Friday animal spirits in good stead

The combination of a US-China Phase One signing and in-line US Retail Sales print has made waves overnight across the equities board and sees Friday animal spirits lift ahead of Asia open. An ASX jump at the opening bell to the tune of 36pts keeps ASX longs in party mode, and looks to consolidate a weekly close above the key psychological level of 7,000. AUD continues to lack conviction as traders await key Aussie employment data due for release on Jan 23 as the decider for what the RBA do early next month.

China growth gets eyeballs

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In the calendar, data risk lies ahead in China Q4 GDP and December activity data (1pm AEDT), which should draw its fair share of onlookers given the implications of China’s growth trajectory. If Q4 GDP prints in line with consensus at 6% y/y, this would go some way to ease concerns around China’s hard landing potential and keep GDP above the PBOC’s lower threshold.

God bless America

My view that the resilience of the US consumer and economy continues to attract portfolio flows remains intact following a solid batch of US data overnight. Positive prints across US Retail Sales, Initial Jobless Claims and the Philly Business Outlook have worked to support USD buying. US Dollar Index trades a touch above 97.3, while anti-risk USDJPY edges marginally above 110.

ECB minutes lack conviction

EURUSD initially ticked up on dovish-lacking ECB minutes but has since pulled back into 1.113 on USD driven inflows. Again, the story hasn’t really changed as markets await Lagarde’s ECB strategy review. Market pricing for a rate cut as it stands is low. There was one point of interest with “confidence expressed that policy rates had not yet reached the so-called reversal rate”. We’re seeing more and more interest from markets pricing out EUR downside risks associated with the ECB.

EM central banks make rate cuts

There was no respite in EM FX markets with Turkey and South Africa’s central banks slashing rates earlier than expected. Turkey’s CBT eased the weekly repo rate by 75bps largely in line with expectations, though, USDTRY still sold down given expectations ranged from 25bps to 150bps and country risk premium seems to be falling away slightly.

In South Africa, SARB issued a unanimous 25bps rate cut to 6.25%. While a cut wasn’t expected this early, the country’s bleak 2020 outlook given a wide-range of economic issues doesn’t surprise me. USDZAR rose to 14.43 at time of print.

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