Fri, Sep 20, 2019 @ 22:44 GMT
The forex markets are pretty steady in Asian session today as markets are preparing for an extremely busy week ahead. Dollar is trying to recovery. While the greenback is trading broadly higher, it's kept in Friday's range. There is no realistic sign of short term bottoming yet. There are countless important data to be released this week, including PCE, ISM and NFP from the US. FOMC is also expected to deliver a hawkish twist to prepare the markets for March hike. But US President Donald Trump's tone regarding Dollar in the State of Union address could be the trend defining moment.
Canadian dollar are lifted by solid job data and strength in oil prices today. The Canadian job market expanded by 48.3k in January, much better than expectation of 0.0k. Unemployment rate also dropped 0.1% to 6.8%. Meanwhile WTI crude oil is gaining 1.7% at the time of writing and is pressing 54 handle. It's possible that WTI is heading to retest recent resistance at 55.24 based on current momentum. On the other hand, the greenback is also strong, except versus Aussie and Loonie. Trump trades as back in force and Donald Trump said he will deliver a "phenomenal" tax overhaul within two or three weeks. From US, import price index rose 0.4% in January.
Sterling jumps after BoE stands pat and indicates that it may raise interest rates earlier than expected. In the accompanying statement, the central bank noted "were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target." That is seen as the main trigger for the buying in the Pound. Other than that, there are many surprises. The votes on keeping the Bank rate at 0.50% and asset purchase at GBP 435b were unanimous. 2018 GDP forecast was raised to 1.8%, up from 1.6%. 2019 GDP forecast was raised to 1.8%, up from 1.7%.
Dollar's data inspired rally overnight was brief and weak. The greenback is still set to end as the weakest major currency for the week despite a Fed rate hike. It seems like markets are rather worried on passage of the reconciled tax bill in the Senate. Euro is indeed trading as the second weakest one for the week. Even though ECB raised both growth and inflation forecasts, it's still not going to meet 2% inflation target before 2020. Commodity currencies are trading broadly higher for the week. Canadian Dollar was given a boost by BoC Governor Stephen Poloz's upbeat comment. But it's overwhelmed by Aussie and Kiwi.
Dollar jumps overnight after hawkish FOMC minutes and remains the strongest one for the week. Nonetheless, the greenback is paring some gains in Asian session. And it's still limited below key near term resistance against most major currencies, except versus Canadian Dollar. Markets sentiment have shifted much since the start of the year. Back then, most doubted whether Fed would really hike three times this year. After a string of solid data and yesterday's minutes, traders are now talking whether Fed could hike more than four times. US treasury jumped on such expectations while stocks reversed some of recent rebound. DOW ended the day down -0.67% at 2479.78. For now, it remains to be seen whether Dollar would finally re-couple with yields.
RBA in its minutes for the December meeting cautioned the high levels of household debt due to low interest rates. It also warned of the 'considerable uncertainty' in the labor market. The central bank maintained a neutral bias at the meeting while leaving its cash rate unchanged at historic low of 1.5%. Note the meeting was held a day before the release of 3Q15 GDP growth which shrank -0.5%.
Headline CPI in the UK surprisingly stayed unchanged at +2.6% y/y in July, compared with consensus of a renewed pick up to +2.7%. From a month ago, inflation contracted -0.1%, after a flat reading in June. Re-designated by the Statistics Authority on July 31, the consumer price index including owner occupiers' housing (CPIH) steadied at +2.6%. The price of motor fuel continued to fall and contributed to the biggest downward change from June to July. Upward contributions came from a range of goods and services, including clothing, household goods, gas and electricity, and food and non-alcoholic beverages. Core CPI stayed unchanged at +2.4%, missing market expectation of a rise to +2.5%.
British pound remains under pressure after Friday’s selloff. GBPUSD slumped almost -1% on Friday, resulting in a second consecutive weekly decline of the pair, as weakness in first quarter GDP growth was accompanied with BOE Governor Mark Carney’s dovish...
Dollar rally lost some momentum as markets are concerned that US President Donald Trump's firing of FBI Director James Comey could delay his tax reform. In a controversial move, Trump abruptly fired Comey who oversaw an FBI investigation into Trump's tie with Russia during last year's election campaign. Trump's tax reform was originally targeted at approval by the Congress by August. It was already delayed after the healthcare act failure. Markets are concerned that there will be more distraction to Trump ahead and further slow down the progress on tax reforms.
Swiss Franc and Yen firm up again in Asian session as markets are gradually convinced that a full-blown US-China trade war is underway. Tensions between the two countries have clearly worsened after trade negotiation collapsed weeks ago. And it's...
Euro dives broadly after Germany Chancellor Angel Merkel declared failure in forming a coalition government. After over time exploratory talks, Merkel's Christian Democratic-led bloc couldn't reach an agreement with pro-business Free Democratic Party and center-left Greens. Merkel will now meet with President Frank-Walter Steinmeier next. The meeting with Steinmeier suggests that Merkel will not opt for forming a minority government with the Greens. And the reincarnation of the grand coalition with SPD is unlikely too. Instead, Merkel may ask Steinmeier to order another election. In the meantime, she will stay as the "caretaker" chancellor. And for the time being, Germany will hold of any work with France on Euro reforms until the domestic political picture comes clear.
Yen weakens broadly as concerns over North Korea tensions continue. Japan Finance Minister spoke in a conference in California, US, yesterday. He warned that while yen is always "said to be a safe-haven currency", the situation in North Korea made it "extremely unstable". And he emphasized that "we should always think about what the yen would be like if something happens in North Korea." Regarding trade relationship, Aso said Japan and 10 other countries should push ahead with the Trans-Pacific Partnership with the involvement of the US. But he is optimistic that US will eventually find it better to rejoin. He said that "it's not a fact that the U.S. will be able to gain more from bilateral framework than TPP." The Japanese currency is also weighed down by renewed strength in US treasury yields. US Treasury Secretary Steven Mnuchin said yesterday that ultra-long bonds are "something that could absolutely make sense for us at Treasury."
Despite stellar report of job growth, Dollar fails to secure upside momentum so far due to sluggish wage growth. Non-farm payrolls report showed 313k growth in February, much better than expectation of 205k. Prior month's figure was also revised...
Euro surges broadly today on much stronger than expected inflation reading. Flash CPI rose 1.8% yoy in January, up from prior month's 1.1% yoy, and beat expectation of 1.5% yoy. That's also the highest reading since February 2013. Core CPI, on the other hand, was unchanged at 0.9% yoy, in line with consensus. Eurozone Q4 GDP showed 0.5% qoq growth, up from 0.3% qoq, beat expectation of 0.4% qoq. Eurozone unemployment rate also dropped to 9.6% in December, better than expectation of being unchanged at 9.8%. That's also the lowest level since mid-2009.
RBA left the cash rate unchanged at 1.5%, as widely anticipated. Little news was seen in the accompany statement with the more notable change was policymakers' acknowledgement in the rise in commodity prices. However, they stopped short of projecting its impacts on growth, for now. Today's announcement lacks indication for the central bank's monetary policy outlook. We expect future moves remain data-dependent but the central bank is not urgent in making another change in the policy rate.
Market reactions to the US government shutdown is rather muted. Dollar is trading generally lower today but is held within Friday's range. Asian markets are pretty steady with Nikkei trading down just -0.14% at the time of writing. The Senate was in session yesterday but failed to deliver any breakthrough. The shutdown is extending into its third day and there is no sign of a resolution in the Senate yet. A procedural vote is expected at noon today. But there are unlikely enough votes to pass the bill to keep government running through February 8. For forex traders there are so many key events ahead in the week that they couldn't care less regarding the government shut down.
As suggested in the CFTC Commitments of Traders report in the week ended September 4, NET LENGTH of USD index dropped -1 085 contracts to 33 486 contracts for the week. Both speculative long and short positions increased. During...
Yen trades generally lower today in otherwise quiet markets. Euro is trading firmer while Sterling is paring some of last week's sharp gains. Global markets are generally in risk seeking mode. The MSCI Asia Pacific ex Japan index surged to decade high earlier today. European indices follow with some gains, including FTSE. US futures also suggest that stocks are going to extend the record run. If other markets, gold continues with it's pull back from recent high at 1362.4 and hits as low as 1314.5 so far. It's possibly heading back to 1300 handle, which is close to 55 day EMA at 1293.4. WTI crude oil weakens mildly as it struggles to find sustainable buying to stay firm above 50 handle.
Dollar remains the strongest currency in early US session as supported by positive job data. Initial jobless claims dropped 2k to 236k in the week ended December 2, below expectation of 241k. That's also the lowest level in five weeks. Four week moving average dropped from 242.25k to 241.50k. Continuing claims dropped -52k to 1.91m in the week ended November 25. Challenger report, though, showed 30.1% yoy rise in planned layoff in November. Overall, recent job released data point to solid non-farm payroll report to be released tomorrow. And expectation of 200k job growth could easily be matched. But again, the tricky point will remain to be wage growth.
With no single party being able to secure over half of the seats in the parliament in last month's election, the right-wing, populist NZ First party has become a kingmaker. Its leader Winston Peters has just announced that his party would form a government with the Labour Party. Kiwi's sell off after the announcement as the outcome has not been quite priced in. NZ First had cooperated with both National and Labour previously (National/ NZ First from 1996 to 1998, and Labour/ NZ First from 2005 to 2008).
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