- Rates: Slow start to trading week
US Treasuries suffered a double blow last Friday after stronger US eco data (payrolls & manufacturing ISM). US Treasuries hover near the sell-off lows this morning with a thin calendar in front. Sentiment-driven, low volume trading within existing technical boundaries will be today’s recipe. - Currencies: Strong US eco data fail to inspire directional USD move
US payrolls and the manufacturing ISM printed (very) solid on Friday, but the reaction hardly filtered through into USD trading. Today, the eco calendar is thin. Price action of last week suggests that the downside in EUR/USD might be rather well protected. UISD/JPY is nearing the 110 barrier.
The Sunrise Headlines
- US equity markets closed last week’s session with gains/losses between -0.25% and +0.25% . Asian equities are trading mixed with Japanese indices outperforming. Chinese markets are closed for the week.
- Venezuelans marched in duelling protest on Saturday, with both sitting President Maduro and US-backed Guaido claiming power of the nation .US President Trump said that use of US military force remains “an option”.
- US President Trump intends to keep a military presence in Iraq to keep tabs on Iran. He will ignore intelligence officials if their view differs from his. Next, he’s confident that deals with both China and North Korea are on the horizon.
- Stephen Barclay, UK Brexit minister, is setting up a new working group of Conservative lawmakers to find an alternative plan to avoid a post-Brexit border in Ireland. Meanwhile, the EU still rules out a reopening of the exit deal.
- Approvals to build new homes in Australia collapsed to five-year lows in December as sliding house prices and a squeeze on credit hammered the apartment market. (Reuters)
- Oil prices held gains near two-month highs after US production growth is slowing to the lowest level in 9 months, in times of OPEC supply cuts and US sanctions on Venezuela. A barrel of crude (Brent) oil changes hands at $62.75.
- Today’s economic calendar is feather light with EMU producer inflation data, and the UK Markit/CIPS Construction PMI. Alphabet (Google) reports Q4 earnings. Chinese markets are closed for the week
Currencies: Strong US Eco Data Fail To Inspire Directional USD Move
EUR/USD largely ignores strong US data
USD trading calmed down on Friday. The reaction to Wednesday’s Fed decision and the subsequent euro decline on Thursday had run their course. EMU eco data (final PMI’s and Jan CPI) were again soft but as expected. EUR/USD started a cautious technical intraday rebound. US payrolls and the manufacturing ISM (56.6) were strong, but neither was able to cause a protracted USD rebound. Interest rate differentials between the USD and the euro rewidened on the strong US data, but hardly filtered through into the FX market. EUR/USD finished the day at 1.1456 (from 1.1448). The price pattern of USD/JPY was a bit more convincing. USD/JPY closed the week at 109.50 (108.89 on Thursday). This morning, Asian equities (Chinese and Korean markets are closed) are trading mixed to cautiously higher. USD/JPY (109.75) extends Friday’s rebound. The 110 ST range top is coming within reach. The Aussie dollar declined as December building approvals printed very weak (-22.5% Y/Y). Uncertainty on housing and mortgage markets might be an issue at tomorrow’s RBA policy meeting. EUR/USD is trading with a minor negative bias this morning (1.1440 area). There are only second tier eco data in EMU today. In the US, the order data are scheduled for release. We don’t expect these data to really affect market sentiment in the wake of last week’s change in the Fed’s communication. During the weekend, US president Trump sounded quite optimistic on the US-China trade talks. However, there probably won’t come any concrete news on this issue anytime soon. Risk-sentiment looks neutral to slightly constructive. Last week, the post-Fed USD decline halted soon, mainly due to poor EMU eco data. However, the subsequent USD comeback also had no strong legs. More sideways EUR/USD trading might be in the cards. Given the price action at the end of last week, we assume the EUR/USD downside to be rather well protected. USD/JPY maintains a constructive momentum. A break beyond the 110 resisistance would further improve the technical picture.
EUR/GBP initially rebounded on Friday as investors took further profit on the recent sterling rebound. A soft UK manufacturing PMI weighted on sentiment, too. However, sterling selling eased later in the session. This week’s, talks between the UK and EMU on Brexit will continue. However, a workable solution is not evident. A cautious BoE (Thursday) and a soft inflation outlook might be also cap further GBP-gains.
EUR/USD: USD shows no clear trend despite strong US eco data
