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Dagelijkse Markt Analyse 11 Januari 2019
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• Franc and Yen rise as European politics undermine risk appetite
• Pound down as Brexit talks stall, Sweden coalition-building fails
• Upbeat US retail sales statistics may amplify risk-off momentum
The Swiss Franc outperformed as worries about EU politics soured sentiment at the start of the trading week. The likewise anti-risk Japanese Yen was not far behind. Brexit talks appeared to stall, souring recent hopes for an imminent breakthrough and sinking the British Pound. Meanwhile, coalition-building efforts failed in Sweden, underscoring yet another pocket of EU-linked instability and punishing the Krona.
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• Pound eyes Brexit breakthrough clues before EU leaders’ summit
• Euro weighs risk of Rome vs. Brussels clash as Italy’s Conte speaks
• NZ Dollar gains on upbeat CPI, Yen down as APAC bourses rise
The New Zealand Dollar outperformed in Asia Pacific trade, building on earlier gains in the wake of unexpectedly strong local CPI data. The Australian Dollar struggled however, seemingly weighed down by a dovish tone in minutes from the latest RBA policy meeting. The Japanese Yen fell as most APAC shares tracked higher, sapping the appeal of the standby anti-risk unit.
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• UK CPI data unlikely to inspire a lasting response from FX markets
• Pound and Euro volatility likely as EU leaders discuss Brexit, Italy
• US Dollar, Yen may rise as hawkish FOMC minutes sour sentiment
UK CPI data headlines the economic calendar in European trading hours. Inflation is expected to slow, with the headline on-year rate ticking down to 2.6 percent after hitting a six-month high at 2.7 percent in the prior month. Absent an improbably dramatic deviation from forecasts, the outcome may pass with little lasting impact on the British Pound.
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• Aussie Dollar upswing following September jobs data unlikely to last
• Japanese Yen aims higher as S&P 500 futures point to risk aversion
• US Dollar may rise as “Powell put” hopes fade after FOMC minutes
The Australian Dollar narrowly outperformed in Asia Pacific trade after September’s labor-market datashowed the unemployment rate unexpectedly fell to 5 percent, the lowest since April 2012. The currency rose alongside local bond yields, suggesting markets interpreted the outcome as supportive for RBA interest rate hike prospects.
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• Yen, Franc, US Dollar fall as commodity currencies rise in risk-on trade
• FTSE 100, S&P 500 futures hint at upbeat mood through the week-end
• Rebound in risk appetite unlikely to be lasting as marquee fears remain
Corrective flows defined G10 FX price action in Asia Pacific trading hours. The Japanese Yen, Swiss Francand US Dollar – all beneficiaries of yesterday’s risk-off push – traded broadly lower. At the opposite end of the sentiment spectrum, the Australian, Canadian and New Zealand Dollars traded higher.
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• Canadian Dollar retracing higher after Friday’s CPI-inspired selloff
• ASX 200, Aussie Dollar down as Liberals lose parliamentary majority
• Japanese Yen at risk as stock index futures point to risk-on sentiment
Major currencies started the trading week in a consolidative mood, with a bare-bones economic calendar seemingly leaving markets rudderless. The Canadian Dollar edged narrowly higher, retracing after Friday’s steep decline on the back of disappointing CPI data.
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• GBP Could Sink to 2018 Lows on Leadership Challenge
• Centrist MP Joins Tory Rebels in No-Confidence Letter
As Brexit discussions enter its most difficult phase yet, PM May once again finds herself under intense scrutiny at the top of a fractured government that is unable to unite over her plans to leave the European Union. Talk surrounding a leadership challenge has been on the rise following reports that an unnamed centrist Tory MP has sent a letter of no-confidence, while Tory rebels have become increasingly critical after Brexit negotiations reached an impasse with the UK and EU failing to agree on a workable solution over the Irish border issue.
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• Yen down, Aussie and NZ Dollars as corrective flows define APAC trade
• S&P 500 futures point sharply lower, hinting risk-off trade set to return
• Euro unlikely to find lasting direction cues from October PMI roundup
The sentiment-geared Australian and New Zealand Dollars traded higher while the anti-risk Japanese Yen retreated as the G10 FX currencies retraced following yesterday’s market rout. These moves may soon reverse course however as futures tracking the bellwether S&P 500 index point convincingly lower before the opening bell on Wall Street, hinting another bout of risk aversion is in the cards ahead.
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• ECB interest rate decision in focus, no core policy changes expected
• Slowing growth, Italian turmoil may cast doubt on tightening outlook
• Euro may fall as Draghi presser hints at dovish guidance adjustment
All eyes are on the ECB rate decision in European trading hours. A change is policy is not expected but the press conference with central bank President Mario Draghi following the policy announcement will be closely monitored for a forward guidance update.
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• Yen up, commodity dollars down as risk appetite evaporates in APAC trade
• De-risking may now be a kind of “new normal” for global financial markets
• Third-quarter US GDP data may encourage the sentiment meltdown further
Risk aversion returned with a vengeance in Asia Pacific trade after a brief respite Thursday. Most regional stock indices sank, pulling the sentiment-geared Australian, Canadian and New Zealand Dollars down along the way. The perennially anti-risk Japanese Yen dutifully outperformed.
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• Aussie, NZ Dollars rise as sentiment steadies in APAC trade
• S&P 500 futures hint at renewed anti-risk liquidation ahead
• WTO weighs US vs. China spat, US PCE inflation data due
The sentiment-geared Australian and New Zealand Dollars narrowly outperformed as risk appetite cautiously firmed in Asia Pacific trade. Many of the region’s bellwether bourses edged higher, although a drop in mainland Chinese names tarnished overall performance.
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• Yen down, commodity currencies up as Trump talks up China trade deal
• Sentiment recovery unlikely to prove lasting as macro headwinds remain
• Eurozone GDP, German CPI data to bolster the case for Euro weakness
Recovering risk appetite defined G10 FX performance in Asia Pacific trade. The sentiment-geared Australian, Canadian and New Zealand Dollars rose alongside regional stock exchanges while the perennially anti-risk Japanese Yen ticked broadly lower.
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• US dollar rally on hold after running riot on Tuesday but further gains expected.
• US Mid-Term elections (November 6) now fully in focus.
The recent rally in the greenback, to within a whisker of a fresh 16-month high, is on hold for now as traders look ahead to the latest US jobs report on Friday (non-farm payrolls) and next week’s US Mid-Term elections on November 6. Friday’s jobs data is expected to confirm that the US economy is still running hot and will add credence to the Fed’s tightening policy. No US rate hike is expected at next week’s FOMC meeting, but the market has priced in another 0.25% rate hike in December.
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• British Pound lifted as Times, FT reports stoke November Brexit deal hopes
• BOE “Super Thursday” may boil down to comments from Governor Carney
• Australian, New Zealand Dollars soar as China hints at more fiscal stimulus
The British Pound rose in Asia Pacific trade amid a burst of Brexit-related optimism. A Times report claimed that the UK and EU have reached a tentative deal on financial services. Separately, the FT reported that UK Brexit Secretary Dominic Raab expects to conclude a final accord by November 21.
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• US Dollar may rise as upbeat jobs data bolsters Fed rate hike speculation
• Aussie, NZ Dollars rise with APAC stocks as anti-risk Yen underperforms
• Hopes for US/China trade accord swelling after “positive” Trump, Xi call
The sentiment-linked Australian, Canadian and New Zealand Dollars tracked rising stocks in Asia Pacific trade while the anti-risk Japanese Yen underperformed. Hopes for a breakthrough in the US trade war with China continued to drive optimism.
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• British Pound gains after Times article claims progress on Brexit deal
• New Zealand Dollar retreats from 3-month high before RBNZ meeting
• Yen may rise as markets become defensive before US midterm elections
The British Pound outperformed in overnight trade, seemingly buoyed another burst of Brexit-related optimism. That followed a Times article over the weekend claiming that Prime Minister Theresa May has secured enough concessions from her Brussels counterparts to keep the UK within the EU customs union, resolving the thorny issue of a hard post-Brexit border running through the island of Ireland.
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• US Dollar might gain as the Yen falls after midterm elections
• British Pound up as Times article hints at Brexit breakthrough
• Aussie and NZ Dollars rise with stocks in risk-on APAC trade
A quiet day on the economic data docket puts the spotlight on the outcome of midterm elections in the US. Baseline projections derived from polling data and implied in betting markets envision a divided Congress after the votes are counted, with Democrats reclaiming control of the House of Representatives while the Republicans retain a majority in the Senate.
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• US Dollar cautiously lower as midterm election outcome matches forecasts
• Yen higher, commodity FX down with APAC stocks on fiscal gridlock fears
• Bets on inflationary infrastructure plan may boost USD, cap JPY advance
The outcome of the US midterm elections proved to be squarely in line with baseline expectations. Democrats took control of the House of Representatives while Republicans successfully defended (and narrowly expanded) their majority in the Senate.
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• Gold and crude oil prices seesaw, echoing US Dollar after midterm election
• Intraday gains evaporated as markets risk appetite, Fed rate hike bets firmed
• Upbeat FOMC policy announcement may punish commodity prices further
Commodity prices seesawed in the aftermath of US midterm elections yesterday. Initial US Dollar weakness offered a lift as markets worried about fiscal policy deadlock after the Democrats secured a hold on the House of Representatives while Republicans successfully defended (and expanded) their majority in the Senate. The move came undone over the course of the day however, as expected.
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• Crude oil prices shrug off OPEC chatter, drop as US Dollar gains
• Upbeat FOMC registers as hawkish after October’s risk aversion
• Quiet data docket, idling sentiment may mark consolidative pause
Crude oil prices shrugged off chatter about a possible OPEC output cut in 2019, dropping as the US Dollar pushed upward ahead of FOMC monetary policy announcement. The Greenback’s ascent echoed a steepening of the priced-in rate hike path implied in Fed Funds futures, hinting that investors were positioning for the possibility of a hawkish outcome.
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