Wed, May 22, 2019 @ 00:44 GMT
Dollar is trying to recover against other major currencies today as recent selloff looks exhausted. Initial jobless claims rose to 259k in the week ended January 21, above expectation of 245k. That's the highest level in a month due to holiday volatility. Initial claims have, nonetheless, stayed below 300k handle for the 99 straight weeks and counting, the longest streak since 1970. Continuing claims rose 41k to 2.1m in the week ended January 14. Also from US, trade deficit narrowed slightly to USD -65.0b in December. Wholesale inventories rose 1.0% in December.
Risk appetite continued in the market as US equities extended record run. DJIA finally took out 20000 handle to close at 20068.52, up 155.80 pts or 0.78%. S&P 500 closed up 18.3 pts, or 0.80%, at 2298.37. NASDAQ ended at 5656.34, up 55.38 pts or 0.99%. All three indices closed at new historical highs. Positive sentiments carried on in Asian session with Nikkei up 1.8% to above 19400 Notable strength was also seen in treasury yields. 10 year yield gained 0.052 to close at 2.523 while 30 year yield rose 0.052 to 3.108. However, the greenback continued to lag behind with Dollar index dipping through 100 handle to as low as 99.79. The index is trying to regain 100 handle at the time of writing but lacks momentum so far. In the currency markets, dollar remains the weakest major currency this week while Sterling is the strongest.
Global financial markets are trading in general risk seeking mode today. At the time of writing, European indices are trading in black with FTSE up 0.4%, DAX up 1.7% and CAC up 1.1%. US futures also point to higher open as S&P 500 and NASDAQ could extend their record runs. Meanwhile, DJIA is head for a take on 20000 handle again. In the currency markets, while the greenback remains generally weak, Aussie is even weaker after disappointing consumer inflation data. On the other hand, recent news regarding Brexit seems to be welcomed by the markets as Sterling surges broadly.
US stocks surged overnight as boosted by strong corporate earnings as led by tech and finance. There was additional support on news that president Donald Trump signed two executive orders with the construction of Keystone XL and Dakota Access oil pipelines. The orders were seen as rolling back Obama administration's environmental actions. S&P 500 closed up 14.87 pts, or 0.66%, at 2280.07, as record high. NASDAQ gained 48.02 pts, or 0.86%, to close at 5600.96, also a record high. DJIA also rose 112.86 pts, or 0.57% to close at 19912.71, heading to 20000 handle again. Treasury yield also rose with 10 year yield up 0.068 at 2.471. 30 year yield rose 0.065 to 3.056, back above 3.000 handle. But both TNX and TYX are stuck in recent range. Dollar index is still trying to defend 100 handle for the moment and probably need range breakout in yield to give it some sustainable momentum.
Sterling weakens against Dollar and Euro today after the UK Supreme Court ruled that Prime Minister Theresa May must get approval from Parliament before triggering Article 50 for Brexit negotiations. Nonetheless, a government spokesman noted that the ruling won't change the schedule and May would still trigger Article 50 by the end of March. Opposition Labour leader Jeremy Corbyn also said they wouldn't block the move. Instead, the Labour would seek to influence on the shape of the deal and seek "full, tariff-free access to the single market". May outlined the plan for hard Brexit earlier this month with emphasize of immigration control over single market access. Also from UK, public sector net borrowing dropped to GBP 6.4b in December.
Dollar recovers mildly today but stays in red across the board for the week so far. The dollar index hit as low as 99.89 and is trying to defend 100 handle for the moment. Treasury yields tumbled sharply overnight with 10 year yield closing at 2.403, down -0.064. But stocks were just a touch lower with DJIA lost -0.14% to close at 19799.85, staying in familiar range. Markets continue to reaction to US president Donald Trump's initial actions. It's reported that Trump promised business leaders to reduce tax with business regulations cut by 75%, or more. Regarding corporate tax, Trump noted that his administration is going to be "cutting taxes massively for both the middle class and for companies, and get it down to We're trying to get it 15 to 20%, from 35%.
The financial markets are trading in mild risk averse mode today. European indices started the week lower, following -1.29% loss in Japanese Nikkei. And FTSE, DAX and CAC are all staying in red at the time of writing, despite paring some losses. US futures also point to mildly lower open. Meanwhile, Dollar remains pressured as recent selloff resumes. Sentiments seemed to be weighed down by US president Donald Trump's protectionist tone in his inauguration speech. In addition, Trump has signaled renegotiation of the North American Free Trade Agreement and withdrawal from the Trans-Pacific Partnership trade pact. Meanwhile, he treated in US morning that it's going to be a "busy week with a heavy focus on jobs and national security". Markets will stay focused on what Trump would deliver.
Dollar weakens broadly as another week starts. EUR/USD and USD/CHF extend recent near term move with EUR/USD hitting as high as 1.0749 so far. GBP/USD also takes out 1.2432 resistance. Some analysts attribute the selloff in the greenback to uncertainty over US president Donald Trump's policies. The markets were generally let down by the lack of details, or even direction other than "America first", in Trump's inauguration last Friday. Trump reiterated over the weekend that he's going to withdraw from the Trans-Pacific Partnership trade pact. However, nothing has been said regarding what pushed the markets higher since election. That is, expansive policies with lower taxes and higher infrastructure spending. The greenback will stay weak until the markets get some more clarity on the issues.
US equities ended Friday mildly higher but closed the week down as US president Donald Trump's inauguration provided little inspiration to the markets. DJIA closed at 19827.25 comparing to prior week's close at 19885.73. S&P 500 closed at 2271.31 comparing to prior week's close at 2274.64. Treasury yields, however, were notably higher. 10 year yield closed at 2.467 comparing to prior week's close at 2.309. Dollar ended the week mixed, closing higher against Yen and Canadian but down against all others. Dollar index gyrated around 101 last week, where the 55 day EMA sits. In other markets, Gold hit as high as 1218.9 but lost momentum above 1200 handle. WTI crude oil stayed in recent range and closed at 53.24.
Dollar trades mildly higher today but stays in range except versus Canadian dollar. Focus is now on Donald Trump's inauguration. Traders are generally cautious ahead of the events and keen awaiting to see whether Trump would assure that markets of his expansive policies or disappoint. Meanwhile, Canadian dollar is pressured by BoC's governor Stephen Poloz comments earlier this week. Additional selling is seen after disappointing data. Canada retail sales rose 0.2% mom in November versus expectation of 0.5% mom. Ex-auto sales rose 0.1% mom, in line with consensus. CPI dropped -0.2% mom, rose 1.5% yoy in December, below expectation of 0.0% mom, 1.7% yoy. Core CPI dropped -0.3% mom, rose 1.6% yoy versus expectation of -0.2% mom, 1.7% yoy.
Dollar remains in red for the week, except versus Yen and Canadian Dollar, as markets await Donald Trump's inauguration. Treasury Secretary nominee Steven Mnuchin had sent USD higher. As he suggested, USD's "long-term strength, over long periods of time, is important". He added that "the US currency has been the most attractive currency to be in for very, very long periods of time. I think that it's important". Regarding President-elect Donald Trump's recent statement that the greenback was too strong, Mnuchin clarified that "when the president-elect made a comment on the US currency, it wasn't meant to be a long-term comment".
ECB kept the main refinancing rate at 0.00% and deposit rate at -0.4% as widely expected. There is also no change to the asset purchase program. The central bank extended the program to December 2017, buying EUR 60b a month. ECB president Mario Draghi noted in the post meeting press conference that "there are no signs yet of a convincing upward trend in underlying inflation." He emphasized that "a very substantial degree of monetary accommodation is needed for euro area inflation pressures to build up and support headline inflation in the medium term". Meanwhile, growth would be "dampened" by "sluggish pace of structural reform" in the region. Euro lost much momentum against Dollar and Sterling and is trading mildly lower. Also from Europe, Eurozone current account surplus widened to EUR 36.1b in November. UK RICS house price balance dropped to 24 in December. Swiss PPI rose 0.2% mom, 0.0% yoy in December.
Dollar recovered mildly overnight with treasury yield. The dollar index is now back at 101.25, comparing to this week's low at 100.26. 10 year yield closed at 2.389, comparing to this week's low at 2.313. 30 year yield closed 2.985 after touching 3.000, but recovered from this week's low at 2.913. Stocks were mixed as major indices were bounded in tight range with DJIA closed down -0.11% at 19804.72 and S&P 500 up 0.18% at 2271.89. Fed chair Janet Yellen said that it "makes sense" to gradually raise interest rate. And she warned that "waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road - either too much inflation, financial instability, or both." And more importantly, "in that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession." Yellen also pledged to "closely follow" with economic policies and factor them into Fed's policies.
Dollar recovers mildly today but remains the weakest major currency for the week so far. Consumer inflation data from US looks promising. Headline CPI rose 0.3% mom, 2.1% yoy in December, accelerated from November's 1.7% yoy. Core CPI rose 0.2% mom, 2.2% yoy, accelerated from prior month's 2.1% yoy. Both met market expectations. Technically, the declines in Dollar and treasury yields seem to be losing some momentum. But volatility is anticipated on Donald Trump's inauguration data this Friday. Meanwhile, it should be noted that after all the rhetorics and speculations, fed fund futures are still pricing in 67.8% change of another rate hike by Fed by June. That hasn't changed much in recent weeks.
Dollar remains the weakest major currency over the week despite some positive comments from Fed officials. Fed Governor, Lael Brainard indicated that material increase in fiscal stimulus measures would lead to acceleration in rate hikes. Speaking for the Brookings Institution, Brainard suggested that "if fiscal policy changes lead to a more rapid elimination of slack, policy adjustment would, all else being equal, likely be more rapid than otherwise". She added that "based on recent spending indicators, we might expect progress to continue to be gradual and steady". Meanwhile, speaking for the National Retail Federation, New York Fed president William Dudley noted that the "risk that the Fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem".
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.
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.
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 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.
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.
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