Market Roundup
- USD/JPY trades 111.60-113.02 and rumour mill in overdrive.
- BoJ Gov Kuroda - Market moves excessively risk-averse.
- Kuroda out of line with fundamentals won't hesitate to ease more.
- Japan PM Abe advisor Honda - BoJ emergency meeting possible - Nikkei.
- Japan Fin Min Aso - Recent FX moves sudden, "rough".
- Aso will take appropriate action if needed, no comment on intervention.
- EUR/USD offered but orderly-Plays 1.1265-1.1334.
- Brent 3.8% firmer at 31.20, Crude 3.6% higher at 27.16.
- Barclays cuts USD/JPY end Q1 forecast to 100.
- German Flash Q4 GDP 2.1% y/y vs 1.7% (revised 1.8%) previous, 2.3% expected.
- UK Flash Q4 GDP 1.5% y/y vs 1.6% previous, 1.5% expected.
- Euro Zone December Industrial Output -1.3% y/y vs 1.4% previous, 0.8% expected.
Economic Data Ahead
- (0830 ET/1330 GMT) The U.S. Commerce Department is expected to report that retail sales rebounded 0.1 percent in January after slipping 0.1 percent in December, signalling the domestic demand remains firm and the economic drag is mostly coming from external sources. Core retail sales are likely to have risen 0.3 percent in January after falling 0.3 percent in December.
- (0830 ET/1330 GMT) The U.S. Labor Department's import price index likely fell 1.4 percent in January after dropping 1.2 percent in December as falling oil prices keep the cost of imported energy products subdued. A strong dollar is also dampening imported inflation pressures. While export price index is expected to have dropped 0.6 pct after sliding 1.1 pct in December.
- (0955 ET/1455 GMT) The University of Michigan's consumer sentiment preliminary survey is expected to have unchanged at 92.0 in February from January.
- (1000 ET/1500 GMT) U.S. Business inventories for December are expected to have risen 0.1 percent after falling 0.2 percent in November, their largest drop since September 2011.
- (1300 ET/1800 GMT) Bake Hughes reports its Oil Rig Count.
- (1900 ET/0000 GMT) Central bank of Peru will likely raise benchmark interest rate to 4.25 percent. The bank raised rate to 4 percent in January to keep inflation expectations from rising further.
Key Events Ahead
- (0945 ET/1445 GMT) FRB Dallas's Kaplan opening remarks at housing outlook conference.
- (1000 ET/1500 GMT) Federal Reserve Bank of New York President William Dudley gives his take on the economy a week after he said global market turbulence could force the central bank to rethink its rate-hike plan for 2016. He will also discuss the Q4 2015 Household Debt and Credit Report and react to the January jobs report that showed unemployment fell to 4.9 percent.
FX Recap
USD: The dollar climbed to 112.52 yen on Friday from 112.29 the previous day, it fell to 110.985 yen on Thursday, its lowest level since October 2014, and is on track to shed 3.8 percent for the week, its worst since Oct. 2008. The dollar index has slightly recovered till 95.91 at the time of writing after making a low of 95.23. It is currently trading around 95.70.
EUR/USD: The euro dropped 0.4 percent to $1.1275, not far Thursday's high of $1.1377, its highest since October 2015. The pair has made a high of 1.1375 and was trading around 1.13055. On the lower side the major support is around 1.1250 and break below targets 1.1180/1.1150 level. The major resistance is around 1.1380 and break above targets 1.1435/1.1450.
USD/JPY: The Japanese yen has recovered after making a low of 110.96 and was trading around 112.55. The short term trend is slightly weak as long as resistance 113.60 holds. On the lower side major support is around 110.80 and break below targets 109.80/109. The minor resistance is around 113.60 and break above targets 115/116. The yen was firm and on track to post its biggest weekly rise against the dollar since late 2008, as intensifying global growth worries and whether policymakers have enough ammunition to respond to it underpinned flows into safe-haven currencies. One-month dollar/yen implied volatility is expected in the weeks ahead, surged to 15.9 percent on Friday, its highest since June 2013.
GBP/USD: The Sterling inched higher from a 14-month low against the euro but is still on track to post a third straight week of losses, as investors bet the Bank of England would keep interest rates at their record lows for the rest of the decade. Against the dollar, sterling was above half a percent up at $1.4570, the short term trend is weak as long as resistance 1.4580 holds. On the lower side major support is around 1.4480 and any break below targets 1.4450/ 1.4400/1. weakness can be seen below 1.4320. Any break above major resistance 1.4580 will take the pair till 1.4650/1.4680 level. The pound was up around 0.7 percent against the euro at 77.68 pence, having weakened to 78.975 pence on Thursday. Sterling's trade-weighted index edged up to 87.4, having hit a 15-month low on Thursday.
USD/CHF: The pair has slightly recovered after making a low of 0.9660, it was trading around 0.9745. The short term trend is slightly weak as long as resistance 0.9835 holds. On the lower side the major support is around 0.9650 and any break below 0.9650 will drag the pair down till 0.9630/0.9550. On the higher side the minor resistance is around 0.9750 and break above will take it till 0.9800/0.9835.
AUD/USD: The Australian dollar fared better on the U.S. dollar around 71 cents, having bounced off an overnight trough of $0.6984. It has gained 0.5 percent. It is consolidating within narrow range 0.6970-0.7153 and was trading around 0.7110. The short term trend is slightly bullish as long as support 0.6970 holds. On the higher side major resistance is around 0.7170 and break above targets 0.7240/0.7300. The minor support is around 0.7075 and break below will drag the pair till 0.702/0.6970. The Aussie slipped to 79.51 yen, having plumbed on Thursday its lowest in four years at 77.57. It was on track to repeat last week's decline of 3.6 percent.
NZD/USD: The New Zealand dollar slipped after four days of gains, it edged down to $0.6674 after topping out at $0.6740. The Kiwi skidded to 74.91 yen, nearing a 6-month trough of 73.19 touched on Thursday. It has slumped 3.3 percent so far this week.
Equities Recap
European shares climbed on Friday as the sell-off in banking shares faded away and oil prices rebounded from a 12-year low. In the early deals, Germany's DAX rose 1.3 percent at 8,863.25 and Britain's FTSE 100 leapt 1.3 percent to 5,611.99. France's CAC 40 advanced 1.3 percent to 3,948.44. Dow futures rose 0.8 percent to 15,737.00 and S&P 500 futures added 1 percent to 1,842.20.
Tokyo's Nikkei 225 plunged 4.8 percent to 14,952.61 after earlier sinking as much as 5.3 percent, driving other Asian markets lower. Hong Kong's Hang Seng slid 1.2 percent to 18,319.58. Markets in China and Taiwan have been closed all week for Lunar New Year holidays and will reopen on Monday. South Korea's Kospi lost 1.4 percent to 1,835.28 and Australia's S&P/ASX 200 was down 1.2 percent to 4,765.30.
Commodities Recap
Oil prices rose on possible coordinated production cuts, Brent rose as much as 6 percent against its previous settlement and was up 4.9 percent at $31.53 per barrel at 0938 GMT. WTI futures gained as much as 6 percent and were up 4.5 percent at $27.39 per barrel at 0938 GMT after hitting lows in the previous session.
Gold eased after rising 4 percent on the previous day but is on track to post its best week in four years after stock market turmoil drove investors to prefer safe haven assets. Spot gold fell 0.7 percent at $1,237.36 by 1001 GMT, after rising to as high as $1,260.60 an ounce on Thursday, its highest since February last year.
Treasuries Recap
The 10-year U.S. Treasury yield stood at 1.671, 0.027 pct.
JGBs posted relatively deep negative yields to make up for losses in equities. 5-year JGBs are up 7bp from Wednesday's afternoon close at -0.155% in negative territory, after moving in a range between -0.23% and -0.145%, while the 10s rose 5.5bp at 0.06%, after fluctuating in a 0.00%-0.07% range. In the super-long zone, the 20s were up 5.5bp at 0.79%, after moving in a 0.74%-0.795% range, ahead of next Tuesday's 20-yr auction, while the 30s were up 6.5bp at 1.13%, vs 1.08% earlier. The lead 10-yr March JGB futures were down 0.53% at 151.36.
UK's benchmark borrowing costs dropped to their lowest level in 320 years as panicked investors flocked to the safety of government debt amid rising market turmoil. The return on 10-year UK gilts, which move inversely to prices, dropped as low as 1.226pc - a fall of 18 basis points to their lowest figure since records began in the 17th century.
German bunds rallied to as low as 0.1329 pct, Portuguese 10-year debt spiked to 4.074pct. Italy's 10-year debt rose to 1.699 pct, its highest level since November 2015, while Spain's bonds have soared 25 basis points in February.
Australian government bond futures were a touch softer, with the 3-year bond contract off 2 ticks at 98.270. The 10-year contract shed one tick to 97.6200, while the 20-year contract was half a tick higher at 97.1000. New Zealand government bonds gained, sending yields 2 basis points lower along most of the curve.
