FX News Today

Euro weakness and commodity currency strength has been the central theme in forex markets in the wake of the ECB’s dovish guidance yesterday. The biggest mover has been the Russian rouble, which is up 3% against the dollar, and by more than this versus the euro as a 4%-plus rebound in oil prices sparked a rebound from record lows. EURAUD, EURNZD and EURCAD are also down notably today. AUDUSD climbed back above 0.7000 for the first time in eight days. EURUSD has remained above yesterday’s post-ECB low at 1.0777, but has remained heavy, giving back most of the rebound gains to 1.0900 in unraveling to the low 1.08s. The yen has mostly traded lower, except in the case against the euro, as its safe haven premium unwound. Japanese stock markets led Asian markets higher, closing 5.88% for the better — its second biggest one-day gain in the last five years, according to Bloomberg.

Draghi gave markets what they wanted, a clear hint that the ECB may extend easing measures further in March when the QE program will be reviewed again and Draghi highlighted that this move towards an easing bias, was adopted unanimously, which means it is also backed by Bundesbank President Weidmann. Draghi said in the introductory statement that the downside risks that emerged since the start of the year mean that there is the “need to review and possibly reconsider” the policy stance in March, when the next set of forecasts are available. In the Q&A session he was keen to highlight this part of the statement, which confirms that Draghi’s message to markets is that the ECB can and will do more if necessary. The question is what the ECB can still do – and Draghi didn’t go into detail when quizzed about that, just reiterated again that the ECB is willing to use all “instruments available”. So we could see a further QE extension and in particular an extension to other papers, as the pool of eligible assets is limited under the current structure of QE.

BoC Outlook: Rate cut bets that were unfulfilled have been moved ahead to March and April, according to Bloomberg, which cities futures pricing in roughly 50% odds for a cut by April. The  spotlights the contrast between the Bank’s optimism and the increasingly weaker domestic growth outlook. To review, the BoC’s lack of cut day before yesterday was accompanied by a still constructive growth outlook. Granted, 2016 GDP was slashed to 1.4% from 2.0%, but the return to full capacity growth was only delayed to the end of 2017 from 2017. We see a 1.3% growth rate in 2016, but downside risks abound.

 

Main Macro Events Today

• EMU PMI:We are looking for broadly stable PMI readings in January, with the Eurozone manufacturing reading seen steady at 53.2 (med same) and the services reading to 54.1 (med 54.2). Even German ZEW investor confidence, which naturally is much more sensitive for market moves, came in somewhat better than expected and French national business sentiment yesterday also showed a slight improvement. With Draghi sending the ECB on course for further moves in March, even a better than expected PMI reading may have limited impact, although it would underpin the recovery in stock markets.

• Canada CPI Preview: We expect CPI to expand at a 1.8% y/y pace in December (median +1.7%), accelerating from the 1.4% rate in November. CPI is seen falling 0.3% month comparable basis in December after slipping 0.1% in November. Gas prices fell 5.0% in December compared to November, which is expected to weigh on month comparable CPI. The BoC’s core CPI index is seen falling 0.2% m/m in December after the 0.3% drop in November.

•  US Existing Home Sales Preview: December existing home sales data is out Friday and should reveal a 11.3% headline increase to a 5.300 mln (median 5.120 mln) pace following the 10.5% drop to 4.760 mln in November.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FX News Today

The risk roller-coaster resumed in Asia where shares snapped back after Wall Street cut savage Wednesday losses into the close, with Japan’s Nikkei up 1.5% and Hong Kong Hang Seng +1.3%. China’s Shanghai Comp opened over 1.4% lower before rebounding 0.6% into the green after the PBoC injected a heavy dose of 110 bln yuan via 7-day reverse repos and 290 bln via 28-day reverse repos in the largest open market operation in 3-years. Commodities bounced back with crude oil back over $28 bbl, while copper and other industrial metals strengthened. The yen gave up some of its new-found strength as the dollar rose above 117.00 to highs of 117.47, while gold retreated below $1,100.

The 0.111% December US CPI drop with a lean 0.127% core price increase undershot estimates despite the expected 2.4% energy price slip and 0.2% food price decline thanks to a 0.2% apparel price drop that marked a fourth consecutive decline, a 0.1% new vehicle price dip, and a lean 0.1% medical care service price rise.

US housing starts declined 2.5% to 1.149 mln in December following the 10.1% jump in November to 1.179 mln (revised from 1.173 mln), while October’ pace was boosted to 1.071 mln from 1.062 mln. On an annual basis starts are up 6.4% y/y versus 17.1% y/y previously. Single family starts declined 3.3%. Multifamily starts slid 1.0%. Building permits fell 3.9% to 1.232 mln from a revised 1.282 mln (was 1.289 mln). Housing completions bounced 5.6% after two months of declines. The headline starts figure is disappointing, which won’t help investors’ shaky mindset.

Bank of Canada Holds Rates Steady and maintains constructive Outlook: The Bank of Canada held rates steady at 0.50%, maintaining their constructive view on domestic growth as the ongoing adjustment to lower oil and commodity prices is facilitated by already implemented rate cuts and the decent in the loonie. The outlook for global and domestic growth was cautiously upbeat. Our base case remains for no change in rates through year end, although a continuation of rock-bottom oil prices will keep the conversation skewed toward the possibility of another reduction as soon as March.

 

Main Macro Events Today

• ECB: Draghi likely to take wait and see stance for now,in line with other central banks. Even the doves at the ECB seem to think it is too early to react to the rout in global markets and that one needs to wait if current trends continue or if things settle down again. But even if the ECB is likely to stay on hold for now, Draghi will be very eager to keep the door wide open to additional measures later on and the tone of the press conference will almost certainly be more dovish than in December. The sharp drop in oil prices in particular will be a focus, but also the fact that Eurozone spreads are widening sharply again in line with the pickup in risk aversion, which highlights that the risk of a renewed flaring up of the Eurozone debt crisis has not been banned yet. March will be the next date to focus on as that will bring the updated set of staff projections. 

• US Philadelphia Fed Index: January Philly Fed is expected to improve to -7.0 (median -5.5) from -10.2 in December and -5.7 in November. This compares to the already releasedEmpire State index which plunged to -19.4 in January from -6.2 in December. Overall, we expect producer sentiment to trend sideways in January with and ISM-adjusted average of all major measures holding at 50 where it has remained since September. 

• US Initial Jobless Claims: Claims data for the week of January 16th are out today and are expected to show a decline to a 269k (median 272k) headline from 284k in the week prior. There is some downside risk to the release as post-holiday layoffs occur. January claims look poised to average 271k for the month, down from 277k in December.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

FX News Today

The yen is weaker amid improved risk appetite, while commodity currencies have firmed. This comes with oil and most other commodity prices gaining over 1% in the Asia session, and with stock markets rebounding, led by 3%-plus advances in the main China indexes. AUDJPY, which is the currency cross most correlative with China market sentiment, is up by 1.3% after Chinese YoY GDP numbers weren’t worse than expected. The AUD, meanwhile, is showing a 0.6% gain, and the CAD a 0.7% rise, against the USD. A further whittling in the yen’s safe haven premium has seen USDJPY climbed over 0.5% to the upper 117s. The EUR is mixed, down versus the USD but up versus the JPY.

China growth was weakest in 25 years, as shown by the latest GDP figures. The Q4 growth disappointed slightly (1.6% instead of 1.7% consensus expectation) and was down by 0.2% from the previous quarter. The year on year GDP change was in line with the expectations at 6.8% but was 0.1% slower than the previous figure.  Chinese government’s transition from infrastructure spending and export oriented economy to a consumer spending oriented economy hasn’t happened as quickly as was expected. Industrial production, retail sales and fixed asset investment all slowed in December but the overall growth in the Chinese economy is still encouraging.

German Dec HICP was confirmed at 0.2% y/y, the national CPI rate at 0.3% y/y, weaker than originally expected, but in line with preliminary data. National prices were down -0.1% m/m, driven by a 14.5% m/m drop in oil prices and a -4.4% m/m decline in petrol prices. Oil still continues to drive overall inflation trends then and excluding household energy and petrol, the headline rate would have been 1.1% y/y. Still this is down from 1.3% y/y in the previous month and 1.4% y/y in October, which will back the arguments of the doves at the ECB, which already pushed for more easing measures in December against German resistance. The current market rout and the drop in oil prices since then, which lead to even more pressure on Draghi to top up the measures already announced in December.

Main Macro Events Today

• German ZEW:The January set of confidence readings are likely to reflect the deterioration in global sentiment this year, especially ZEW Investor Confidence, which is seen falling to 9.0 (med 8.5) from 16.1 in December. Together with the ongoing rout on global stock markets and the pressure on oil prices, the numbers will likely see Draghi delivering a dovish press conference on Thursday, even if it seems the ECB will follow the BoE’s example and defer a final judgement of the impact of lower oil prices and slowing growth in China, to the next update of official forecasts and projections, which for the ECB is in March.

• BoE Governor Speech: Market participants are expecting the governor Carney to shed light on the Bank of England’s future monetary policy. We expect the BoE to hike interest rates by 25bp in Q2 2016, which would take the repo rate to 0.75%. This would be the first policy change since March 2009, and the first tightening since July 2007.

• US NAHB housing market index: is out today and forecast to rise to 62 in January from 61.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.