Market Roundup
• US consumer spending rises solidly 0.5% as per forecast, Personal income +0.3% m/m v 0.44% forecast.
• US Dec Core PCE price Index m/m0.2$ v 0.1% previous, y/y 1.6% v 1.4% previous.
• ECB’s Nowotny: ECB to review policy in June, won't wind down stimulus; dismisses debate about Italy, France leaving euro.
• German inflation hits 3.5-yr high in Jan, 1.9% v forecast 2%; opens door to question on ECB QE tapering.
• EZ economy steams into 2017; German inflation, Spanish GDP strong; Dutch central banks sees faster growth.
• UK PM May: A50 vote will be a simple decision for MPs, do you respect the will of the British people or not.
• Brazil's Goldfajn: sees room for more rate cuts, not sure exact rate, not concerned about BRL –report.
• Deal flow absorbed as month-end, risk-off mute early UST sale.
• Latin America currencies up on optimism over US-Mexico talks.
Looking Ahead - Economic Data (GMT)
• 00:30 Australia NAB Business Conditions Dec 5- previous
• 00:30 Australia NAB Business Confidence Dec 5- previous
• 00:30 Australia Private Sector Credit* Dec 0.5%- previous
• 00:30 Australia Housing Credit* Dec 0.5%- previous
• 23:30 Japan All House hold Spending YY* Dec forecast -0.6%, -1.5%- previous
• 23:30 Japan All House hold Spending MM* Dec forecas0.6%, -0.6%- previous
• 23:30 Japan Jobs/Applicants Ratio Dec forecas1.42, 1.41- previous
• 23:30 Japan Unemployment Rate Dec forecas3.1%, 3.1%- previous
• 23:50 Japan Industrial output prelim mm Dec f/c 0.3%, 1.5%- previous
• 23:50 Japan IP Forecast 1 Mth Ahead* Dec 2%- previous
• 23:50 Japan IP Forecast 2 Mth Ahead* Dec 2.2%- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan-Bank of Japan monetary policy meeting (to Jan. 31).
Currency Summaries
EUR/USD is likely to find support at 1.0580 levels and currently trading at 1.0696 levels. The pair has made session high at 1.0708 and hit lows at 1.0619 levels. Euro rose against the dollar on Monday after new U.S. immigration curbs stirred concerns about the impact of U.S. President Donald Trump's policies on global trade and the economy. Trump's order to temporarily ban the entry of refugees and people from seven Muslim-majority countries faced mounting criticism, even from some prominent Republicans, and sparked protests that drew tens of thousands in major American cities. The euro fell to an 11-day low against the dollar after the release of German inflation data that was slightly weaker than expected. But the euro rebounded as investors reassessed Trump's protectionist bent and the risks it poses for the economy. The Federal Reserve is expected to leave interest rates unchanged when it concludes its two-day meeting on Wednesday. Traders will be looking for any new indications on when a rate hike is next likely at the Fed's first meeting since Donald Trump was sworn in as U.S. President on Jan. 20.
GBP/USD is supported in the range of 1.2416 levels and currently trading at 1.2482 levels. It reached session high at 1.2534 and dropped to session low at 1.2463 levels. Sterling declined against the dollar on Monday as sterling came under selling pressure ahead of Thursday's first Bank of England meeting of 2017. Super Thursday will see the central bank, which cut interest rates to a record low of 0.25 percent after the June referendum on EU membership, present its quarterly inflation report along with its decision on monetary policy. Inflation has accelerated as sterling has shed 12 percent since the Brexit vote on a trade-weighted basis. This has led to market talk that the BoE may take a more hawkish tilt and even signal that it is moving closer to raising rates from their current record low of 0.25 percent. The pound has fallen roughly 19 percent against the dollar since June's Brexit vote, but for the last few months, it has been in a relatively restrained range of between $1.20 and $1.28 and 84 pence and 88 pence per euro.
USD/CAD is supported at 1.3051 levels and is trading at 1.3117 levels. It has made session high at 1.3144 and lows at 1.3073 levels. The Canadian dollar strengthened against its U.S. counterpart on Monday, recovering from an earlier nearly one-week low, as uncertainty triggered by a travel curb ordered by U.S. President Donald Trump pressured the greenback. Oil one of Canada's major exports fell. U.S. crude prices were down 0.87 percent at $52.63 a barrel after another increase in U.S. drilling activity spread concern over rising output. Meanwhile, the market braced for Canada's gross domestic product data for November and a speech by Bank of Canada Governor Stephen Poloz on Tuesday. The Canadian dollar was last trading at C$1.3111 to the greenback, or 76.13 U.S. cents, slightly stronger than Friday's close of C$1.3138, or 76.12 U.S. cents. A stronger dollar was one of 2017's big calls for many investment banks and asset managers at the end of last year, but that view has been undermined by worries about how U.S. trade and diplomacy will pan out under Trump's presidency.
AUD/USD is supported around 0.7498 levels and currently trading at 0.7548 levels. It hit session high at 0.7567 and made session lows at 0.74535 levels. The Australian dollar strengthened against the dollar on Monday after investors were worried that a curb on immigration ordered by Donald Trump was a reminder that some of the U.S. president's policies are not market-friendly. An executive order issued by Trump on Friday banned immigration from seven Muslim-majority countries, including legal residents and visa holders, and temporarily halted the entry of refugees. Over the weekend, thousands of people rallied in major U.S. cities and at airports in protest. The Australian dollar held at $0.7551, not too far from its 2-1/2 month peak of $0.7609 touched last week. It is already up nearly 5 percent this month, on track for its best monthly performance since March 2016.The currency has been swinging in a tight 75-76 U.S. cent band, having struggled to stay above 76 cents after disappointing domestic inflation figures last week underlined the risk that interest rates were more likely to move down than up this year.
Equities Recap
European shares ended lower on Monday, weighed down by losses among commodities-related stocks and financials, though speculation about merger and acquisition activity offered some support with Vodafone among the leading gainers.
UK's benchmark FTSE 100 closed down by 1 percent, the pan-European FTSEurofirst 300 ended the day down by 1.13 percent, Germany's Dax ended down by 1.2 percent, France’s CAC finished the day down by 1.3 percent.
Major U.S. stock indexes posted their largest drop so far in 2017 on Monday as investors worried that a curb on immigration ordered by Donald Trump was a reminder that some of the U.S. president's policies are not market-friendly.
Dow Jones closed down by 0.63 percent, S&P 500 ended down 0.62percent, Nasdaq finished the day down by 0.85 percent.
Treasuries Recap
Most U.S. Treasury prices were steady on Monday before the Federal Reserve meets on Tuesday and Wednesday and ahead of a heavy week of data, while long-dated bonds were weighed down by Microsoft's $17 billion debt sale.
Thirty-year bonds fell 14/32 in price to yield 3.08 percent, up from 3.06 percent late on Friday.
The yield gap between five-year notes and 30-year bonds widened to 115 basis points, the steepest since Dec. 14.
Benchmark 10-year notes dipped 2/32 in price to yield 2.49 percent, up from 2.48 percent on Friday.
Commodities Recap
Gold rose on Monday as political uncertainty created by U.S. President Donald Trump's move to ban people from seven Muslim-majority countries, and by elections in Europe, supported prices.
Spot gold was up 0.4 percent at $1,196.20 an ounce by 3:18 p.m. EST (2018 GMT). That compared with Friday's 2-1/2-week low of $1,180.65. U.S. gold futures settled up 0.4 percent at $1,193.20 per ounce.
Oil prices fell on Monday as news of another weekly increase in U.S. drilling activity had oil forecasters concerned that production cuts from other producing nations may not reduce the global supply glut as much as had been hoped.
Global benchmark Brent crude oil prices settled down 29 cents at $55.23 a barrel, while U.S. crude futures settled down 54 cents at $52.63.
