Market Roundup

• UK Government loses Brexit Article 50 case as Supreme Court dismisses its appeal
• UK Supreme Court: PM May must get parliament approval to trigger Brexit
• Spokesman for May: Supreme Court ruling does not change plan to trigger Article 50 by end of March
• USD/JPY +0.6%, GBP/USD -0.6%, EUR/USD -0.3%
• DXY +0.2%, DAX -0.3%, Brent +0.6%, Gold -0.4%
• Germany Jan Flash Manufacturing PMI 56.5 vs 55.6 previous, 55.4 expected
• Germany Jan Flash Service PMI 53.9 vs 54.3 previous, 54.5 expected
• EZ Jan Manufacturing Flash Manufacturing PMI 55.1 vs 54.9 previous, 54.8 expected
• EZ Jan Flash Service PMI 53.6 vs 53.7 previous, 53.9 expected
• UK Dec PSNB GBP 6.421bln vs 10.830 bln revised previous, 7.0 bln expected
• UK Dec PSNCR GBP 36.294bln vs 20.013 bln revised
• Australia & New Zealand pledge to salvage TPP after US exit
• Japan FinMin Aso: Seeking understanding with the US on trade
• China outbound property investment to drop as capital curbs bite
• UK PM Theresa May plans China visit to bolster trade – FT

Economic Data Ahead

• (0730 ET/1230 GMT) Brazil’s current account deficit is likely to widen to $4.5 billion in December from 0.878 billion in the previous month.
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• (0900 ET/1400 GMT) Mexico’s annual inflation rate is expected to have increased 4.51 percent in the 12 months through mid-January, while core annual inflation rate is likely to have edged up to 0.35 percent in the first half of January.
• (0945 ET/1445 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of January. The index is likely edged up to 54.5 after posted a final reading of 54.3 in the previous month.
• (1000 ET/1500 GMT) National Association of Realtors is expected to report that U.S. existing home sales declined 1.1 percent to an annual rate of 5.52 million units in December after rising 0.7 percent to 5.61 million units in November.
• (1000 ET/1500 GMT) Federal Reserve Bank of Richmond will publish it Manufacturing Index for January. The index posted a rise of 8 in the prior month.
• (1030 ET/1530 GMT) The Conference Board releases Australia’s Leading Indicator for the month of December. The indicator posted a fall of 0.5 percent in the previous month.
• (1630 ET/2130 GMT) API reports its weekly crude oil stock.
• (1850 ET/2350 GMT) Japan’s Ministry of Finance reports merchandise trade balance for the month of December. The economy’s trade surplus is expected to rise to 270.0 billion yen from 52.5 billion yen in November.

Key Events Ahead

• (0945 ET/1445 GMT) FedTrade operation 30-yr Ginnie Mae (max $1.425 bn)
• (1145 ET/1645 GMT) FedTrade operation 15-yr Fannie Mae/Freddie Mac (max $775 mn)

FX Beat

DXY: The dollar recovered versus its major peers, boosted by rising U.S. Treasury yields amid risk-on market sentiment. The greenback against a basket of currencies traded 0.4 percent up at 100.38, recovering from a low of 99.89 hit overnight, its lowest since Dec. 8. FxWirePro’s Hourly Dollar Strength Index stood at -18.86 (Neutral) by 1100 GMT.

EUR/USD: The euro declined after hitting a 7-week high earlier in the session, as the greenback rebounded on the back of rising U.S. Treasury yields. Moreover, fresh selling seen in the EUR/GBP cross following the UK’s Supreme Court Brexit decision weakened the bid tone around the major. The European currency traded 0.3 percent lower at 1.0730, after rising as high as 1.0772 earlier, it’s highest since Dec 8. FxWirePro’s Hourly Euro Strength Index stood at 29.23 (Neutral) by 1100 GMT. Potential reversal Zone is around 1.08015 and any break above will take the pair till 1.08735. On the lower side, any break below 1.07280 (23.6% retracement of 1.05780 and 1.07548) will drag it down till 1.0665 (200- H MA)/1.0580.

USD/JPY: The dollar bounced back above the 113.00 handle after declining to a near 2-month low earlier in the session, as comments from the U.S Treasury Secretary Steven Mnuchin and a bounce in the U.S. Treasury bond yields boosted the greenback. The major trades 0.6 percent up at 113.37, after declining as low as 112.52 in early trade, it’s weakest since Nov 30. FxWirePro’s Hourly Yen Strength Index stood at 51.11 (Bullish) by 1100 GMT. The major resistance is around 114.02 (5- day MA) and any break above will take it till 114.85 (38.2% retracement of 118.61 and 112.57)/115.60 (daily Kijun-Sen). On the lower side, minor support is around 111.55 (127.2% retracement of 112.59 and 115.62) and any break below targets 111 (100- day EMA)/110.

GBP/USD: Sterling slumped below the 1.2500 handle after Britain’s Supreme Court ruled the government required parliamentary assent to trigger the start of the Brexit process.  Sterling trades 0.6 percent lower at 1.2453, after rising as high as 1.2544 earlier, it’s strongest since Dec. 15. FxWirePro’s Hourly Sterling Strength Index stood at 96.58 (Slightly Bullish) by 1100 GMT. The resistance is around 1.2550 and any break above will take the cable till 1.2590/1.26700. On the lower side, any break below 1.2415 (60- day EMA) will drag it down till 1.23330 (23.6% retracement of 1.19860 and 1.25447)/1.2200. Against the euro, the pound fell 0.3 percent to 86.16 pence, having hit a peak of 85.65 earlier in the day, it’s strongest since Jan. 6.

USD/CHF: The Swiss franc declined, reversing most of its previous session losses, as the greenback rebounded on the back of higher U.S treasury yields. The major trades 0.4 percent higher at 1.0006, having hit a low of 0.9959 earlier in the day, it’s lowest since Nov. 15. FxWirePro’s Hourly Swiss Franc Strength Index stood at -74.65 (Bearish) by 1100 GMT. The downside is capped by 38.2% fibo and any further weakness can be seen below 0.99575. The jump from 0.95490 till 1.03436 will come to an end if it breaks below 0.99575 level. On the lower side, any break below 0.99575 will drag it till 0.9925 (200- day EMA)/0.9860 (200- day MA).

AUD/USD: The Australian dollar eased after rising to a fresh 2-1/2 month high above the 0.7600 earlier, as the U.S. dollar rebounded across the board. The Aussie trades 0.3 percent lower at 0.7557, having touched a high of 0.7608 hit earlier in the session, it’s strongest since Nov. 11. FxWirePro’s Hourly Aussie Strength Index stood at -17.48 (Neutral) by 1100 GMT. On the higher side, the pair should close above 0.7600 for further bullishness. Any break above will take it till 0.7645/0.7700. The minor support is around 0.7550 (trend line joining 0.74934 and 0.75174) and break below will drag it till 0.7495 (10- day MA)/0.74350

NZD/USD: The New Zealand dollar tumbled from a 10-week high hit earlier in the day, as a rise in U.S. Treasury yields strengthened the bid tone around the U.S. dollar.  The Kiwi trades 0.1 percent lower at 0.7222, having hit a peak of 0.7264, it’s strongest since Nov. 10. FxWirePro’s Hourly Kiwi Strength Index was at 66.61 (Bullish) by 1100 GMT. Immediate resistance is located at 0.7264 (Session High), a break above could take it near 0.7300. On the downside, support is seen at 0.7187 (5-DMA), a break below could drag it till 0.7152 (10-DMA).

Equities Recap

European shares gained, lifted higher by commodity stocks, while the dollar recovered from recent lows amid concerns over the U.S. President Donald Trump’s protectionism stance.

The pan-European STOXX 600 index increased 0.26 percent to 361.96 points, while the FTSEurofirst 300 index rose 0.31 percent to 1,426.84 points.

Britain’s FTSE 100 trades 0.27 percent up at 7,170.49 points, while mid-cap FTSE 250 slumped 0.18 percent to 18,082.66 points.

Germany’s DAX jumped 0.21 percent at 11,570.16 points; France’s CAC 40 trades 0.17 percent higher at 4,830.28 points.

Tokyo’s Nikkei declined 0.55 percent to 18,787.99 points, Australia’s S&P/ASX 200 index rose 0.72 percent to 5,651.40 points and South Korea’s KOSPI shed 0.01 percent to 2,065.76 points.

Shanghai composite index gained 0.18 percent to 3,142.55 points, while CSI300 index climbed 0.01 percent to 3,364.45 points. Hong Kong’s Hang Seng rose 0.2 percent at 22,949.86 points.

Commodities Recap

Crude oil prices advanced as lower production by OPEC and other exporters tightened fuel market, however, an increase in the United States drilling activity capped upside. International benchmark Brent crude was trading 0.6 percent higher at $55.65 per barrel by 1033 GMT, having hit a high of $56.92 last week, its highest since Jan. 9. U.S. West Texas Intermediate crude rose 0.57 percent at $53.12 a barrel, after declining to $50.89 in the previous week.

Gold prices eased, reversing some of its previous session gains as the dollar retreated from a seven-week low amid concerns over the U.S. President Donald Trump’s protectionist stance on trade. Spot gold slid 0.4 percent to $1,212.91 per ounce by 1039 GMT, after hitting a high of $1,219.99 earlier in the session, its strongest since Nov. 22.

Treasury Recap

The U.S. Treasuries plunged after a continuous upward session during a relatively quiet session that received data of little significance. The yield on the benchmark 10-year Treasury jumped nearly 3 basis points to 2.42 percent, the super-long 30-year bond yield also rose nearly 2 basis points to 3.01 percent and the yield on short-term 2-year note moved higher by nearly 2 basis points to 1.16 percent.

The UK gilts slumped ahead of the Bank of England Governor Mark Carney’s speech on January 25. Also, investors are now curiously eyeing the fourth quarter gross domestic product (GDP), scheduled to be released on Wednesday. The yield on the benchmark 10-year gilts, fell nearly 3 basis points to 1.39 percent, the super-long 30-year bond yields also moved higher by nearly 3 basis points to 2.04 percent and the yield on short-term 2-year remained lower by 2-1/2 basis points at 0.18 percent.

The 10-year German government bunds edged lower, following higher-than-expected manufacturing PMI. Also, investors will now be focusing on the super long 30-year bund auction, scheduled to be held on Wednesday. The yield on the benchmark 10-year bond, rose 1 basis point to 0.38 percent, the long-term 30-year bond yields also climbed nearly 1 basis point to 1.14 percent and the yield on the short-term 2-year bond traded 1/2 basis point higher at -0.67 percent.

The Japanese government bonds rallied for the second consecutiveday, tracking firmness in U.S. Treasuries after investors sought refuge in safe haven assets following President Donald Trump’s withdrawal from the Trans-Pacific Partnership (TPP) trade deal on Monday. The benchmark 10-year bond yield, edged down 1-1/2 basis points to 0.04 percent, while the long-term 30-year bond yields fell nearly 1 basis point to 0.78 percent and the yield on the short-term 2-year note remained nearly flat at -0.24 percent.

The New Zealand government bonds closed on a stronger note following a rise in global safe-haven demand after the United States President Donald Trump lifted the 12-nation Trans-Pacific Partnership (TPP) trade deal on Monday, distancing the Asian economies from its U.S. counterpart. The yield on the benchmark 10-year bonds fell 1-1/2 basis points to 3.24 percent at the time of closing, the yield on 7-year note also ended 1-1/2 basis points lower at 2.91 percent and the yield on short-term 2-year note slipped 1 basis point to 2.28 percent.

The Australian 10-year bond yields hit a 1-week low after the United States President Donald Trump ended the long-standing 12-nation Trans-Pacific Partnership (TPP) trade deal with its Asian allies on Monday despite rising influence from China in the region. The yield on the benchmark 10-year Treasury note, slumped nearly 6 basis points to 2.71 percent, the yield on 15-year note also plunged 6 basis points to 3.15 percent and the yield on short-term 2-year fell 4 basis points to 1.84 percent.