Market Roundup
- EUR/USD on the pullback-1.1083 low vs 1.1210 Asia high.
- USD/JPY 112.75 to 113.92 and bid holding into NY.
- Germany Final February CPI confirmed HL 0.0% and HICP -0.2% y/y.
- UK public inflation expectations year-ahead 1.8% in Feb vs 2.0% in Nov- BoE.
- UK January Trade Balance -bln vs -10.45bln revised, -10.3bln expected.
- UK January Construction output -0.8% vs +1.6% previous, -1.5% expected.
- PBOC fixes CNY at 6.4905 against USD, strongest this year.
- PBOC Gov- Country's leverage ratio is excessively high.
- Japan Q1 big mfg sentiment index -7.9, Q4 '15 +3.8.
- Japan investment trust outflows in Feb Y460 bln, 7 ½ yr high-Nikkei.
Economic Data Ahead
- (0830 ET/1330 GMT) The U.S. Labor Department releases its data on import and export prices for February. Import prices are likely to have fallen 0.6 percent after declining 1.1 percent in January, while the export prices are expected to show a decline of 0.5 percent after sliding 0.8 percent in January.
- (0830 ET/1330 GMT) Canada's job market report is expected to show the economy added 9,000 jobs in February, offsetting the loss seen the month before. That is expected to keep the unemployment rate at a two-year high of 7.2 percent. The participation rate likely unchanged at 65.9 pct.
- (0900 ET/1400 GMT) Mexico's industrial output is likely to have increased 0.15 percent in January after declining for a third straight month in December.
- (1200 ET/1700 GMT) Baker Hughes reports United States Oil Rig Count.
- Statistics Canada will release figures on Canadian household debt for the fourth quarter. Analysts will watch for signs whether consumers are overextending. The ratio of total household debt to disposable income was at a record in the previous quarter.
Key Events Ahead
- (1145 ET/1645 GMT) New York FedTrade 30-yr F.Mae/Fr.Mac max $2.125bln.
FX Recap
USD: The dollar was up 0.5 percent at 113.74 yen, though still below Thursday's pre-ECB peak of 114.45. Against a basket of currencies, the greenback gained about 0.6 percent to 96.654, but was still down 0.8 percent for the week, having shed 1 percent on Thursday.
EUR/USD: The euro slipped back to $1.1105, having risen from a trough of $1.0820 to a peak of $1.1217 on Thursday, a move that would have stopped-out both bulls and bears and left everyone nursing losses. Against the yen, the single currency hit a 3-week high of 126.86 yen, before reversing back to a flat 126.40. After a surge to more than $1.12 on Thursday, the euro eased half a percent to $1.1118 in early trade in Europe. Short term bias remains bearish till the time pair holds key resistance level at $1.1218. On the down side, key support level is seen at $1.1050 marks. A daily close above key resistance will drag the parity towards $1.1376 marks. The Germany's CPI measured on a yearly basis showed zero growth, in line with the preliminary numbers released at the end of the last month and down from January's 0.5% growth.
USD/JPY: The dollar was up 0.5 percent at 113.74 yen, having dipped to 112.75 in Asian time. It is still within striking distance of a 16-month low below 111 yen hit last month in response to concerns over banks and the pace of global growth. The focus will now shift to a March 14-15 Bank of Japan policy meeting. The BOJ is widely expected to stand pat on monetary policy after adopting negative rates in January, but some speculate the central bank could lower rates further. Pair is likely to consolidate below 114.87 levels. A daily close above 114.87 is required to confirm the bullish trend. On the other side, key support level is seen at 112.60 levels. A daily close below key support level at 110.98 will drag the parity towards 108.75/107.51 marks thereafter. On the top side, key resistance levels are seen at 114.87/115.96 levels.
USD/CHF: The US dollar fell sharply against the following the ECB announcement, from 1.0092 francs per dollar to 0.9810. The Swiss National Bank could boost foreign currency purchases to prevent the franc from strengthening after the European Central Bank delivered a bigger than expected stimulus package on Thursday. Pair is currently trading around 0.9880 levels. A daily close above 1.0073 is required to confirm the bullish bias. A current rebound from 0.9878 will take the parity towards key resistance area around 1.0073 and 1.0256 thereafter. Alternatively, a daily close below 1.0000 will turn the bias bearish and drag the parity towards major support at 0.9662 levels in near term.
GBP/USD: Against the dollar, sterling was flat at $1.4290. Sterling rose from a one-week low against the euro on Friday, with a boost from the latest policy easing measures from the European Central Bank overriding concerns about whether Britain will leave the European Union. The pair breaks key resistance at $1.4268 and remains well supported around $1.43 levels. Short term bias remains bullish till the time pair holds key support at $1.4032 level. On the down side key support falls at $1.3835 level. Alternatively, a daily close above $1.4270 will take the parity towards key resistance at $1.4357/$1.4508. Business activity within UK building firms slowed above expectations between December last year and January, with the overall output declining 0.2%. The deficit on UK trade in goods and services widened to £3.5 billion in January, more than was expected, but slightly below a markedly revised deficit of £3.7 billion in December.
AUD/USD: Against its U.S. counterpart, the Australian dollar had a milder session at $0.7470, still within reach of an eight-month summit of $0.7528. It was on track for a 0.4 percent gain for the week, having leapt three cents since March 1. Pair hits key resistance at $0.7507and made high at $0.7514 levels. A sustained close above $0.75 levels will drag the parity towards 0.7653 area. On the downside, a break below $0.7365 support levels will turn bias back to the downside for retesting 0.6826 low.
NZD/USD: The New Zealand dollar edged up to $0.6704 on Friday after falling as low as $0.6618 the previous session. It is still down 1.8 percent so far this week, largely due to the RBNZ's rate cut. Pair remains well supported below $0.67 marks and made low at $0.6653 levels. Key support was found at $0.6633, with resistance at $0.6717 levels.
Equities Recap
Shares and bonds rose on Friday after the European Central Bank delivered aggressive stimulus plan on Thursday and signalled it was unlikely to cut its negative interest rates further.
The pan-European FTSEurofirst 300 rose 2.3 pct after falling 1.8 percent in the previous session, Britain's FTSE 100 was up 1.4 pct, France's CAC 40 rose 1.7 pct and Germany's DAX gained 1.9 pct. MSCI's 46-country 'All World' index was on track to post their first weekly falls in a month.
Both Shanghai Composite Index and China's CSI300 Index was edged up 0.2 pct at 2,810.31 points and 3,018.28 points, respectively. HK'S Hang Seng Index climbed 1.1 pct at 20,199.60 points.
Tokyo's Nikkei gained 0.51 pct at 16,938.87, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 percent on the day.
Commodities Recap
Brent crude futures were at $40.72 a barrel, up 67 cents, and on track for the third consecutive weekly gain, supported by an optimistic report from the IEA and a weaker dollar, which makes fuel cheaper for importers using other currencies. U.S. crude futures were trading at $38.67 a barrel, up 76 cents from their last close, having hit a 2016 high of $38.86 earlier in the day.
Gold climbed to a 13-month high on Friday before pulling back slightly. It rose as far as $1,282.51 an ounce, its strongest since Feb. 3, 2015, and was last at $1,263.26, on track to gain almost 1 percent this week. U.S. gold for April delivery eased 0.1 pct to $1,271 an ounce, after peaking at $1,287.80.
Treasuries Recap
The 10-year U.S. Treasury yield stood at 1.951 percent vs U.S. close of 1.929 percent on Thursday.
German Bunds were down 4 basis points at 0.27 percent in early trade. The benchmark German 10-year yields doubled from a low of 16 basis points to a peak of 32 basis points on Thursday.
June Gilt futures initially opened up 23 ticks from the 119.97 settlement price at 120.20. 10-yr Gilt is underperforming within the EGB complex as its yield rises 2bp to 1.5525% whereas 10-yr Bund yield falls 3.5bp and other core bond yields fall around 5bp.
JGB prices ended the day lower, with the 20s hit most heavily. JGBs in the 10-yr to 20-yr zone saw relatively good 2-way flow among domestic real money accounts. Yields on the current 20-yr JGBs declined sharply from 0.80% to the record low of 0.305%, sending the price up sharply by around 10 points from 103.424 to 112.965. Yields on the current 30-yr JGBs moved in a 0.76%-0.805% range, vs 0.765% for the average accepted yield in Tuesday's 30-yr auction, before finishing the day up 3bp at 0.79%. JGBs in the 10-yr and shorter zone trimmed large part of their earlier losses. Lead March JGB futures moved in a range of 0.58 (vs 0.44 yesterday) before finishing the day down 0.13 at 151.53 before Monday's expiry.
Australian government bond futures extended losses. The 3-year bond contract shed 3.5 ticks at 97.995, having touched its lowest in two months. The 10-year contract fell 4.75 ticks to 97.3550, while the 20-year contract eased 6.5 ticks to 98.8150. New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve.
