FX News Today
European Fixed Income Outlook: The global stock rally started to fade in Asia with a stronger Yen and higher global yields weighing. The BoJ’s implicit tapering and the ECB’s reduced monthly purchase targets acted as a reminder that central bank support is slowly being phased out and Japanese indices headed south. The ASX 200 was also down, but Hang Seng and CSI 300 were underpinned, by data and as China’s central bank weakened its daily fixing on the yuan by the most since September. Yields continued to rise and the Japanese 10-year is up 1.9 bp and the 10-year Treasury yield up 1.7 bp, but South Korea is leading the way as safe haven flows are being reversed slowly. FTSE 100 futures as well as U.S. futures are heading south and against that background European stock markets are likely to retreat, and bonds are likely to remain under pressure ahead of supply from Italy and Germany today. The calendar has industrial production data out of France and the U.K. as well as U.K. trade numbers.
FX Update: The dollar has traded steady-to-firmer, overall. EURUSD has remained heavy, meeting good selling interest above 1.1950, though so far remaining above yesterday’s 12-day low at 1.1915. Cable and AUDUSD have been seeing similar price actions, aided by the spike in U.S. Treasury yields over the last day, while the dialogue between North and South Korea has seen a rotation out of haven assets and currencies. USDJPY has declined for a second consecutive day, logging an eight-day low of 112.16. The move has been driven by broader yen gains, with EURJPY and AUDJPY, among other yen crosses, also down. Market participants have been continuing to digest the BoJ’s QE tapering announcement of yesterday, despite some market narratives downplaying the taping move has being little more than a baby step, with the central bank likely to remain committed to its YCC (yield curve control) policy in the face of the chronic undershooting of the inflation target.
Charts of the Day
Main Macro Events Today
- UK Manufacturing Production – expected to rise to 0.3%m/m from 0.1%m/m and to fall to 2.8%y/y from 3.9%y/y. Industrial production expected to rise 0.5% m/m and 1.9% y/y.
- UK Goods Trade Balance
- Canadian Building Permits – Building permit values are expected to rise 1.0% m/m in November after the 3.5% gain in October.
- Crude Oil Inventories & US Imports – MBA mortgage market data is due, along with import prices seen +0.2% in December and export prices flat (median 0.3%). EIA energy inventory data are on deck as well.
Support and Resistance Levels
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