Market Roundup
- BoJ Policy Board members break ranks over inflation approach - Nikkei.
- Japan FinMin Aso - Extra budget @Y3.5 trln, cannot rely on FX reserves special account as stable revenue source due to JPY volatility - Reuters.
- EconMin Amari - No change in primary budget surplus goal, continued crude oil price falls could affect BoJ's inflation target, excluding effect of oil an option - Reuters.
- Credit Suisse sells Y55.5 bln 4-tranche samurais via CS, MUFJ, Mizuho et al.
- PBOC fixes yan at 6.4358 vs USD, weakest in more than four years.
- Foreign CB US debt holdings -$6.342 bln to $3.317 trln week-ended December 9, Treasuries -$6.253 bln to $2.999 trln, agencies -$99 mln to $272.014 bln.
- NY Fed- Swaps with foreign CBs $136 mln Dec 9 week, BoJ $2 mln, ECB $134 mln.
- Lipper - US stock funds post $8.6 bln in withdrawals Dec 9 week.
- ECB/Buba Weidmann - ECB asset-buying blurs line between fiscal and monetary policy - Reuters.
- RBNZ - Non-residents held 64.1% of NZ govt securities in Nov, Oct 64.9%.
- NZ Dec ANZ/RM consumer confidence index 118.7, Nov 122.7, 6-month high.
- NZ Nov PMI 54.7, Oct 53.2; food price index -0.2% m/m, -0.2% y/y.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Nov CPI/HICP - final, +0.4% and +0.3% y/y forecast; last +0.3%, +0.2%.
- (0245 ET/0745 GMT) France Oct current account balance; last E500 mln surplus.
- (0400 ET/0900 GMT) Italy Oct industrial output, +0.3% m/m, +2.0% y/y forecast; last +0.2%, +1.7%.
- (0430 ET/0930 GMT) Great Britain Oct construction output, +1.0% m/m, -0.9% y/y forecast; last -0.2%, -1.6%.
- (0830 ET/1330 GMT) United States Nov retail sales, +0.3% m/m forecast; last +0.1%.
- (0830 ET/1330 GMT) United States Nov - ex-autos, +0.3% m/m forecast; last +0.2%, ex-gas/autos +0.3%.
- (0830 ET/1330 GMT) United States Nov PPI final demand, unch m/m, -1.4% y/y forecast; last -0.4%, -1.6%.
- (0830 ET/1330 GMT) United States Nov - ex-food/energy, +0.1% m/m, +0.2% y/y forecast; last -0.3%, +0.1%.
- (1000 ET/1500 GMT) United States Dec U.Mich sentiment index - prelim, 92.0 forecast; last 91.3.
- (1000 ET/1500 GMT) United States Oct business inventories, +0.1% m/m forecast; last +0.3%.
Key Events Ahead
- N/A UN COP 21 conference in Paris (last day), Riksbank executive board meets.
- N/A United Kingdom DMO GBP1/2.5/1.5 bln 1/3/6-month treasury bill auctions.
- N/A Ratings rush - EFSF, ESM, UK, France, Sweden from Fitch, Moody's.
- (0400 ET/0900 GMT) ECB/Finland CB Liikanen press conference in Helsinki.
- (0425 ET/0925 GMT) Bank of England Rule speech in London.
- (0500 ET/1000 GMT) IMF Lagarde speaks in London, UK ChancExch Osborne present.
- (0515 ET/1015 GMT) ECB 1015-day LTRO allotment announced.
- (0900 ET/1400 GMT) EU Moscovici, Luxembourg FinMin Gramegna speak at Paris OECD conference.
- (1035 ET/1535 GMT) Bank of England MPC Weale speech at NIESR conference in London.
FX Beat
USD: The dollar steadied on Friday, while euro lost momentum in wake of dovish comments by ECB's policymaker. The dollar index was up about 0.1 percent at 98.044, but was on track for a weekly loss of about 0.3 percent after investors trimmed dollar-long positions ahead of next week's U.S. Federal Reserve meeting at which interest rates are expected to hike for the first time in nearly a decade.
EUR/USD: The euro edged down about 0.1 percent to $1.0933 but still up about 0.4 percent for the week after comments from the European Central Bank's Ewald Nowotny raised doubts about the extent to which U.S. and European monetary policy will diverge. Currently the pair is trading at 1.0935 levels after session low of 1.0926. Overall trend is still weak as long as resistance 1.10450 holds and any break above 1.10450 will take the pair till 1.1070/1.1090 level. On the lower side major support is around 1.0900 and break below will drag the pair further down till 1.0830/1.07850 level. Against the Aussie, euro has gained 1.6 percent this week, having leapt 7 cents since early December.
USD/JPY: The dollar added 0.4 percent against its Japanese counterpart to 122.07 but was still down around 0.8 percent for the week. The yen trades at 122.070 levels after touching a daily high of 122.29, putting further distance between a 1-month low of 121.075 plumbed earlier in the week. The safe-haven Japanese currency attracted bids this week as a slide in commodity prices bruised investor risk appetite. The pair sees upside on anticipation of a Fed rate rise closing in on next week's Fed meeting. Immediate resistance seen at hourly cloud top at 122.23, while support on the downside is located at 121.58 (200 DMA). A close above 122.40 could take the pair higher to 123.70 levels, but close below 200 DMA at 121.58 could see retrace to 120.89 levels.
AUD/USD: The Aussie edged down 0.5 percent to $0.7247 after soaring more than 1 percent to a high of $0.7335 on Thursday as Australia's jobless rate had hit a 19-month low in November. With persistent weakening of oil prices and negative performance of the stock index, the pair faces downside pressure. It is currently trading at 0.7250 levels, having touched a daily low of 0.7235 levels. It faces resistance 0.7289 (10-DMA) above which gains could be extended and support is seen at 0.7214 levels below which it could see retrace.
NZD/USD: The New Zealand dollar eased to $0.6738 from $0.6782, after the central bank cut rates by 25 bps to 2.50 percent Thursday. The pair has hit session lows at 0.6735 on weakness in oil prices and downbeat NZ consumer confidence data. Strong resistance is seen at 0.6773 (Trendline), while support on the downside is located at 0.6703 (23.6% Fib of 0.6429 to 0.6787 rise).
USD/CNY: China's yuan hit a 4-1/2-year low of 6.4515 to the dollar in mid-morning trade on Friday after the PBoC set its official midpoint rate at 6.4358 per dollar. Markets have been rife with speculation that Beijing would allow the yuan to depreciate to shore up economic growth, after the currency's inclusion into the IMF's Special Drawing Rights basket. In the spot market, the yuan was trading at 6.4515 in early trade, taking out its August low hit after the unexpected devaluation of the Chinese currency.
Equities Recap
Asian shares dropped on Friday, on track for a weekly loss as plunging crude prices heightened fears about receding global growth.
MSCI's broadest index of Asia-Pacific shares outside Japan erased early gains and was down about 0.4 percent, facing a weekly loss of 2.7 percent. The CSI300 index was down 0.8 percent, while the Shanghai Composite Index shed 0.9 percent.
Australia's S&P/ASX 200 Index edged down 0.30 pct at 5,022.60 points, while Nikkei closed up 0.97 pct at 19,230.48 with Seoul Shares down 0.25 pct.
Commodities Recap
Gold slipped on Friday and was headed for the seventh weekly drop in eight weeks as investors positioned for a looming U.S. rate hike. Spot gold dropped 0.4 percent to $1,067.20 an ounce by 0331 GMT, after closing flat over the last two sessions.
U.S. crude prices remained near 2009 lows in early Asian trading on Friday as oil output in the Middle East continued to rise despite an existing global glut. Brent crude futures were down 29 cents at $39.44 a barrel at 0551 GMT, above a near-7-year low hit earlier in the session at $39.38 a barrel. U.S. crude futures were at $36.67 per barrel at 0029 GMT, down 9 cents from their last settlement, and only slightly above 2009 lows of $36.38 reached on Thursday.
Treasuries Recap
U.S. 10-Year Treasuries yield stood at 2.2288 percent down by 0.009.
Australian government 3-year bond contract off 1 tick at 97.800 while the 10-year contract eased 3.25 ticks to 97.0850, with the 20-year contract dropped 3 ticks to 96.5725.
New Zealand government bonds dropped, pushing yields 5 basis points higher at the short end and 4.5 basis points higher at the long end.
Canadian government bond prices were mixed across the maturity curve, with the benchmark 10-year increasing 3 Canadian cents to yield 1.487 percent and 2-year price down 1.5 Canadian cents to yield 0.544 percent. The Canada-U.S. 2-year bond spread was 2 basis points wider at -40.3 basis points, while the 10-year spread was 2.8 basis points wider at -74.5 basis points, extending recent outperformance for Canadian bonds.
