Thu, Jul 07, 2022 @ 17:47 GMT
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Market Overview

Sterling Rebounds as PM May Pledged “Phased Approach” for Brexit, With Parliament Vote

Sterling rebounds today as UK prime minister Theresa May pledged to adopt a "phased approach" to achieve a "smooth and orderly Brexit". More important, the positive reaction was towards the confirmation that "the government will put the final deal that's agreed between the U.K. and the EU to a vote in both Houses of Parliament before it comes into force." May emphasized that UK will not stay as a member of the single market. But She would opt to "have a customs agreement with EU" and reach the country's "own tariff schedules at the WTO". GBP/USD's break of 1.2316 minor support argues that the pair has successfully defended 1.1946 key near term support and opens up the case for further rebound to 1.2774 resistance.

Pound Recovers, But Remains Vulnerable on PM May’s Speech on Brexit

Sterling recovers mildly today but remains the weakest major currency for the week. Prime minister Theresa May's speech on Brexit is the main focus and could trigger more volatility in the pound. It's reported that May will reject the idea of "partial" EU member in return for a full control of UK's border. The trade relationship that May would like to push through is unknown. But EU leaders have already made it clear that UK cannot "cherry pick" access to the single markets. The pound could stay under pressure after May's speech. Technically, Sterling is staying bearish against Dollar, Euro and Yen in near term and we'd expect more downside ahead.

Sterling Broadly Lower as PM May Expected to Outline Hard Brexit

The British Pound drops across the board as the week starts. It's reported that prime minister Theresa May is schedule to deliver a speech on Tuesday to lay out the plan of Brexit. And, May is expected to outline a "hard Brexit" approach. And UK is prepared to withdraw from tariff-free trade relationship with EU, in return for the control of immigration. GBP/USD drops through 1.2036 support and breaches 1.2 handle as recent decline resumes. EUR/GBP also extended recent rebound from 0.8303 and reaches as high as 0.8844. GBP/JPY also drops sharply to as low as 136.94 so far. Sterling's selloff slowed a bit on news that Treasury is going to talk to major banks to smooth market reactions. But the pound remains vulnerable to further decline.

Dollar Down But Not Out Yet after Selloff, Trump Inauguration Key

Dollar ended the week broadly lower, except versus Sterling, after US president-elect Donald Trump disappointed the markets by not giving any details on his policies during the first post election press conference. Dollar index reached as low as 100.72 before recovering to close at 101.18. Meanwhile, the greenback also took out key near term support level against Euro, Yen and Canadian Dollar, which carries some bearish implications. However, treasury yields staged a strong rebound on Friday, which could provide some relieves to Dollar bullish. 10 year yield closed at 2.380, after dipping to as low as 2.309, comparing to prior week's close at 2.418. Stocks were also resilient with NASDAQ closing a fresh record of 5574.12. DJIA stayed in tight range of around 200 pts. below 20000 handle. There are still prospects for the greenback to strike back is Trump delivers in his inauguration on January 20.

Markets Steady ahead of Weekend, Dollar and Sterling Weak

The forex markets are generally steady today, staying in prior day's range. Dollar and Sterling remain the two weakest major currencies for the week while Yen is strong together with Aussie and Kiwi. Released from US, retail sales rose 0.6% in December, missing expectation of 0.7%. Ex-auto sales rose 0.2%, also missed expectation of 0.5%. Headline PPI rose 0.3% mom, 1.6% yoy in December, accelerated from November's 1.3% yoy and meets expectation. PPI core rose 0.2% mom, 1.6% yoy, unchanged from November's 1.6% yoy and above expectation of 1.6% yoy.

Dollar Recovers as Supported by Fedspeaks

Dollar recovers mildly towards the end of the week as supported by comments from Fed officials. Fed chair Janet Yellen said that the economy is "doing quite well" and there are no serious short term obstacles. She noted "unemployment has now reached a low level, the labor market is generally strong and wage growth is beginning to pick up." Inflation has moved up and is "pretty close" to 2% target. Chicago Fed president Charles Evans expected that president-elect Donald Trump's stimulus policies to "increase growth by a couple of tenths over the next two years." And policymakers "look forward to refining that when we actually see proposals that are moving forward and likely to be implemented." A improvements in the economic outlook materializes, US would need "less accommodation". He also said earlier in the month that three rate hikes this year is "not implausible".

Dollar Selloff Continues Despite Solid Job Data

Dollar's selloff continues today in spite of positive job data. In particular, EUR/USD broke 1.0652 resistance. USD/JPY took the lead yesterday and broke 114.76 support. USD/CAD also broke 1.3080 key near term support. The dollar index also breached 55 days and breached 101 handle. Deeper decline is now in favor in the greenback in general, possibly except versus Sterling. US initial jobless claims rose 10k to 247k in the week ended January 7. Continuing claims dropped 16k to 2.1m in the week ended December 31. Import price index rose 0.4% mom in December.

Dollar Broadly Lower as Trump Press Conference Lacks Clarity on Policies

Dollar traded broadly lower while stocks struggled in tight range as markets are dissatisfied with the lack of clarity on economic policies at president-elect Donald Trump's first post election press conference. DJIA gained 98.75 pts, or 0.50%, to close at 19954.28, still lacks buying to push through 20000 handle. S&P 500 rose 6.42 pts, or 0.28%, to close at 2275.32, kept below recent high at 2282.10. Dollar index had a volatile day yesterday, jumping to as high as 102.95 but then reversed and dipped to as low as 101.28, now back at 101.50. Gold rode on Dollar weakness and extended recent rebound, set to take on 1200 handle today. WTI crude oil also rebounded and is trading above 52 for the moment. In the currency markets, Yen is clearly strengthening on falling yield but is overwhelmed by the strength in Aussie. Sterling and Dollar remain the two weakest major currency for the week.

Dollar Strengthens Mildly, Focus on Trump

Dollar strengthens mildly today ahead of US president-elect Donald Trump's first post election press conference. Nonetheless, the strength is mainly seen against European majors. The dip in EUR/USD sent the dollar index above 102.50 briefly but there is no follow through buying in the greenback yet. US stock index futures also point to a flat open. The press conference will be held at 11am eastern time today and no specific topic was announced. Nonetheless, markets will be eagerly looking for details of Trump's expansive fiscal plans; The so called "Trump Rally" in stocks, yield and dollar lost much steam since the start of the year and will need fresh stimulus for the next moves.

Equities Mixed, Dollar Soft as Trump Awaited

US equities closed mixed overnight as markets await president-elect Donald Trump's first post election press conference. DJIA continued to struggle in tight range below 20000 handle and closed down -31.85 pts, or -0.16%, at 19855.53. S&P 500 closed completely flat for the first time in 9 years, at 2268.9. On the other hand, NASDAQ closed at 4th straight record at 5551.82, up 20 pts, or 0.36%. 10 year yield was relatively unchanged, closed up 0.003 at 2.379. Dollar index is trying to recover and is back above 102, comparing to last week's low at 101.30, but lacks momentum. In other markets, gold is staying firm as recent rebound is still in progress and is pressing 1190 handle. WTI crude oil dropped sharply overnight to as low as 50.71 and is trying to defend 50 handle.

Dollar Recovers Mildly, But Stays Down for the Week

Dollar recovers mildly today but stays weak for the week, next to Sterling. Focus is turning to US president-elect Donald Trump's first post election press conference tomorrow. Markets are looking for clues on whether Trump is prepared to deliver his election promises and push expansive fiscal policy after his inauguration on January 20. While the greenback weakens this week, it's still holding on to key near term support levels. Thus, the pull back is still seen as a correction technically. Meanwhile, markets will also pay close attention to whether DJIA would power through 20000 handle, or bounce off from there. Meanwhile, Sterling remains on the weakest major currencies on Brexit worries.

Sterling Stays Soft after Theresa May Clarifications

Sterling remains the weakest major currency this week as pressured by uncertainties over Brexit. UK prime minister Theresa May blamed the fall in the Pound's exchange rate on media's misinterpretation of what she said yesterday. She clarified that "I am tempted to say that the people who are getting it wrong are those who print things saying I'm talking about a hard Brexit, it is absolutely inevitable it is a hard Brexit. I don't accept the terms soft and hard Brexit." She emphasized that "what we are doing is going to get an ambitious, good and best possible deal for the United Kingdom, in terms of trading with and operating within the European single market." Earlier in the day, May said in a televised interview that Brexit is about "getting the right relationship" and the right relationship is about being "have control of our borders, control of our laws".

Sterling’s Selloff Continues, Stays Weak

Sterling is sold off across the board today and remains weak in early US session. The pound falls on fear that UK will opt for hard Brexit and lose access to the single market in EU. On the other hand, FTSE surges to new record high at 7239. UK prime minister Theresa May. May emphasized in a televised interview that Brexit is about "getting the right relationship, not about keeping bits of membership." And she noted that the right relationship is about being "have control of our borders, control of our laws" while having the "best possible deal" for trading with EU. The comments indicated that control of immigration and law prevail access to the single markets. Meanwhile, May also pledged to set out "some more details in the coming weeks" about Brexit ahead of the March 31 deadline for triggering Article 50 for Brexit negotiations.

Sterling Broadly Lower, Weighed Down By PM May’s Comments

Sterling opens the week broadly lower as weighed down by comments from UK prime minister Theresa May. May emphasized in a televised interview that Brexit is about "getting the right relationship, not about keeping bits of membership." And she noted that the right relationship is about being "have control of our borders, control of our laws" while having the "best possible deal" for trading with EU. The comments indicated that control of immigration and law prevail access to the single markets. Meanwhile, May also pledged to set out "some more details in the coming weeks" about Brexit ahead of the March 31 deadline for triggering Article 50 for Brexit negotiations. GBP/USD dips through 1.2200 near term support to resume recent decline next key support level at 1.1946.

Stocks Rebounded to Record Highs, Dollar and Yield Lagged

The markets originally looked set for a general trend reversal with the synchronized sharp decline in US stocks, yield and the Dollar leading into 2017. Nonetheless, equities staged a strong come back towards the end of last week and helped stabilized both yields and the greenback. The overall solid non-farm payroll report, with strong wage growth, provided some support to sentiments. But it looked more like the trump rally is back in force. While there are still risks of trend reversals, it's much lowered now with S&P 500 and NASDAQ closing at record high at 2276.98 and 5521.06 on Friday. DJIA also just missed 20000 handle by a hair and reached as high as 19999.63 before closing at 19963.80. The coming would be crucial to the overall developments in the markets as Donald Trump's inauguration day on January 20 approaches.

Dollar Trying to Rebound after NFP, Lacks Momentum

Dollar is trying to rebound after non-farm payroll report but struggles to find sustainable buying. Headline NFP showed 156k growth in December, below expectation of 178k. Nonetheless, prior month's figure was revised up from 178k to 204k. Unemployment rate rose to 4.7% as expected. Wages showed strong growth with average hourly earnings increased 0.4% mom, above expectation of 0.3%. Also from US, trade deficit widened to USD -45.2b in November. On the other hand, Canadian dollar rises on job data which showed an impressive 53.7k growth in December. Unemployment rate in Canada also rose to 6.9%. Canada trade balance turned into CAD 0.5b surplus in November.

US Yields Tumbled on Trump Correction, NFP Next

US treasury yields tumbled sharply as markets corrected the post election rally. Surge in yields since November was driven by anticipation of Donald Trump's policies of higher spending, lower taxes and higher debt. Markets seemed to turn cautious as Trump prepares to take office later in the month. 10 year yield dropped to 2.368 comparing to December's high at 2.621. 30 year yield also dropped to close below 3.000 handle at 2.962, comparing to December's high at 3.196. The development dragged Dollar broadly lower with the dollar index hitting as low as 101.30. The developments confirmed that yields and Dollar turned into a correction phase which could last for the the rest of the month. It's doubtful whether a strong non-farm payroll report could trigger sustainable comeback in the Dollar in near term. In other markets, gold rode on Dollar weakness and reached as high as 1185.9. DJIA continued to stay in tight range below 20000 handle.

Dollar Stays Soft after Mixed Job Data

Dollar stays soft in early US session after mixed job data as the post FOMC minutes selloff might extend. Initial jobless claims dropped 28k to 235k in the week ended December 31, much lower than expectation of 260k. That's also just 2k above the 43 year low of 233k made back in November. In addition, initial claims stayed below 300k for 96 straight weeks, the longest since 1970. Continuing claims rose 16k to 2.11m in the week ended December 24. ADP report showed 153k growth in private sector jobs in December, missing expectation of 175k. Challenger report showed 42.4% yoy rise in planned layoffs in December. Also release in US session, Canada IPPI rose 0.3% mom in November. RMPI dropped -2.0% mom.

Markets Reacted Differently to FOMC Minutes, Dollar Down

The financial markets reacted differently to the FOMC minutes overnight. Stocks seemed to have taken the more optimistic view of the minutes. DJIA closed up 60.4 pts, or 0.30%, at 19942.16. S&P 500 also gained 12.92 pts, or 0.57%, to close at 2270.75. Both indices are heading back to historical high with DJIA set to take on 20000 handle again. However, Dollar and yields seemed to pay more attention on the "consider uncertainties" that policy makers believed would alter the policy path. In particular, Dollar index drops sharply to as low 101.86 so far today and is threatening a near term reversal. Gold rides on dollar weakness and is back above 1170.

Dollar Stays Soft as FOMC Minutes Awaited

Dollar trades mildly softer today as markets await FOMC minutes. Besides the discussion over the 25 bps rate hike decision made on the month, we are closely watching for the discussion of potential monetary policy changes as Trump takes office. The president-elect has been proposing pro-growth fiscal policy. We would also look for the rationale behind the more hawkish shift in the dot plot which signals 3 rate hikes in 2017. Currently, fed fund futures are pricing in around 70% chance of another rate hike by June this year.