- Rates: Counting down to tomorrow’s US CPI prints
US Note futures’ gains remained rather small after Friday’s below consensus payroll/wage growth print. This morning’s Asian trading start is slow and that will probably remain so given the empty eco calendar. Tomorrow’s US CPI inflation print will keep investors side-lined. - Currencies: EUR/USD decline aborted after ‘mediocre’ US payrolls
A solid USD (out)performance was blocked after a mixed US payrolls report on Friday. EUR/USD again rebounded back higher in the 1.1066/1.1250 ST trading range. US CPI next tomorrow is the next important reference for USD trading. Sterling is trading slightly in the defensive after ongoing soft BoE comments of late.
The Sunrise Headlines
- Wall Street gave up on earlier highs following a disappointing US jobs report, eventually grinding up to 0.46% lower (Dow Jones) over the weekend. Asian stock markets are mostly colouring green with HK outperforming (+0.94%).
- The US and China have agreed to revive semi-annual talks to resolve economic disputes, aside from phase 2 trade talks,people familiar reported. The meetings were abandoned as a dragging trade war between the countries escalated.
- Iran witnessed a second night of anti-government protests after the country admitted it had erroneously downed a Ukrainian jetliner that killed 176 people, following days of rebuffing such allegations.
- French president Emmanuel Macron held out an olive branch by discarding efforts to raise the retirement age for full pension benefits by two years to 64. The major concession to French unions aims to put a halt to a month of strikes.
- Influential BoE MPC member Gertjan Vlieghe stated he would vote in favor of a rate cut at the upcoming meeting later this month, barring an “imminent and significant” improvement in the UK’s growth data.
- Taiwan president Tsai Ing-wen won a landslide victory over his more China-friendly opponent Han Kuo-yu. The victory echoes the Taiwanese people’s push to defend the region’s sovereignty and democracy against Beijing’s interference.
- Today’s economic calendar is little inspiring leaving trading up to global sentiment as all eyes are on the phase 1 trade deal. Fed speeches (Bostic & Rosengren) are due, providing insights on the US economy/monetary policy.
Currencies: EUR/USD Decline Aborted After ‘Mediocre’ US Payrolls
USD ascent capped by mixed US payrolls
Geopolitical tensions around Iran gradually faded last Friday as the dominant driver for global (FX/USD) trading. The focus turned to US payrolls. EUR/USD drifted below the 1.11 level in the run-up to the payrolls release. The overall report still suggested a healthy US labour market, but both January job growth (145 000) and wage growth (AHE 2.9%) missed the consensus estimate. This miss aborted recent USD rebound. US yields and the dollar made a modest step backward. EUR/USD finished at 1.1121 (from 1.1106 on Thursday). USD/JPY closed the day only marginally lower at 109.45.
This weekend, there were plenty of headlines on domestic protests in Iran, but the impact on global trading is limited. Asian equities show modest to decent gains. A lower oil price and the prospect of a US-China trade deal to be signed this week are creating a positive market mood. The yuan rebound accelerates with USD/CNY testing the 6.90 level. USD/JPY (109.60/65 area) reversed the post payroll loss. Contrary to last week, the euro also profits from constructive overall sentiment. EUR/USD is changing hands in the 1.1125/30 area. Today, there are no important EMU or US data. Later this week, the signing of the US-China trade deal (Wednesday) will grab the headlines. Regarding the data, we keep a close eye on the US CPI (Tuesday) and the retail sales (Thursday). There are few EMU data.
Last week, the dollar outperformed but the ascent was capped by mixed payrolls. EUR/USD dropped below 1.11, but 1.1066 support survived. Easing trade tensions might be a mildly positive for the likes of the yuan and the euro. On the other hand, a further rise in US CPI might provide interest rate support for the USD. EUR/USD 1.1066 remains our first downside reference. A rebound above 1.1180 would call off the downside alert. Still, a ST break beyond 1.1250 looks far from easy.
On Friday, sterling tried to fight back after soft comments from BoE’s Carney on Thursday. However, EUR/GBP still closed north of 0.85. This weekend, BoE’s Vlieghe in an FT interview said he will support a January interest rate cut if data don’t improve. Recent soft BoE comments are weighing on sterling. EUR/GBP extends gains beyond 0.85. Today, UK November production data will be published. They are from the pre-election era, but after recent BoE comments, sterling might be a bit more sensitive to weak data.
EUR/USD decline aborted after mixed payrolls.
