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Dagelijkse Markt Analyse 11 Januari 2019
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• British Pound drops as UK PM May struggles for Brexit plan support
• Euro down before Italy vs EU clash, Sweden votes on new government
• US Dollar may be joined by Yen, Franc on the upside in risk-off trade
The Canadian Dollar outperformed in Asia Pacific trade, in move seemingly linked to a spirited recovery in crude oil prices. That followed from OPEC+ comments over the weekend hinting that the cartel and its allies may reduce output in 2019.
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• Yen down, Aussie and NZ Dollars up on US/China trade deal hopes
• Euro bounce may stall on budget clash between Italy, EU authorities
• British Pound still looks vulnerable as Brexit negotiators scramble
The Euro and the British Pound corrected higher following yesterday’s politically-driven bloodletting while the US Dollar retraced some of its explosive gains. Meanwhile, the sentiment-linked Australian and New Zealand Dollars rose while the anti-risk Japanese Yen traded broadly lower. That seems to be linked to hopes for de-escalation of the trade war between the US and China.
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• British Pound may look past UK CPI, all eyes on Brexit deal
• Euro is likely to focus on political turmoil in Italy and Sweden
• US Dollar may rise on inflation rise, hawkish Powell speech
UK CPI data headlines the economic calendar in European trading hours. The headline on-year inflation rate is expected to tick up to 2.5 percent in October, rebounding from a three-month low at 2.4 percent set in the prior month.
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• Pound may fall further as UK PM May brings Brexit deal to Parliament
• Yen, US Dollar may rise if hostile MPs stoke broader-based risk aversion
• Australian Dollar jump on upbeat labor market report may not be lasting
The British Pound turned broadly lowerin Asia Pacific trade. UK Prime Minister Theresa May managed to secure a Brexit deal with her EU counterparts and even managed to have it “grudgingly” approved by her cabinet, but eurosceptic members of her own Conservative Party have lined up in opposition. In fact, the road to parliamentary approval looks so treacherous that it may yet cost Mrs May her job.
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• Yen up, Aussie Dollar down as no-deal Brexit fears sour sentiment
• British Pound selloff may resume as UK PM Theresa May teeters
• Euro vulnerable on dovish comments from ECB President Draghi
Signs of deteriorating risk appetite began to emerge in the G10 FX space toward the end of an otherwise quiet Asia Pacific trading session. The sentiment-geared Australian and New Zealand Dollars declined in tandem while the anti-risk Japanese Yen traded broadly higher.
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• Yen gains as S&P 500 futures decline, hinting at a risk-off shift ahead
• Pound manages tepid gains despite growing pressure on UK PM May
• US Dollar may extend bounce as Fed’s Williams boosts rate hike bets
Corrective flows seemed to define price action for most G10 FX currencies at the start of the trading week. The US Dollar corrected higher after Friday’s selloff while the Australian and New Zealand Dollars backtracked having enjoyed impressive gains in the prior session. An uptick in trade war fears following some sharp comments from US Vice President Pence might have helped.
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• British Pound eyes Carney testimony amid “no deal” Brexit worries
• Australian Dollar down as AsiaPac stocks follow Wall Street lower
• NZ Dollar holds up as yields and demand tick higher at bill auction
Testimony from Bank of England Governor Mark Carney before a Parliament’s Treasury committee is in focus. MPs will grill Carney and a group of BOE top brass including the central bank’s Deputy Governor Jon Cunliffe and Chief Economist Andy Haldane on the latest Quarterly Inflation Report (QIR) and press them to opine on the Brexit deal advocated by Prime Minister Theresa May.
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• European Commission may push back against Italy on budget
• EDP trigger likely to stoke uncertainty, weighing on the Euro
• G10 currencies in corrective mode after sweeping risk aversion
European politics are back in focus for currency markets, with Italy now in the spotlight. The European Commission will report on the country’s budget, which it has said breaches the regional bloc’s fiscal rules. For its part, Rome has balked at amending its position.
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• Gold prices correct higher as the US Dollar retraces gains
• Crude oil prices manage meager bounce following plunge
• Thin market liquidity might amplify any kneejerk volatility
Commodity prices were in corrective mode yesterday after the prior session’s fireworks. Gold prices edged higher as the US Dollar retraced some of Tuesday’s gains while a cautious improvement in risk appetite helped buoy sentiment-sensitive crude oil prices. They rose alongside the bellwether S&P 500 index, seemingly ignoring EIA inventory data showing an unexpectedly large 4.85 million barrel build last week.
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• Yen down, commodity currencies up on optimism before G20 summit
• US Dollar lower as risk appetite firms, follow-through may be lacking
• Euro might decline on dovish comments from ECB President Draghi
A chipper mood on most Asia Pacific stock exchanges was on full display in the G10 FX space as the trading week began. The perennially anti-risk Japanese Yen traded broadly lower while the sentiment-geared Australian, Canadian and New Zealand Dollars advanced. The Kiwi even shrugged off early data-driven losses to participate.
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• Aussie, NZ Dollars rise with APAC stocks on G20-linked optimism
• British Pound broadly lower as Brexit deal hopes continue to fizzle
• US Dollar may rise as Fed comments boost rate hike expectations
The sentiment-linked Australian and New Zealand Dollars rose in Asia Pacific trade, echoing an upbeat mood on regional stock exchanges. Like yesterday, this seems to reflect hopes for de-escalation in the US vs. China trade war after presidents Trump and Xi meet at the G20 summit this weekend.
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• BOE’s Brexit analysis, FSR report may weigh on the British Pound
• Yen down, Aussie and NZ Dollars up on hopeful G20 summit outlook
• Canadian Dollar lower with local yields as BOC rate hike bets cool
The Bank of England is in focus in European trading hours. It will publish its Financial Stability Report (FSR), which will include stress test result for major UK lenders. The central bank’s analysis of the economic impact of a range of Brexit scenarios is also on offer. Governor Mark Carney will hold a press conference to explain the content on offer.
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• Dovish shift in Fed rate hike expectations likely an overreaction
• FOMC minutes may revive tightening bets, boosting US Dollar
• Euro likely to overlook slight downtick in German CPI inflation
German CPI data headlines the economic calendar in European trading hours. The headline inflation rate is expected to edge down to 2.4 percent on-year in November, retreating from the decade high of 2.5 percent set in the prior month.
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• US Dollar eyeing Trump, Xi meeting at G20 summit for its next move
• Trade war de-escalation may hurt Yen, boost Aussie and Kiwi Dollars
• Euro unlikely to find a potent catalyst in November CPI inflation data
Currency markets marked time in Asia Pacific trade as all eyes turn to Argentina, where a G20 leaders’ summit is getting underway. Traders were seemingly leery of committing one way or another before the conclave, which they hope will bring de-escalation in the trade war between the US and China. President Donald Trump floated the possibility of a deal ahead of his sit-down with counterpart Xi Jingping.
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• PM May faces legal challenge ahead of a pivotal week.
• Sterling gives back early gains and remains weak.
As we head into a pivotal week for PM May and her Brexit deal, MPs from both sides of the House are demanding that the government publish the full legal text of her Brexit deal and not the abridged version on offer. The MPs fear that the full version will show that the UK may not be able to leave the custom’s backstop, leaving the UK trapped in a custom union with the EU and unable to make its own trade agreements.
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• The USD price is weakening further: down Monday on news of a US-China trade war ceasefire, down Tuesday on misgivings that a long-term deal can be agreed.
• That may be because the US Treasury yield curve has flattened and partly inverted, seen by some as a harbinger of recession.
The USD price is easing again Tuesday as doubts emerge that a long-term US-China trade war deal can be reached after slipping back Monday on news of a temporary truce. US President Donald Trump and China President Xi Jinping have decided to hold off from imposing new tariffs for 90 days while they negotiate an agreement.
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• US Dollar higher as hawkish Williams speech boosts Fed outlook
• Aussie Dollar underperforms in APAC trade after soft GDP data
• Pound may rise as Parliament humbles UK Prime Minister May
The US Dollar led the way higher in Asia Pacific trade, rising against all its major counterparts. Recovering Fed rate hike expectations seemed to be at work following a rosy speech form New York Fed President John Williams. He sang the economy’s praises and argued that gradual rate hikes will remain appropriate in the coming year or so. The Australian Dollar underperformed following disappointing GDP data.
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• Yen soar as US/China trade détente hopes fade on Huawei CFO arrest
• Stock futures hint risk aversion aims to continue in European, US trade
• British Pound volatility elevated as PM May struggles with Brexit deal
The anti-risk Japanese Yen and Swiss Franc rose while the sentiment-geared Australian, Canadian and New Zealand Dollars plunged as risk appetite evaporated in Asia Pacific trade. The move follows news that Huawei CFO Wanzhou Meng was arrested in Canada on allegations of violating US sanctions on Iran.
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• US jobs report may signal data-driven Fed need not be dovish
• Rebuilding FOMC rate hike bets may broadly boost US Dollar
• Australian Dollar down as Chinese stocks lag in APAC trade
A quiet offering on the European data docket is likely to see traders looking ahead to November’s US jobs report for direction. An on-trend rise of 198k in nonfarm payrolls is expected, while the unemployment rate remains at a five-decade low of 3.7 percent and wage inflation at a nine-year high of 3.1 percent.
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• Talk gets louder that Tuesday’s Brexit vote may be postponed.
• Latest hard data shows UK economy slowing down.
UK PM Theresa May is expected to lose the Brexit agreement vote in the House on Tuesday by a large majority prompting increased speculation that the vote may be delayed allowing the PM extra time to talk with the EU over extra concessions. PM May spoke with EC President Donald Tusk over the weekend, along with Taoiseach Leo Varadkar, with the contentious Irish border high on the lists of topics discussed.
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