Market Roundup

• USD/JPY +0.5%, GBP/USD -0.7%, EUR/USD -0.8%, USD/CHF +0.8%
• DXY +0.7%, DAX +0.4%, Brent -0.1%, Gold -0.5%
• Euro set for biggest daily fall of 2017 vs dollar
• DXY on track for its biggest daily gain since early January
• Euro implied volatility rises as French election comes in range
• UK Jan Halifax House prices -0.9% m/m vs previous 1.6% revised 0.0% forecast
• UK Halifax House prices +5.7% in 3mths to Jan vs previous 6.5%. +6.0% forecast
• UK BRC Retail sales -0.6% y/y vs previous 1.0%. 0.8% forecast
• Germany Dec Industrial output -3.0% vs previous 0.5% revised 0.3% forecast
• China FX reserves fall to below $3 trln for 1st time since Feb 2011
• China FX regulator says China’s FX reserves are ample
• South Africa ZAR expected to weaken almost 8% this year-Reuters FX Poll
• Japan Finmin-reiterates pledge against competitive FX devaluation
• Switzerland Q1 Consumer confidence -3 vs previous -13
• SNB FX reserves at 643.668bln end Jan vs 645.325bln at end of Dec
• ​

Economic Data Ahead

• (0830 ET/1330 GMT) The United States releases trade balance figures for the month of December. The economy’s trade deficit is expected to have narrowed to $45.0 billion from 45.2 billion in November.
• (0830 ET/1330 GMT) The Statistics Canada is likely to report that building permits dropped 4.0 percent in December, extending November’s decline of  0.1 percent.
• (0830 ET/1330 GMT) The Statistics Canada is likely to report that international trade deficit narrowed to C$0.35 billion in December from C$0.53 billion in November.
• (1000 ET/1500 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) report for the month of December. The report is expected to show job openings rose to 5.57 million from 5.52 million in November.
• (1000 ET/1500 GMT) The Investor’s Business Daily (IBD)/ TechnoMetrica Institute of Policy and Politics (TIPP) will release U.S. Economic Optimism index for the month of February. The indicator rose to 54.8 in January.
• (1000 ET/1500 GMT) The Richard Ivey School of Business releases Canada’s seasonally adjusted Ivey Purchasing Managers Index for the month of January. The index posted a reading of 60.8 in the prior month.
• (1500 ET/2000 GMT) The U.S. Federal Reserve is likely to report that consumer credit declined to $20.0 billion in December from $24.53 billion the month before.
• (1630 ET/2130 GMT) API reports its weekly crude oil stock.
• (1850 ET/2350 GMT) Japan’s Ministry of Finance is likely to report that Current Account (N.S.A) surplus narrowed to 1,294.5 billion yen in December from 1,415.5 billion yen in November.
• (1850 ET/2350 GMT) Japan’s Customs Office will release Trade Balance (BOP Basis) figures for the month of December. The economy posted a trade surplus of 313.4 billion yen in the earlier month.

Key Events Ahead

• (1145 ET/1645 GMT) FedTrade operation 15-yr Fannie Mae/Freddie Mac (max $675 mn)
• (1430 ET/1930 GMT) FedTrade operation 30-yr Ginnie Mae (max $1.225 bn)

FX Beat

DXY: The dollar rebounded versus its major peers, ahead of U.S. trade data due later in the session. The greenback against a basket of currencies traded 0.8 percent up at 100.67, having hit a high of 100.72 earlier in the day, its highest since Jan. 30. FxWirePro’s Hourly Dollar Strength Index stood at 138.15 (Highly Bullish) by 1000 GMT.

EUR/USD: The euro slumped to a 1-week low below the 1.0700 handle, amid renewed buying interest seen behind the greenback versus its major peers. Moreover, rising political uncertainty surrounding the elections and widening bonds yield differentials between the French 10-year government bonds and 10-year German bund yields weakened the bid tone around the pair. The European currency traded 0.8 percent down at 1.0665, having touched a low of 1.0656 earlier, it’s lowest since Jan. 30. FxWirePro’s Hourly Euro Strength Index stood at -41.88 (Neutral) by 1000 GMT. On the higher side, major resistance is around 1.0740 (200- HMA) and above that level targets 1.0800/1.08288 (Feb 2 High)/1.08735 (Dec 8 High). The short term bearish invalidation is only above 1.08735. The decline from 1.16163 and 1.03402 will come to an end if the pair breaks above 1.08735 level.

USD/JPY: The dollar rose above the 112.00 handle, retreating from a 2-month low amid an ongoing recovery in the greenback above 100.00 psychological mark. Moreover, a fall in the U.S. treasury yields and risk-off market sentiment capped the major’s upside.  The pair trades 0.5 percent up at 112.28, after falling as low as 111.59 earlier, it’s lowest since Nov 29. FxWirePro’s Hourly Yen Strength Index stood at 57.17 (Bullish) by 1000 GMT. The major resistance is around 113.35 (10 – day MA) and any break above will take the pair till 114/115.11 (daily Kijun-Sen). On the lower side, minor support is around 111.76 (89- day EMA) and any break below 111.76 will drag it till 111.38 (100- day EMA).

GBP/USD: Sterling slumped below the 1.2400 handle, hitting a fresh 2- week low against the dollar after data showed Halifax House prices declined 0.9 percent in January. Moreover, the British Retail Consortium numbers indicated that consumers refrained from spending last month, adding to signs that the economy was turning more cautious as the Brexit vote pushed up inflation. Sterling trades 0.76 percent down at 1.2368, having hit a low of 1.2346 earlier, it’s weakest since Jan. 20. FxWirePro’s Hourly Sterling Strength Index stood at -56.83 (Bearish) by 1000 GMT. The upside is capped by 23.6% fibo and also the psychological level of 1.2500. Any break above that level will take the pair till 1.2547 (10- day MA)/1.2599 (23.6% retracement of 1.27085 and 1.24274). On the lower side, any break below 1.24100 will drag it till 1.23475 (50% retracement of 1.19860 and 1.27058)/1.2300. Against the euro, the pound trades down at 86.21 pence, having hit a low of 86.44 on Monday, it’s weakest since Jan. 24.

USD/CHF: The Swiss franc declined nearly 1 percent against the U.S. dollar, as the greenback rebounded from recent lows. The major trades 0.9 percent higher at 0.9994, having touched a high of 1.0006 earlier, it’s highest since Jan. 30. FxWirePro’s Hourly Swiss Franc Strength Index stood at -46.99 (Neutral) by 1000 GMT. The near term resistance is around 1.00180 (21- day MA) and any break above will take the pair till 1.00448 (38.2% retracement of 1.03435 and 0.98611)/1.0098 (daily Kijun-Sen). On the lower side, major support is around 0.98600 (200- day MA) and any break below targets 0.9799 (61.8% retracement of 0.95493 and 1.03435)/0.9750.

AUD/USD: The Australian dollar declined to three-day lows near the 0.7600 handle, reversing RBA-led gains, amid resurgent greenback demand. Moreover, downbeat sentiment around the commodity, especially copper and crude weakened the bid tone around the major. The Aussie trades 0.6 percent down at 0.7612, hovering away from a high of 0.7696 hit last week, it’s strongest since Nov. 10. FxWirePro’s Hourly Aussie Strength Index stood at -55.46 (Bearish) by 1000 GMT. On the lower side, the minor support stands at 0.76000 and any break below will drag it down till 0.7539 (21- day MA)/0.7500. The minor resistance is around 0.7700 and a break above will take it till 0.7748/0.77783 (Nov 8th high).

NZD/USD: The New Zealand dollar slumped below the 0.7300 handle, after rising to a 3-month high earlier in the session on the back of RBNZ’s inflation expectations data. A modest recovery in the U.S. Treasury bond yields and weaker sentiment around commodities hampered the major’s demand. The Kiwi trades 0.4 percent down at 0.7289, having hit a peak of 0.7375 earlier, its strongest since Nov. 9. FxWirePro’s Hourly Kiwi Strength Index was at 9.37 (Neutral) by 1000 GMT. Immediate resistance is located at 0.7400, a break above could take it near 0.7430. On the downside, support is seen at 0.7270 (Jan 31 Low), a break below could drag it lower 0.7250.

Equities Recap

European shares rose as positive company updates and gains in healthcare stocks offset weakness in oil majors and banks stocks, while the dollar rebounded amid growing economic and political concerns.

The pan-European STOXX 600 index increased 0.38 percent to 362.98 points, while the FTSEurofirst 300 index rallied 0.3 percent to 1,432.08 points.

Britain’s FTSE 100 trades advanced 0.6 percent to 7,215.60 points, while mid-capFTSE 250 climbed 0.82 percent to 18,527.64 points.

Germany’s DAX edged up 0.35 percent at 11,553.05 points; France’s CAC 40 trades 0.09 percent higher at 4,782.31 points.

Tokyo’s Nikkei fell 0.35 percent to 18,910.78 points, Australia’s S&P/ASX 200 index rose 0.03 percent to 5,617.50 points and South Korea’s KOSPI edged down 0.12 percent to 2,075.21 points.

Shanghai composite index declined 0.1 percent to 3,153.09 points, while CSI300 index dropped 0.2 percent at 3,365.68 points. Hong Kong’s Hang Seng shed 0.1 percent at 23,331.57 points.

Commodities Recap

Crude oil prices tumbled, extending losses for the second straight day, despite support by OPEC and other exporters to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017. International benchmark Brent crude was trading 0.8 percent lower at $55.40 per barrel by 0952 GMT, having hit a low of $55.33 earlier in the session, it’s weakest since Jan. 31. U.S. West Texas Intermediate crude fell 0.6 percent at $52.74 a barrel, after falling to $52.68 earlier, its lowest since late Jan.

Gold prices eased, drifting away from a near three-month high hit earlier in thesession as investors booked profits, amid global political uncertainty. Spot gold was down 0.52 percent at $1,228.54 per ounce at 1001 GMT, having touched its highest since Nov. 11 at $1,235.50 earlier. U.S. gold futures fell 0.06 percent, to $1,231.2.

Treasuries Recap

The U.S. Treasuries remained silent as markets lacked release of significant economic data, ahead of the 30-year auction, scheduled to be held on Thursday. The yield on the benchmark 10-year Treasury traded flat at 2.42 percent, the super-long 30-year bond yield rose nearly 1 basis point to 3.05 percent while the yield on short-term 2-year note also traded nearly 1 basis point higher at 1.16 percent.

The UK gilts rebounded ahead of the 30-year super-long bond auction, scheduled to be held on February 9. Also, investors will remain focused on the Bank of England (BoE) Governor Philip Lowes’s speech due on Friday. The yield on the benchmark 10-year gilts, fell 2-1/2 basis points to 1.29 percent, the super-long 30-year bond yields also slumped nearly 2 basis points to 1.99 percent and the yield on short-term 2-year edged lower by 1/2 basis point to 0.09 percent.

The German government bunds gained after the country’s industrial production disappointed, in contrast to market expectations. Also, investors are eyeing the 30-year auction, scheduled to be held on February 8 amid a timid trading session that lacked release of significant economic data. The yield on the benchmark 10-year bond, fell over 1 basis point to 0.36 percent, the long-term 30-year bond yields also slipped 1 basis point to 1.13 percent and the yield on short-term 2-year bond slipped 1/2 basis point to -0.74 percent.

The Japanese government bonds remained flat in a subdued trading session that witnessed data of least economic significance, while slightly lower equities limited the fall in yields. Also, investors are curiously eyeing the super-long 3-year bond auction, scheduled to be held on February 9. The benchmark 10-year bond yield, hovered around 0.09 percent, while the long-term 30-year bond yields also remained flat at 0.90 percent and the yield on the short-term 2-year note slid nearly 1 basis point to -0.21 percent.

The New Zealand government bonds bounced as investors digested the United States President Donald Trump’s aggressive policy actions. Also, investors remain focused on the GlobalDairyTrade price auction scheduled to be held on February 7, besides the Reserve Bank of New Zealand’s (RBNZ) first monetary policy decision of 2017 on February 9. The yield on the benchmark 10-year bond, plunged 8 basis points to 3.33 percent at the time of closing, the yield on 7-year note also slumped 7 basis points to 2.96 percent and the yield on short-term 2-year note traded 3-1/2 basis points lower at 2.28 percent.

The Australian 10-year government bond yields tumbled to 2-week low despite the Reserve Bank of Australia (RBA) maintaining its official cash rate (OCR) at its record-low of 1.50 percent, citing improved global macroeconomic conditions at the first monetary policy meeting of 2017 held today. The yield on the benchmark 10-year Treasury note, tumbled 7-1/2 basis points to 2.70 percent, the yield on 15-year note also slumped nearly 8 basis points to 3.16 percent and the yield on short-term 2-year fell nearly 3 basis points to 1.81 percent.