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The British pound is gathering downside momentum against the greenback on Monday, with price-action falling well below the 1.4100 level. The GBPUSD pair is currently trading around the 1.4070 level, which remains close to the current intraday price-low, at 1.4061. The sell-off in the pound is largely due to growing unhappiness inside the ruling Conservative party, over British PM Theresa May's handling of Brexit negotiations with the European Union.

GBPUSD selling is likely to gather momentum while trading below the 1.4082 level, with sellers aiming towards the 1.4041 and 1.4000 levels.

If price-action can move above the 1.4082 level on the GBPUSD pair, buyers may test towards the 1.4109 and 1.4171 levels.

The U.S dollar continues to see selling pressure against the Japanese yen in early week trading, with the pair so far ignoring a bounce-back in the broader U.S dollar index. The USDJPY pair currently trades well below the 109.00 mark, as buyers remain cautious after last week's strong sell-off in the U.S dollar. Traders now look to the release of the CORE PCE Index later today, and a steady stream of high-impacting macroeconomic data coming out from the United States economy this week.

The USDJPY pair to remain under pressure while price-action trades below the 108.98 level. Key downside support is located at 108.51 and 108.27.

If the USDJPY pair moves above the 108.98 level, further upside towards 109.30 and 109.59 seems possible.

The DAX is showing little movement in the Monday session. Currently, the index is trading at 13,334.50, down 0.04% since the close on Friday. On the release front, there is just one eurozone indicator. German Import Prices slowed to 0.3%, matching the estimate. On Tuesday, Germany releases Primary CPI and the eurozone publishes Preliminary Flash GDP for fourth quarter 2016. In the US, President Trump will deliver the State of the Union address.

The euro posted sharp gains on Thursday after comments from ECB President Mario Draghi, but the gains didn't last, as EUR/USD continues to show limited movement. Draghi was more dovish than expected, saying that the ECB was prepared to increase QE in "size or duration", a reminder to the markets that it is premature to expect normalization anytime soon. He added that interest rates would not rise until well after the ECB's asset-purchase program (QE) was over. The QE program will not end until September at the earliest, so Draghi essentially ruled out any rate hikes before early 2019. A new headache for ECB policymakers is the streaking euro, which has hit 3-year highs against the US dollar. EUR/USD has jumped 3.3% in January, as the dollar continues to struggle.

Investors are also concerned about the streaking euro, which could hurt exports and affect company earnings. The euro posted strong gains on Wednesday, after US Treasury Secretary Robert Mnuchin said that the US had no problem with a weak dollar. ECB policymakers were not pleased with Mnuchin's statement, and Mario Draghi, without naming Mnuchin, said that such comments amounted to "targeting the exchange rate". Mnuchin has since backtracked, saying that his words were taken out of context and that the US has a long-term interest in a strong dollar. President Trump added that Mnuchin was misinterpreted, but these attempts at damage control haven't had much effect, as EUR/USD has traded sideways since the Mnuchin comments.

Notes/Observations

Action-packed week ahead with Chair Yellen’s last FOMC meeting, President Trump’s State of the Union and heavy data highlighted by US payrolls on Friday

Asia:

Bank of Japan spokesperson noted that Gov Kuroda’s comments at WEF panel were intended to repeat the BoJ's official view that it expects to meet its 2% inflation target around FY19

China National Development and Reform Commission (NDRC) saw 2018 GDP growth between 6.5-6.8%

Europe:

ECB's Knot (Netherlands): central bank has to end its QE program as soon as possible, arguing that there’s not a single reason anymore to continue with it - Chancellor Hammond/Brexit Sec Davis/Business Sec Clark sent open letter to British businesses which reiterated pledge for speedy agreement on Brexit transition phase

Aims to reassure British companies who have called for more clarity on the Govt’s Brexit plans - German IG Metall union: 5th round of regional wage talks ended with no deal; Leadership had decided to call for 24hr strikes (as speculated)

Fitch affirmed France sovereign rating at AA; outlook Stable; Austria sovereign debt at AA+ with stable outlook

Americas:

President Trump will use his State of the Union address to build momentum for legislation on infrastructure and immigration (**Note: scheduled for Tuesday, Jan 30th)

Economic Data:

(DE) Germany Dec Import Price Index M/M: 0.3% v 0.2%e; Y/Y: 1.1% v 1.1%e

(FI) Finland Jan Consumer Confidence: 24.2 v 24.0 prior; Business Confidence: 16 v 17 prior

(ES) Spain Dec Adjusted Retail Sales Y/Y: 1.2% v 2.2%e; Retail Sales (unadj) Y/Y: 1.5% v 3.2% prior

(IT) Italy Dec PPI M/M: 0.0%e v 0.4% prior; Y/Y: 2.2%e v 2.8% prior

(IS) Iceland Jan CPI M/M: -0.1%e v +0.3% prior; Y/Y: 2.4%e v 1.9% prior

(AT) Austria Jan Manufacturing PMI: 61.3 v 64.3 prior (24th month of expansion)

Fixed Income Issuance:

(IT ) Italy Debt Agency (Tesoro)sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg Yield: -0.417% v -0.457% prior; Bid-to-cover: 1.39x v 1.43x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 - 0.2% at 399.8, FTSE flat at 7669, DAX -0.4% at 13287, CAC-40 -0.2% at 5521 , IBEX-35 -0.5 at 10544, FTSE MIB -0.2% at 23820 , SMI -0.2% at 9497, S&P 500 Futures -0.3%]

Market Focal Points/Key Themes: European Indices trade mostly lower this morning, tracking the declines in US futures after record closes on Wallstreet on Friday. News flow has been quiet ahead of a busy earnings week with Siemens, Vodafone, ING and Royal Dutch Shell some of the names reporting. AMS in Switzerland outperforms this morning after a sharp Revenue rise; To the downside Petra Diamond, Santhera and Bankia trade lower following earnings. In the M&A space Sanofi trumped Novo Nordisk by acquiring Ablynx in a €3.9B deal. Elsewhere RELX acquired ThreatMetrix for £580M and Schmolz + Bickenbach received court approval for the acquires of parts of Asco Industrials. Looking ahead notable earners include Seagate, Adient and Dominion Energy.

Movers

Consumer Staples [Conviviality [CVR.UK] -8% (Earnings)]

Financials [ Bankia [BKIA.ES] -3.3% (Earnings) ]

Healthcare [Santhera Pharma [SANN.CH] -3.3% (Earnings), Getinge [GETIB.SE] -6.2% (Earnings), Abylnx [ABLX.BE] +21%, Novo Nordisk [NOVOB.DK] -1.1% (Ablynx to be acquired by Sanofi for €45/shr) ]

Materials [Petra Diamond [PDL.UK] -8% (Prelim results, cuts outlook) ]

Technology [Wirecard [WDI.DE] +1.3% (prelim earnings), AMS [AMS.CH] +17% (Prelim FY17)]

Speakers

ECB's Praet (Belgium, chief economist): Policy will be data-dependent. Domestic price pressures remained subdued; ample degree of monetary accommodation was still needed

ECB said to will accept Spain Fin Min de Guindos to vice chancellor position if there is a consensus

Japan Currency Head Asakawa: To continue to monitor FX market closely; checking what was behind moves; should avoid FX competition; (in-line with G7 rhetoric). Reiterated that would not target FX for competitiveness and that excessive, disorderly moves had bad effects. FX volatility had increased and watching for nervousness or speculative moves

China PBoC Dep Gov Yi Gang: 2018 GDP growth expected to remain on a stable path. Debt and leverage ratios were too high . PBoC to study inclusion of shadow banking into MPA

Iraq State Organization for Marketing of Oil (SOMO) chief: jan exports seen between 3.5-3.55M bpd

Currencies

USD began the week with a small bit of retracement after six straight weeks of losses as FX speculators have been short of dollars. There are a plethora of key events during the week that could account for some of the squaring of USD positions dominated the data agenda, with the Janet Yellen's swan-song FOMC meeting, the ISM data and then the monthly payroll jamboree to come, as well as the State of the Union address. Overall dealers believe that upcoming US economic data won't turn the tide of dollar weakness. Also dealers noted that rise in US bond yields was doing little to support the greenback

EUR/USD in today’s session probed near the lows registered in the aftermath of Trump’s reply to the weak dollar environment last week. The pair tested 1.2385 before inching back above 1.24 in quiet trading. (President Trump noted late last week that the USD would strengthen as the economy did)

USD/JPY was only marginally higher and unable to remain above the 109 level in a quiet session.

Fixed Income

Bund Futures trades down 59 ticks at 159.22 as the German five-year bond yield touches 0%, highest level since 2015. Continued upside targets 162.00, while a move lower targets the158.75 low.

Gilt futures trade at 122.43 down 13 ticks as the 10-year yield hits the highest level since Feb 2017. Support continues to stand at 122.25 then 121.75, with upside resistance at 123.75 then 124.33.

Monday’s liquidity report showed Friday’s excess liquidity rose to €1.874T from €1.872T prior. Use of the marginal lending facility fell to €50M from €0M prior.

Corporate issuance saw 2 issuers raise $2.6B in the primary market.

Looking Ahead

(BR) Brazil Jan CNI Consumer Confidence: No est v 100.5 prior

05:25 (BR) Brazil Central Bank Weekly Economists Survey

06:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v 2.6% prior; Y/Y: No est v 6.8% prior

06:00 (IL) Israel to sell Bonds - 06:45 (US) Daily Libor Fixing

07:00 (RO) Romania to sell 1.35% 2019 Bonds

07:30 (BR) Brazil Dec Total Outstanding Loans (BRL): No est v 3.064T prior; M/M: No est v 0.4% prior; Personal Loan Default Rate: No est v 5.4% prior

08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week

08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Dec Personal Income: 0.3%e v 0.3% prior; Personal Spending: 0.4%e v 0.6% prior , Real Personal Spending (PCE): 0.4%e v 0.4% prior

08:30 (US) Dec PCE Deflator M/M: 0.1%e v 0.2% prior; Y/Y: 1.7%e v 1.8% prior

08:30 (US) Dec PCE Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.6%e v 1.5% prior

08:55 (FR) France Debt Agency (AFT) to sell combined 4.3-5.5Bin 3-month, 6-month and 12-month BTF Bills

09:00 (BE) Belgium Q4 Preliminary GDP Q/Q: No est v 0.3% prior; Y/Y: No est v 1.7% prior

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tend

10:30 (US) Jan Dallas Fed Manufacturing Activity: 25.4e v 29.7 prior

11:30 (BR) Brazil Dec Central Govt Budget Balance (BRL): -25.0Be v +1.3B prior

11:30 (US) Treasury to sell 3-Month and 6-Month Bills

15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 25bps to 4.50%

16:00 (KR) South Korea Feb Business Manufacturing Survey: No est v 82 prior; Non-Manufacturing Survey: No est v 78 prior

16:45 (NZ) New Zealand Dec Trade Balance (NZD): -0.1Be v -1.2B prior

18:30 (JP) Japan Dec Jobless Rate: 2.7%e v 2.7% prior; Job-to-Applicant Ratio: 1.57 v 1.56 prior

18:30 (JP) Japan Dec Overall Household Spending Y/Y: 1.5%e v 1.7% prior

Just a day before the Fed starts its two-day monetary policy meeting, the Bureau of Economic analysis will release figures on the core personal consumption expenditure price index (PCE), the Fed’s most preferred inflation measure. However, the results are less likely to drive to a rate hike on Wednesday as markets are already pricing in a 'no-change' rate decision. Still, any upside surprise in the data might generate hawkish feelings about the central bank’s appetite for tighter monetary policy before Jerome Powell replaces Janet Yellen as the new Fed chair in February.

On Monday at 1330 GMT, the US PCE inflation, which excludes food and energy is expected to stand pat at 1.5% y/y in December, finishing 2017 below the Fed’s target of 2.0%, while on a monthly basis the gauge’s change is said to inch up by 0.1 percentage points to 0.2%. Economists are challenged to explain the lack of inflation, as many of them are surprised to see the famous Philips curve, which presents the inverse relationship between inflation and unemployment rate, not holding in times when the central bank was using artificial ways to spread money to the markets. The nationwide unemployment rate hit a 17-year low of 4.1% in December, whereas in several states the jobless rate dropped to historically low levels. On the other side, inflation did not go in the direction predicted but instead eased from 1.8% in the beginning of 2017 to 1.5% y/y in the aforementioned month, with the Fed chair Janet Yellen characterizing the phenomenon a 'mystery'. That also brought doubts whether the gloomy inflation was indeed only transitory. Even so, policymakers remained optimistic that a strengthening labor market will push wage growth higher and eventually drive inflation towards the target probably by the end of this year.

On Friday, the Commerce Department showed that the US economy expanded by 2.6% y/y in initial estimates in the fourth quarter of 2017, failing to meet the 3.0% forecast and falling below the previous print of 3.2% as the trade deficit widened to its biggest since 2008. However, the parts of the report that mattered most for demand came in stronger than expected, pointing that price growth might gain momentum in 2018. Consumer spending turned the strongest in three years, rising by 3.8% y/y, while a measure of core inflation related to consumer spending hit the highest level in a year, jumping by 0.6 percentage points to 1.9% y/y. Hence, today’s readings on personal spending and personal income might also shed light to whether consumption forces have the strength to add speed to the slow-moving inflation and consequently help the Fed to stay on course with its stimulus reduction plans. Still, the market is currently betting that the central bank will hold rates unchanged at the end of its two-day meeting on Wednesday, probably signaling that a rate rise might only come in March.

Turning to forex markets, dollar/yen had its worst start of the year since 2003 last week, breaching the 200-day moving average and making a deep move downwards to the 108 key area. This week, data out of the US will dominate the calendar, with the PCE index being the first to test the greenback’s downside. A disappointing outcome would add further losses to dollar/yen, which could try to find a bottom at 108 psychological level. Any decreases from here would also shift focus to 107.31 critical handle, which if violated would turn the medium-term outlook from neutral to bearish. Alternatively, encouraging results would drive the market back to the 109 key mark, while larger deviations from forecasts would likely retest the area between 110 and 111.

US equity markets are on course to open slightly in the red at the start of what should be another big week for the world’s largest economy.

The S&P 500 and the Dow both made decent gains again on Friday and ended at record closing highs, so the fact that we’re seeing futures pare these isn’t too surprising. Especially when you consider the week the US has ahead of it, which includes almost a quarter of S&P 500 companies reporting earnings, the Federal Reserve monetary policy decision and Friday’s jobs report, to name just a few notable events.

Naturally, the start of the week is looking a little quieter but even then, we’ll get inflation, income and spending figures ahead of the open which will be of interest to traders. The core PCE price index comes a couple of weeks after its CPI alternative ticked higher to 1.8%, but with this being the Fed’s preferred measure of inflation, traders will be playing close attention to it. Inflation has struggled below target for too long as with some policy makers becoming anxious about this, we may need to see evidence of it approaching target soon or interest rate hike expectations will likely be pared.

The income and spending data is also of note to traders as ultimately, improvements in both of these areas should typically feed into the end goal of 2% inflation, not to mention stronger economic growth. With the data covering December, it's too soon for tax reform to have had a positive impact, something we should see over the course of this year. Still, we are expecting to see continued, albeit marginal, progress on both of these even in the absence of reforms.

Wednesday's Fed decision is widely being viewed as a write-off in terms of the odds of a rate hike, with it being Janet Yellen's last meeting as Chair and following December's increase. However, with tax reform having passed towards the end of the year, it may be interesting to see whether it has influenced policy makers views on the economy and inflation, particularly given the challenges with regards to the latter.

Friday's jobs report will ensure traders are kept on their toes this week. As ever, focus will likely be on the earnings component given the challenges the central bank is facing, but we'll also get figures on job creation and unemployment. Again, with tax reform having just passed, we'll likely have to wait a little while before the impact is seen in the jobs data.

Monday January 29: Five things the markets are talking about

U.S Treasuries have extended their selloff, pushing yields to its highest in three-years as capital markets prepare itself for a busy week of data releases and monetary policy announcements.

Note: Higher sovereign yields have given the 'mighty' U.S dollar a temporary lift from its multi-year lows against G20 currency pairs print from last week. Is this sustainable? Not if other sovereign yields back up at the same rate. U.S dollar bulls require a wider spread.

Investors can expect the FX market to most likely to continue to lean on the U.S dollar until they elicit another response from U.S Treasury Secretary Mnuchin that suggests, 'he cares' – because U.S economic data alone will find it rather difficult to turn the tide of the current general dollar weakness.

On Wednesday (Jan 31), Federal Open Market Committee (FOMC) gathers for Chair Janet Yellen's final meeting on interest rates before her term ends.

This is also jobs week in the U.S and on Friday (Feb 2) U.S employers are expected to have added more jobs in January than a month earlier. Government data is also expected to show the jobless rate held steady atop of its two-decade low, and the pace of wage growth picked up from a year earlier.

In China, estimates of Chinese manufacturing and services industries are due Wednesday (Jan 31), while in Europe, growth and inflation are on display this week. On Tuesday (Jan 30), data is expected to show the euro economy with a solid expansion, while on Wednesday (Jan 31), the core euro-zone inflation report may show an uptick from a year ago.

Elsewhere, the sixth round of NAFTA talks conclude in Montreal.

On Tuesday evening (9:00 pm EDT), President Trump delivers his first State of the Union address – he is expected to build momentum for legislation on infrastructure and immigration.

1. Global stocks rally pauses

U.S indices finished last week on yet another positive note pressing new highs.

In Japan, the Nikkei ended flat in choppy trade overnight, with gains in cyclicals (computer chips) offset by weakness in shares sensitive to domestic demand, notably railroad and construction companies. The broader Topix produced a small gain (+0.1%).

Down-under, Aussie shares rose +0.4% on Monday, led by financials, taking a cue from Wall Street, while in S. Korea, the Kospi hit another record high, climbing +0.91%.

In Hong Kong, the Hang Seng Index fell overnight, ending a seven-day winning streak, as the market took a breather after repeatedly hitting record highs. At close of trade, the Hang Seng index was down -0.56%, while the Hang Seng China Enterprises index fell -0.47%.

In China, stocks tumbled on Monday, with the blue-chip index posting its worst day in more than two months, led by a slump in consumer and healthcare firms as investors booked profits after a recent strong rally. The Shanghai Composite index was down -0.97%, while the blue-chip index was down -1.81%.

In Europe, regional indices trade mostly lower, tracking the declines in U.S futures after their record closes stateside Friday.

U.S stocks are set to open in the black (-0.3%).

Indices: Stoxx600 – 0.2% at 399.8, FTSE flat at 7669, DAX -0.4% at 13287, CAC-40 -0.2% at 5521, IBEX-35 -0.5 at 10544, FTSE MIB -0.2% at 23820, SMI -0.2% at 9497, S&P 500 Futures -0.3%

2. Oil dips as North American output soar, gold lower

Ahead of the U.S open, oil prices have dipped as soaring North American production is seen as undermining efforts led by OPEC and Russia to tighten supplies.

Brent crude futures are holding above +$70 per barrel, but are down by -19c from Friday's close at +$70.34 a barrel. U.S West Texas Intermediate (WTI) crude futures are at +$66.19 a barrel, up +5c.

Despite generally bullish sentiment, consensus believes the market is beginning to come under pressure from rising output in North America.

U.S crude production has grown by over +17% mid-2016 to +9.88m bpd in mid-January.

Note: Output is expected to break through the +10m bpd soon.

Baker Hughes on Friday stated that U.S energy companies added 12 oilrigs drilling for new production last week, taking the total to 759.

U.S production is already on par with top OPEC exporter, Saudi Arabia. Only Russia produces more.

Ahead of the U.S open, gold prices have eased a tad as the U.S dollar gained some lost ground. Nevertheless, the yellow metal continues to hover within striking distance of its 17-month high print of last week. Spot gold is down -0.2% at +$1,347.60 per ounce.

3. Likelihood grows for a Fed rate rise in March

The recent rise in U.S market inflation expectations – boosted by rising oil prices – goes someway to support the Fed's confidence in its inflation outlook.

Currently, the market is not expecting an interest rise at the policy decision on Wednesday (Jan 31) – the Fed fund odd's are +6% for a back up in o/n rates.

Note: It will be Chair Janet Yellen's final meeting on interest rates before her term ends.

The odd's for a hike in March – the first meeting this year that has a press conference and fresh projections outlook – is around +70%.

Note: The Fed's 'dot plot' forecasts three rate increases for 2018.

The yield on U.S 10-year Treasuries has backed up +4 bps to +2.70%, the highest in almost four-years. In Germany, the 10-year Bund yield increased +2 bps to +0.65%, the highest in more than two-years, while in the U.K, the 10-year Gilt yield climbed +1 bps to +1.451%, the highest in a year.

4. Dollar consolidates for now

The U.S dollar starts this week somewhat consolidating, as G10 currencies failed to break last Thursday's highs.

The dollar has advanced after capping a seventh week of losses on Friday. The yen (¥108.69) fell as the BoJ downplayed Governor Kuroda's comments on stronger inflation. The U.S dollar has been unable to remain above the psychological ¥109 level in a quiet session.

GBP (£1.4090) remains on the back foot as pressure builds on PM Theresa May over Brexit.

EUR (€1.2401) trades atop of its recent low registered outright after President Trump's reply to the 'weak' dollar environment comment last week. The pair tested €1.2385 before inching back above €1.24 in quiet trading.

Bitcoin (BTC) has climbed, holding its value above +$11,000 even after a heist of nearly +$500m in a different digital token prompted calls for more cryptocurrency regulation.

5. German import prices rose +3.8% y/y

The index of German import prices rose by +3.8% on an annual average in 2017 compared with 2016 (2016: –3.1% compared with 2015).

Note: This was the highest price increase since 2011 (+6.4% compared with 2010).

In December 2017 the index of import prices increased by +1.1% compared with the same month of the preceding year, and the lowest price increase since November 2016 (+0.3% compared with November 2015).

In November and in October 2017 the annual rates of change were +2.7% and +2.6%, respectively. From November to December 2017 the index rose by +0.3% m/m.

The euro has posted slight losses in the Monday session. Currently, EUR/USD is trading at 1.2419, down 0.09% on the day. On the release front, German Import Prices slowed to 0.3%, matching the forecast. In the US, today’s key event is Personal Spending, which is expected to edge lower to 0.5%. Tuesday will be busier, with key events on both sides of the pond. Germany releases Primary CPI and the eurozone publishes Preliminary Flash GDP for fourth quarter 2016. In the US, the key event is CB Consumer Confidence, and President Trump will deliver the State of the Union address.

The markets have become accustomed to GDP releases above 3.0%, so Advance GDP for Q4 was disappointing. The reading of 2.6% fell short of the estimate of 3.0%. The economy grew 2.3% in 2017, compared to 1.6% in 2016. Growth in Q4 was affected by stronger consumer spending, which led to a surge in imports. At the same time, the increase in consumer spending also boosted inflation, as the personal consumption expenditures index, which the Fed prefers to use, rose 1.9% in the fourth quarter, up from 1.3% in Q3. Meanwhile, the US manufacturing sector is booming, as durable goods orders in December hit 2.9%, crushing the estimate of 0.6%. This was the highest gain in six months, and helped make 2017 a banner year. Durable good orders increased 5.8% in 2017, the sharpest expansion since 2011.

The euro posted sharp gains on Thursday after comments from ECB President Mario Draghi, but the gains didn’t last, as EUR/USD continues to show limited movement. Draghi was more dovish than expected, saying that the ECB was prepared to increase QE in “size or duration”, a reminder to the markets that it is premature to expect normalization anytime soon. He  added that interest rates would not rise until well after the ECB’s asset-purchase program (QE) was over. The QE program will not end until September at the earliest, so Draghi essentially ruled out any rate hikes before early 2019. A new headache for ECB policymakers is the streaking euro, which has hit 3-year highs against the US dollar. Investors are worried that a stronger euro could hurt exports and company earnings. EUR/USD has jumped 3.3% in January, as the dollar continues to struggle.

Did the SNB intervene in the FX market to prevent further CHF strength?

The Swiss franc started the year in the best possible way against the single currency, at least in the view of the Swiss National Bank, as EUR/CHF climbed to its highest level since January 2015 and hit 1.1832. Unfortunately, for Thomas Jordan his team, this period of respite was short-lived as the currency pair headed back down over the last week and fell as low as 1.1572 during the Asian opening.

The second half of 2017 were like holidays for the SNB, with EUR/CHF climbing as much as 10% to reach 1.1832 on January 15th, and allowed the monetary institution to reduce dramatically – if not completely phasing out – it FX intervention. Indeed, total sight deposits at the SNB stabilized at around CHF 575 billion, down from the record level of CHF 579.7 billion reached in August last year.

Last night, EUR/CHF’s price action was volatile before the currency pair starts to pick up towards 1.1630. There is rumours that the SNB has had to step to stop further CHF appreciation. As usual, it is hard to tell whether the rumours are true or not. However, given the sharp appreciation of the Swiss Franc of the past couple of weeks, there is little doubt the central bank won’t stand and watch the CHF going to the moon. Market participants will get more information next Monday when the SNB will release its weekly report. We believe the central bank won’t let the currency pair move below the 1.15 threshold.

Japan economy is in good shape

Japan presents modest to promising economic results since the beginning of the year. The BoJ remained optimistic as to reaching its “medium- to long-term inflation expectations”, thus approaching its CPI Y/Y 2% target according to its January quarterly outlook for economic activity and prices report (effective December 31st 2017 inflation rate at 1%). With positive output gap, Japan is showing signs of improvement in private consumption (view lifted for the first time in 7 months by the Japanese Cabinet Office), though still not strong enough according to officials. Tight market conditions also allowed Japanese government’s view to be revised upward, with a December unemployment rate expected to remain at 2.70%, a 24-year low (release on January 30th 2018).

Consumer spending slow increase (December Core CPI Y/Y at 0.90%) is attributed to low wage growth according to Shinzo Abe who declared on December 26th 2017 that companies have to raise wages by 3% or more, in order to broaden the benefits of his Abenomics stimulus. On the trade side, Japan presented robust December Exports Y/Y at 9.30% (slightly below consensus at 10.10%) and December Imports Y/Y at 14.90%, suggesting economic data that are in line with global economic growth. This week we will be looking at December Retail Sales and Household Spending on Tuesday and December Industrial Production on Wednesday and see if these indicators are supporting growth.

Recent published indicators suggest that Japan might be on the way to leaving its 2-decades long stagnation phase, though the BoJ has still a long way to go until reaching its 2% headline inflation rate target.

Crude oil keeps increasing. Strong support is given at 60.93 (05/01/2018 low). Expected to keep increasing as demand remains strong.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness is very likely. For the time being the pair lies in an upside trend since June 2017. Support lies at 42.20 (16/11/2016) while resistance point is located at 77.83 (20/11/2014). Crude oil is trading largely above its 200 DMA.