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Asian update: Sterling found footing after selloff, Aussie rises on CPI

    By
    ActionForex
    -

    Sterling suffered broad based selloff overnight as the UK parliament put Brexit back into uncertainty. But losses are so far limited as the Pound quickly stabilized. In short, the Parliament passed the proposal to ask Prime Minister Theresa May to go back to Brussels to renegotiate the Irish backstop into alternative arrangements. But EU has reinstated the stance that it won’t reopen negotiations.

    In the currency markets, Australian Dollar is the strongest one in Asian markets today, after slightly stronger than expected Q4 CPI reading. New Zealand Dollar follows as the second. Swiss Franc is currently the weakest one , followed by Dollar and then Yen. The economic calendar is rather busy today. French GDP, Swiss KOF, Eurozone confidence indicators, Germany CPI and US ADP employment will also be watched. But the major focus will be on FOMC rate decision and press conference.

    In Asia:

    • Nikkei is currently down -0.26%.
    • Hong Kong HSI is up 0.29%.
    • China Shanghai SSE is up 0.09%.
    • Singapore Strait Times is down -0.11%.
    • Japan 10-year JGB yield is up 0.0003 at 0.004.

    Overnight:

    • DOW rose 0.21%.
    • S&P 500 dropped -0.15%.
    • NASDAQ dropped -0.81%.
    • 10-year yield dropped -0.032 to 2.712.

    FOMC forward guidance and balance sheet reduction plan watched

      By
      ActionForex
      -

      The economic calendar is rather busy today. French GDP, Swiss KOF, Eurozone confidence indicators, Germany CPI and US ADP employment will also be watched. But the major focus will be on FOMC rate decision and press conference.

      Fed is widely expected to keep federal funds rate unchanged at 2.25-2.50%. Since December, following extreme market volatility and cautious turn in Fedspeaks, pricing of Fed’s rate path changed drastically. Fed funds futures are now only pricing in around 20% chance of a 25bps hike by the December meeting. Dollar then started weakening broadly. The greenback suffered another round selloff last week after a WSJ report suggesting that the Fed members are considering to end the balance sheet reduction plan earlier than previously expected.

      The first focus today will be on forward guidance in the statement. Back in December, FOMC noted that “the Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.”

      But since then, Fed officials sung a chorus, saying that Fed can afford some patience before another rate move. And Fed chair Jerome Powell even indicated that Fed is flexible to move in either direction if necessary. Any change in the forward guidance that hints at a pause could give Dollar more pressure.

      And secondly, Powell will need to indicate if there is any change in Fed’s balance sheet reduction plan.

      Here are some previews on FOMC:

      Australia CPI slowed to 1.8%, but beat expectations

        By
        ActionForex
        -

        Australian Dollar is lifted slightly by stronger than expected consumer inflation reading. Headline CPI rose 0.5% qoq in Q4 versus expectation of 0.4% qoq. Annual rate slowed to 1.8% yoy, down from 1.9% yoy, but beat expectation of 1.7% yoy. RBA trimmed mean CPI rose 0.4% qoq, 1.8% yoy, matched expectations. RBA weighed media CPI rose 0.4% qoq, 1.7% yoy, basically matched expectations.

        ABS Chief Economist, Bruce Hockman said: “Annual growth in the CPI remains below 2 per cent in the December quarter 2018, with annual growth in tradables inflation of just 0.6 per cent, while non-tradables inflation rose 2.4 per cent. Over the past four years, annual growth in the CPI has only risen above 2 per cent in two of the past 16 quarters.”

        ABS also noted that

        • The most significant price rises this quarter are tobacco (+9.4%), domestic holiday travel and accommodation (+6.2%), fruit (+5.0%) and new dwelling purchase by owner-occupiers (+0.4%).
        • The most significant price falls this quarter are automotive fuel (-2.5%), audio visual and computing equipment (-3.3%), wine (-1.9%), and telecommunications equipment and services (-1.5%).

        Full release here.

        EU Tusk: Brexit withdrawal agreement is not open for renegotiation

          By
          ActionForex
          -

          On UK’s decision to seek Brexit deal renegotiations, European Council President Donald Tusk said via his spokesman “The Withdrawal Agreement is and remains the best and only way to ensure an orderly withdrawal of the United Kingdom from the European Union”. “The backstop is part of the Withdrawal Agreement, and the Withdrawal Agreement is not open for renegotiation.”

          Nevertheless, Tusk said “We welcome and share the UK parliament’s ambition to avoid a no-deal scenario. We continue to urge the UK government to clarify its intentions with respect to its next steps as soon as possible.” And, “If the UK’s intentions for the future partnership were to evolve, the EU would be prepared to reconsider its offer and adjust the content and the level of ambition of the political declaration… Should there be a UK reasoned request for an extension, the EU27 would stand ready to consider it and decide by unanimity.”

          European Parliament Guy Verhofstadt echoed and said “we stand by Ireland,”and “there is no majority to re-open or dilute the Withdrawal Agreement in the European Parliament, including the backstop.”

          Sterling drops as UK seeks to reopen Brexit negotiation

            By
            ActionForex
            -

            Sterling dropped broadly after the Parliament voted 317 to 301 for Conservative MP Graham Brady’s Brexit deal amendment. Prime Minister Theresa is now required to go back to EU to renegotiate the deal to replace the Irish backstop with “alternative arrangements”. At the same time, the Parliament rejected Labour MP Yvette Cooper’s proposal to force Article 50 extension to avoid no-deal Brexit. Though, the symbolic amendments opposing no-deal Brexit was passed.

            May’s spokesman said that “tonight parliament has sent a clear message that there is a way forward to secure this deal if we are able to secure changes in relation to the backstop.” And, “the EU’s position remains that they want the United Kingdom to leave with a deal. They want the UK to leave with a deal because it’s in their interests as well as those of the UK.”

            However, EU repeated its stance that there will be no renegotiation. And, it’s uncertain what exactly alternative arrangements on the Irish border backstop are.

            US consumer confidence dropped to 120.1 on temporary shock

              By
              ActionForex
              -

              US Conference Board Consumer Confidence dropped to 120.2 in January, down from 128.1 and missed expectation of 125.0.

              Conference board noted in the release that “Shock events such as government shutdowns (i.e. 2013) tend to have sharp, but temporary, impacts on consumer confidence. Thus, it appears that this month’s decline is more the result of a temporary shock than a precursor to a significant slowdown in the coming months.”

              Full release here.

              Into US session: Sterling recovers, but upside capped by Brexit confusions

                By
                ActionForex
                -

                Entering US session, New Zealand Dollar remains the strongest one for today. Sterling regains some ground yet it’s limited generally below yesterday’s high. Traders are looking at Brexit debate and amendment voting in the Commons, with increasing confusions. New alternatives emerge including the Brady Amendments as the Malthouse Compromise. But after all, one of the keys lies in whether there would be a united consensus within the UK. And another key is whether the EU would agree to re-open negotiations.

                As for today, Swiss Franc is the weakest one followed by Yen. European stocks rise broadly on return of risk appetite while DOW futures also point to higher open. Eyes will also be on US-China trade negotiations but so far there is little news.

                In Europe, currently:

                • FTSE is up 1.34%.
                • DAX is up 0.20%.
                • CAC is up 0.97%.
                • German 10-year yield is down -0.001 at 0.207.

                Earlier in Asia:

                • Nikkei rose 0.08%.
                • Hong Kong HSI dropped -0.16%.
                • China Shanghai SSE dropped -0.10%.
                • Singapore Strait Times dropped -0.37%.
                • Japan 10-year JGB yield rose 0.005 to 0.005.

                UK PM May to push EU to reopen Brexit negotiations

                  By
                  ActionForex
                  -

                  UK Prime Minister Theresa May has told her cabinet today that Brexit negotiation has to be reopened with the EU, to provide legal changes to the Irish backstop. Her spokesman said that “the prime minister said that in order to win the support of the House of Commons legal changes to the backstop will be required, that would mean reopening the Withdrawal Agreement”. And he added that “a vote of the Brady amendment makes it clear that the current nature of the backstop is the key reason that the House cannot support the deal.”

                  Also, May is expected to return to the Commons as soon as possible with a revised deal with the EU. If no deal could be reached by February 13, May will make a statement to the House that day, and table an amendable motion for debate the follow day.

                  As for today, a so called Malthouse Compromise emerged which has support from heavy weight Brexiteers, Remainers as well as Northern Ireland DUP. But EU was quick to dismiss it. EU’s deputy chief negotiator, Sabine Weyand, had said technology to avoid a hard border does not exist.

                  UK Fox: Changes in EU’s Brexit position due to economic slowdown

                    By
                    ActionForex
                    -

                    UK Trade Minister Liam Fox said today that EU is now more afraid of no-deal Brexit due to economic slowdown , including Germany and France. Fox said “there have been some changes in the positions in recent times, dictated by reality”.

                    And, “We’ve seen, for example, the German economy weakening, we’ve seen the French economy weakening, and I think this (EU) view that ‘we can simply weather out any disturbance that would occur from a no deal’, I think there’s much less appetite for that.”

                    Asian update: Stocks follow US lower, Sterling soft ahead of Brexit votes

                      By
                      ActionForex
                      -

                      The forex markets remain relatively quiet today. Yen was lifted overnight by risk aversion as all major indices closed in red. Asian markets followed by opening down. But gain in the Yen are so far very limited. Even USD/JPY is still holding on to 109.14 minor support.

                      As for today, New Zealand Dollar is the strongest one after trade surplus came in larger than expected in December. Australian Dollar shrugs off sharp deterioration in NAB Business Conditions, which just had the largest monthly decline since global financial crisis. Sterling is the weakest one as traders await Brexit debate in the commons, and vote on plan B as well as amendments. Dollar is second weakest with eyes on US-China trade negotiations.

                      In Asia:

                      • Nikkei is down -0.24%.
                      • Hong Kong HSI is down -0.45%.
                      • China Shanghai SSE is down -0.49%.
                      • Singapore Strati Times is down -0.58%.
                      • Japan 10-year JGB yield is up 0.0032 at 0.003, turned positive.

                      Overnight:

                      • DOW dropped -0.84%.
                      • S&P 500 dropped -0.78%.
                      • NASDAQ dropped -1.11%.
                      • 10-year yield closed down -0.009 at 2.744.

                      Australian NAB business conditions: Largest fall since global financial crisis

                        By
                        ActionForex
                        -

                        Australia NAB Business Confidence was unchanged at 3 in December. However, Business Conditions dropped sharply by -9 pts from 11 to 2. That’s the largest monthly fall since the global financial crisis. And the deterioration was “relatively broad-based across states and industries”.

                        NAB also noted that “at face value, the fall over the past 6 months suggests a significant slowing in the momentum of activity in the business sector – especially from the highs seen earlier in the year.”

                        Full release here.

                        Japan cabinet office downgraded exports assessment to weakened recently

                          By
                          ActionForex
                          -

                          Japan Cabinet Office left overall economic assessment unchanged and said it’s in gradual recovery. However, export assessment was downgraded from “flattened” to “weakened recently”. In particular, shipments of electronics and semiconductor manufacturing equipment to China have slowed sharply.

                          The office noted in the monthly report that “we need to keep in mind that there is uncertainty about how trade disputes and China’s economic outlook will affect the global economy.”

                          On inflation, the report noted that consumer prices have leveled off. It’s another downgrade from last month’s description that gains were slowing. Consumer spending was recovering while capital expenditure was increasing. Both assessments were unchanged.

                          US Mnuchin: IP protection, forced JVs & enforcement top on agenda in China trade talks

                            By
                            ActionForex
                            -

                            US Treasury Secretary Steven Mnuchin said yesterday that “IP (intellectual property) protection, no more forced joint ventures, and enforcement are three of the most important issues on the agenda” in trade negotiation with China.

                            He emphasized that “we want to make sure that when we get a deal, that deal will be enforced.” Though, he also admitted “The details of how we do that are very complicated. That needs to be negotiated. ”

                            Mnuchin, a relative trade dove, also said there had been “significant movement” in the trade talks so far. And he expected this week’s meetings to end with significant progress.

                            China’s Xinhua news agency reported that a Chinese delegation led by Vice Premier Liu He arrived in Washington yesterday, for the meeting with US Trade Representative Robert Lighthizer. PBoC Governor Yi Gang is expected to join the meeting too. On the US side, Lighthizer will lead the talks with participation from Mnuchin, Commerce Secretary Wilbur Ross, White House economic adviser Larry Kudlow and White House trade and manufacturing adviser Peter Navarro.

                            WTI crude oil breaks 52, reversing recent rebound, CAD pressured

                              By
                              ActionForex
                              -

                              At the time of writing, Canadian Dollar is the worst performing major currency for today, as dragged down by oil prices. Yen is the strongest ones as Caterpillar and Nvidia warnings punish US stocks. At the time of writing, all DOW, S&P 500 and NASDAQ are down more than -1%.

                              WTI crude oil is back pressing 52 handle and takes our 4 hour 55 EMA. The development affirmed the case that corrective rebound from 42.05 has completed at 54.44, on bearish divergence condition in 4 hour MACD. It also faced rejection from 54.61 resistance, 55 day EMA and below 38.2% retracement of 77.06 to 42.05 at 55.42.

                              Focus is now back on 50.59 support, decisive break there will confirm and will bring deeper pull back to 61.8% retracement of 42.05 to 54.44 at 46.78. Nevertheless, defending 50.59 will maintain near term bullishness for another rise through above mentioned resistance zone of 54.61/55.42.

                              EU Weyand: No Brexit renegotiation, no time-limit of backstop, just margin on political declaration

                                By
                                ActionForex
                                -

                                EU deputy chief negotiator Sabine Weyand reiterated that “there will be no more negotiations on the Withdrawal Agreement”. And given just 60 days from the March 29 Brexit date, time is already tight to complete the ratification of the treaty. However, she also pointed out “where we do have margin is on the political declaration”. But she also emphasized that “we need decisions on the UK side on the direction of travel.”

                                Also, Weyand echoed chief negotiator Michel Barnier’s comments regarding Irish backstop. She said “a time-limit on the backstop defeats the purpose of the backstop because it means that once the backstop expires you stand there with no solution for this border.”

                                ECB Draghi: Euro’s international role in foreign reserves and debt market eroding

                                  By
                                  ActionForex
                                  -

                                  ECB President Mario Draghi appears in the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament today. Regarding Euro’s internal dimension, Draghi said “euro has indeed provided two decades of price stability”. And, thanks to the “collective efforts of all European citizens, the euro area has emerged from” the global financial crisis, with “22 consecutive quarters of economic growth, the unemployment rate at its lowest level since October 2008, and wages and incomes on the rise.”

                                  But Draghi also repeated last week’s cautious comments. He noted “over the past few months, incoming information has continued to be weaker than expected on account of softer external demand and some country and sector-specific factors. The persistence of uncertainties in particular relating to geopolitical factors and the threat of protectionism is weighing on economic sentiment.” He reiterated that “significant monetary policy stimulus remains essential”, and “the Governing Council stands ready to adjust all of its instruments”.

                                  On Euro’s external dimension, Draghi said since the global financial crisis, “the euro’s international role seems to have gradually eroded. While its importance as the currency of invoice for international trade transactions has remained broadly stable, its role in global foreign reserves and global debt markets has declined.” And he urged that “the international role of the euro is supported by the pursuit of sound economic policies in the euro area and a deeper and more complete EMU. And this requires further efforts along the path of deeper integration.”

                                  Draghi’s full speech here.

                                  Into US session: Major pairs bounded in tight range, mild risk aversion

                                    By
                                    ActionForex
                                    -

                                    Entering into US session, the forex markets remain relatively quiet today. Major pairs and crosses are bounded inside Friday’s range. Sterling turned soft as it continues to pare back recent gains ahead of tomorrow’s Brexit debate. Canadian Dollar also turns weaker, following dips in WTI crude oil.

                                    On the other hand, Swiss Franc is slightly higher on mild decline in European socks. Yen and Euro are the second strongest. But the picture is easy to change before weekly close.

                                    In Europe, currently:

                                    • FTSE is down -0.26%.
                                    • DAX is down -0.19%.
                                    • CAC is down -0.48%.
                                    • German 10-year yield is up 0.0241 at 0.22.

                                    Earlier in Asia:

                                    • Nikkei closed down -0.60%.
                                    • Hong Kong HSI rose 0.03%.
                                    • China Shanghai SSE dropped -0.18%.
                                    • Singapore Strait Times dropped -0.09%.
                                    • Japan 10-year JGB yield dropped -0.0016 to -0.001.

                                    UK parliament Brexit committee: Managed no-deal cannot be government policy

                                      By
                                      ActionForex
                                      -

                                      UK Parliament’s Brexit Committee said today that the government cannot have a “managed no-deal” Brexit as its policy. The committee’s chairman Hilary Benn said “having taken a wide range of evidence on the implications of a no deal Brexit, the committee is clear that this cannot be allowed to happen.”

                                      He added “MPs must be able to vote on extending Article 50 if Parliament cannot reach agreement on a way forward before March 29.”

                                      US NABE: Majority of businesses expect no recession in the next 12 months

                                        By
                                        ActionForex
                                        -

                                        The National Association of Business Economics in the US released its quarterly business condition survey today. Nearly all respondents do not expect a recession in the US in the next 12 months. However, 64% expected growth to expect 2%, sharply lower than 90% in prior survey in October.

                                        Regarding capital spending, 84% said the 2017 Tax Cuts and Job Act has not changed their investment of hiring plans. NABE President Kevin Swift said “the capex story is really a tale of two cities. Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments.”

                                        77% indicated no impact from trade conflicts on their investment hiring and even pricing plans. However, from the goods-producing panelists, 36% said their raising prices and 27% delaying investments.

                                        Full release here.

                                        Asian update: Dollar and Sterling soft, risk markets directionless

                                          By
                                          ActionForex
                                          -

                                          Dollar is trading generally softer as it’s entering into an important week. There are a number of high profile events ahead, including US-China trade talk, FOMC rate decision and non-farm payrolls, as well as US government re-opening. But for today so far, Sterling is even softer as markets turns a bit cautious ahead of tomorrow’s Brexit debate in the commons. New Zealand Dollar is so far the strongest, followed by Yen and Australian Dollar. With such a picture, it’s easy to see the lack of direction in the risk markets.

                                          In Asian markets:

                                          • Nikkei closed down -0.60% at 20649.
                                          • Hong Kong HSI is down -0.09%.
                                          • China Shanghai SSE is down -0.18%.
                                          • Singapore Strait Times is up 0.06%.
                                          • Japan 10 year JGB yield is down -0.0022 at -0.002, turned negative
                                          Load more

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