Market Roundup
Senior US official – Currency manipulation not at top of Trump’s list of topics at summit with Japan PM Abe, could come up in talks – Reuters.
US President Trump speaks with China Pres Xi, backs One China policy – FT.
President Trump’s travel ban remains blocked, appeals court rejects bid to reinstate, appeal to Supreme Court likely – NY Times, other media.
Chicago Fed Evans – Three hikes reasonable for ’17 – Reuters.
Foreign CB US debt holdings +$3.790 bln to $3.169 trln Feb 8 week, Treasury holdings +$3.543 bln to $2.851 trln, agencies -$258 mln to $255.777 bln.
NY Fed – Swaps with foreign CBs $265 mln Feb 8 week, all with ECB.
Lipper – Investors put $7.5 bln in US-based bond funds in February 8 week.
Japan Jan domestic corp goods price index +0.6% m/m, +0.5% y/y, Dec +0.7%, -1.2%, no y/y rises recorded in ’16, first rise in almost two years.
Revamped Japan Hitachi gearing up for Y1 trln acquisition spree – Nikkei.
Foreign investment in China slows as labor, land costs weigh – Nikkei.
China Jan trade surplus $51.35 bln, $47.9 bln forecast, exports +7.9%, imports +16.7%, +3.3% and +10.0% forecst, surplus with US $21.37 bln, Dec $21.73 bln, China Customs sees pressure on exports to ease at start of Q2.
China Jan trade surplus CNY354.53 bln, exports +15.9% y/y, imports +25.2%.
China Jan iron ore imports +3.4% m/m, crude imports third highest on record.
RBA monetary policy statement – Holding policy steady consistent with growth- inflation targets, appreciating AUD could complicate economy’s transition, cuts June ’17 GDP forecast to +1.5-2.5%, Dec unch at +2.5-3.5%, inflation 1.75% June ’17, 1.5-2.5% out to Dec ’18, 2-3% by June ’19, China better.
Australia Dec owner-occupied housing finance +0.4% m/m, +1.0% forecast, value of investment housing finance -1.0%.
Economic Data Ahead
(0200 ET/0700 GMT) Norway Jan CPI, +0.2% m/m, +3.0% y/y forecast; last -0.5%, +3.5%, index 146.0.
(0200 ET/0700 GMT) Norway Jan – core, +0.1% m/m, +2.6% y/y forecast; last -0.4%, +2.5%.
(0200 ET/0700 GMT) Norway Jan PPI; last +7.2% y/y.
(0245 ET/0745 GMT) France Q4 non-farm payrolls, +0.3% q/q forecast; last +0.3%.
(0245 ET/0745 GMT) France Dec ind production, -0.7% m/m forecast; last +2.2%.
(0400 ET/0900 GMT) Italy Dec ind production, unch m/m, +3.3% y/y forecast; last +0.7%, +3.2%.
(0430 ET/0930 GMT) Great Britain Dec ind production, +0.2% m/m, +3.2% y/y forecast; last +2.1%, +2.0%.
(0430 ET/0930 GMT) Great Britain Dec mfg production, +0.5% m/m, +1.8% y/y forecast; last +1.3%, +1.2%.
(0430 ET/0930 GMT) Great Britain Dec construction output, +1.0% m/m, -0.5% y/y forecast; last -0.2%, +1.5%.
(0430 ET/0930 GMT) Great Britain Dec trade balance, GBP11.5 bln deficit forecast; last GBP12.16 bln def.
(0430 ET/0930 GMT) Great Britain Dec - non-EU, GBP 3.3 bln deficit forecst; last GBP 3.58 bln def.
(0830 ET/1330 GMT) United States Jan import/export prices, +0.2%, +0.1% m/m forecast; last +0.4%, +0.3%.
(1000 ET/1500 GMT) United States Feb U.Mich sentiment index – prelim, 97.9 forecast; last 96.0.
(1400 ET/1900 GMT) United States Jan Federal budget, $40.0 bln surplus forecast; last $28.0 bln deficit.
Key Events Ahead
(0450 ET/0950 GMT) ECB Mersch presentation in Hamburg.
(0500 ET/1000 GMT) ECB/Buba Weidmann speaks at Hamburg ceremony.
(0500 ET/1000 GMT) Italy E6.5 bln 12-month BOT auction.
(0600 ET/1100 GMT) UK DMO GBP0.5/1.0/1.0 bln 1/3/6-month treasury bill auctions.
Saturday FOMC Vice Chair Fischer speaks at Coventry, UK economics conference.
FX Beat
DXY: The rose across the board on the back of the U.S. President Donald Trump's tax talk and the resulting spike in the U.S. stocks and treasuries. The greenback against a basket of currencies traded up at 100.69, having hit a high of 100.73 earlier in the session, it’s strongest since Jan. 30. FxWirePro's Hourly Dollar Strength Index stood at 40.57 (Neutral) by 0500 GMT.
EUR/USD: The euro attempted a minor recovery after declining in the previous session following comments by U.S. President Donald Trump that he would announce his tax reform plan in the next few weeks. However, political concerns ahead of France's presidential election continued to weigh on the major. The European currency edged up 0.1 percent to 1.0661, hovering away from a low of 1.0640 hit on Wednesday, it’s lowest since Jan. 30 but was down 1.2 percent for the week. FxWirePro's Hourly Euro Strength Index stood at -1.15 (Neutral) by 0400 GMT. Investors’ will continue to track overall market sentiment, ahead of the U.S. import/export prices and Michigan Consumer Sentiment index. Immediate resistance is located at 1.0676 (Jan 19 High), a break above targets 1.0706 (20-DMA). On the downside, support is seen at 1.0625 (Jan-20 Low), a break below could drag it till 1.0600.
USD/JPY: The dollar rose to a 9-day high above the 113.50 level after the U.S. President Donald pledged to announce major tax cuts to lower the burden on businesses in the coming weeks. Moreover, rising U.S. Treasury yields and better-than-expected U.S. unemployment benefits report, which showed jobless claims unexpectedly fell last week to near a 43-year low strengthened the bid tone around the major. The major trades 0.4 percent higher at 113.69, having hit a high of 113.79 earlier, it’s highest since Feb 1. FxWirePro's Hourly Yen Strength Index stood at 94.96 (Slightly Bullish) by 0400 GMT. Investors’ attention remains on the developments surrounding Trump and Japan PM Abe’s meeting scheduled later today amid improved risk sentiment following upbeat Chinese January trade data. Immediate resistance is located at 114.00, a break above targets 114.42 (Jan 23 High). On the downside, support is seen at 112.94 (10-DMA), a break below could take it near 112.64 (Feb 1 Low).
GBP/USD: Sterling steadied around the 1.2500 handle, after declining from a 1-week high hit in the previous session, as comments by U.S. President Donald Trump on taxation sent the dollar broadly higher. Sterling trades 0.1 percent higher at 1.2507, after rising to a high of 1.2582 on Thursday, it’s strongest since Feb. 2. FxWirePro's Hourly Sterling Strength Index stood at 66.92 (Bullish) by 0400 GMT. Investors’ focus will remain on the UK trade balance, industrial and manufacturing production, ahead of the U.S. economic data. Immediate resistance is located at 1.2550, a break above could take it near 1.2600 (Jan. 30 High). On the downside, support is seen at 1.2458 (21-DMA), a break below targets 1.2364 (trendline joining 1.2260 and 1.2346. Against the euro, the pound trades 0.05 percent up at 85.23 pence, having hit a high of 84.93 the day before, it’s strongest since Feb. 1.
AUD/USD: The Australian dollar gained after the Reserve Bank of Australia provided an optimistic view of the economy, strengthening views that further interest rate cuts were off the table. Moreover, better-than-expected Chinese trade data release, which showed trade surplus rose to 354.5 billion yen versus 307.25 billion yen expected and 275.40 billion previous also provided strong support to the Aussie. The major gained 0.25 percent to 0.7643, but remained between a narrow trading band of 76-77 U.S. cents. FxWirePro's Hourly Aussie Strength Index stood at 103.74 (Highly Bullish) by 0400 GMT. Investors will continue to digest RBA monetary policy statement, ahead of the U.S. macro fundamental drivers. Immediate support is seen at 0.7610 (Previous Session Low), a break below could drag it near 0.7574 (21-DMA). On the upside, resistance is located at 0.7680 (Feb 6 High), a break above targets 0.7700.
NZD/USD: The New Zealand dollar edged up after hitting a 2-1/2 week low in the previous session following Reserve Bank of New Zealand’s dovish stance. The RBNZ kept its official cash rate steady at 1.75 percent and hinted it could hold it for two years or more. The Kiwi trades 0.1 percent up at 0.7191, having hit a low of 0.717 on Thursday, it’s weakest since Nov. 23. FxWirePro's Hourly Kiwi Strength Index was at -156.80 (Highly Bearish) by 0400 GMT. Investors will continue to track NZ-US yield spread, ahead of series of U.S. economic data. Immediate resistance is located at 0.7220 (23.6 % retracement of 0.7375 and 0.7173), a break above could take it near 0.7281 (10-DMA). On the downside, support is seen at 0.7158 (Jan 23 Low) a break below could drag it lower 0.7150.
Equities Recap
Asian shares traded near 18-month highs, following an overnight rally on Wall Street after U.S. President Donald Trump said he would make a major tax announcement in a few weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1 percent and was on track to gain 1.1 for the week.
Tokyo's Nikkei rose 2.39 percent to 19,360.17 points, Australia's S&P/ASX 200 index gained 0.91 percent to 5,716.30 points and South Korea's KOSPI was trading 0.52 percent up at 2,076.02 points.
Shanghai composite index climbed 0.57 percent to 3,201.21 points, while CSI300 index was trading 0.61 percent up at 3,417.58 points.
Hong Kong’s Hang Seng was trading 0.6 percent higher at 23,666.91 points. Taiwan shares added 0.68 percent at 9,655.59 points.
Commodities Recap
Crude oil prices declined, reversing some of its previous session gains, as increasing U.S. fuel inventories offset OPEC-led production cuts. International benchmark Brent crude was trading 0.04 percent lower at $55.68 per barrel by 0349 GMT, pulling away from a low of $54.43 hit on Wednesday, its weakest since Jan. 20. U.S. West Texas Intermediate crude fell 0.1 percent at $53.06 a barrel, after falling as low as $51.20 earlier in the week, its lowest since Jan. 19.
Gold prices declined, extending losses of nearly 1 percent from the previous session, as the dollar strengthened following robust U.S. economic data that boosted expectations of a U.S. rate hike. Spot gold was down 0.3 percent at $1,224.36 per ounce by 0352 GMT, having hit its highest since Nov. 11 at $1,244.56 on Wednesday. U.S. gold futures dropped 1 percent to $1,224.40 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.4109 percent higher by 0.014 bps, while 5-year yield was up by 0.015 bps at 1.8849 percent.
The Australian government bonds snapped rally on the last trading day of the week after the Reserve Bank of Australia maintained relatively stable economic outlook in the near-to-medium-term. The yield on the benchmark 10-year Treasury note bounced 5-1/2 basis points to 2.70 percent, the yield on 15-year note also jumped 5-1/2 basis points to 3.15 percent and the yield on short-term 2-year rebounded 4-1/2 basis points to 1.83 percent.
The New Zealand government bonds snapped a long streak of gains as investors booked in profits on the last trading day amid a subdued session that witnessed data of little economic significance. The yield on the benchmark 10-year bond jumped 3-1/2 basis points to 3.22 percent at the time of closing, the yield on 7-year note surged 2 basis points to 2.83 percent and the yield on short-term 2-year note traded 21/2 basis points higher at 2.20 percent.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 2-year fell 6 Canadian cents to yield 0.754 percent and the 10-year declined 52 Canadian cents to yield 1.681 percent. The 10-year yield touched a two-month low at 1.607 percent on Wednesday.
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