct and Germany's DAX plunged 0.5 pct.
The MSCI All-Country World index rose 0.1 percent, while the MSCI Emerging Market index advanced 0.7 percent.
Tokyo's Nikkei closed down 0.71 pct at 17,041.45, Shanghai Composite Index closed down 2.9 pct at 2,655.66 points, while China's CSI300 Index ended down 2.6 pct at 2,853.76 points.
Commodities Recap
Oil steadied above $33 per barrel supported by the possibility that major producers may co-operate to slash production. Brent crude was 18 cents higher at $33.28 a barrel by 0856 GMT, after ending up 4.1 percent in the previous session. U.S. crude rose 4 cents to $32.34 a barrel.
Gold edged lower from 12-week highs after the U.S. Fed acknowledged a challenging global economy but hinted it was unlikely to be deterred from raising interest rates this year. Spot gold fell 0.7 percent at $1,117.64 an ounce by 0635 GMT. U.S. gold for February delivery rose 0.2 percent at $1,118 per ounce, off a session high of $1,125.70.
Treasuries Recap
U.S. Treasury yields dropped 6 bps from their day's high of 2.05 percent after the statement was released late on Wednesday.
Euro zone bond yields dropped, mirroring an earlier move in U.S. Treasuries, after the U.S. Fed delivered a dovish tone by acknowledging recent market volatility. German 10-year yields fell 2 basis points to 0.35 percent, their lowest since April 2015. Italian 10-year yields fell 2 bps to 1.48 percent. Greek, Portuguese and Spanish equivalents were down by a similar amount.
Japanese government bonds mostly edged lower as investors awaited the outcome of the Bank of Japan's two-day meeting, though a solid sale of 2-year JGBs limited losses. The benchmark 10-year yield added 1.5 bps to 0.225 percent, while March 10-year JGB futures shed 0.05 point to end at 149.53. The 30-year JGB yield rose 2.5 bps to 1.170 percent, a day after dropping as low as 1.140 percent.
UK Gilts opened 25 ticks higher than the settlement of 119.20, as expected, as dealers played catch up with slightly dovish FOMC meeting last night. March Gilts are around 5 ticks lower at 119.28 after British Q4 GDP preliminary data.
New Zealand government bonds were mixed, with yields a touch lower. Australian government bond futures were subdued, with the 3-year bond contract off two ticks at 98.080. The 10-year contract eased one tick to 97.3150, while the 20-year contract added one tick to 96.8300.
