Most Asian equities fell into the red, led by energy shares as crude oil extended the worst 2-day slump in 4 weeks. Safe haven assets such as the yen and gold were higher amid continued uncertainty regarding the political situations in Europe, Trump’s economic policies and the outcome of his immigration ban ruling expected later this week.
- December trade deficit edged lower to $45.2 bn, from $45.7bn in November.
- President Donald Trump’s travel ban came under scrutiny from a panel of appeals court judges, as hundreds of thousands tuned into YouTube to hear them combat on legal issues. A ruling is expected this week, although whatever the outcome, it will likely be appealed to the US Supreme Court.
- White House spokesman Sean Spicer said President Trump supports Medicare drug price negotiations, triggering a selloff in biotech stocks. Trump had previously threatened to force drug-makers to bid for government business to reduce health-care costs.
- According to Pimco, the Fed and the BoE are the latest central banks to step into a new “cold currency war”. While the ECB, BOJ and PBOC all took covert actions to depreciate their currencies during the second half of 2016, the Fed has stuck back by attempting to restrain interest-rate expectations, according to Joachim Fels, Pimco’s global economic adviser.
- The US dollar ended higher, with the Bloomberg Dollar Spot Index closing 0.4% stronger, after paring a gain of as much as 0.8% from earlier in the session.
- Treasuries reversed losses, rallying on the back of falling crude prices and solid demand from a 3yr note auction. The benchmark 10yr Treasury yield fell 2bps in New York, and a further 1bp earlier this morning.
- The Dow Jones Industrial Average briefly traded up to a record high, while the S&P 500 Index reversed earlier gains to end the session largely unchanged. Gains in consumer staples were offset by losses in energy shares.
- According to ZeroHedge, the S&P 500 has not had a more-than-1% intraday move for a record 36 straight sessions, the longest streak in history. With most market participants looking “simplistically at aggregate level data”, the benchmark index provides a sense of calm that is “at odds” with the recently documented surge in political uncertainty.
- BoE policy maker Kristin Forbes said if the UK economy continues on its current trajectory, accelerating inflation may push her to vote for an interest-rate hike.
- Germany’s Bundesbank President Jens Weidmann said accusations by US President Trump’s top trade adviser that Germany is manipulating currency markets are worrying, and might mask “homemade” causes for a stronger dollar.
- France’s National Front leader Marine Le Pen plans to take control of the central bank and fire up the printing presses as she leads France out of the euro if she wins the presidential election in May, her chief economic adviser said. Le Pen’s plan involves:
- Replacing the euro with a basket of new national currencies
- Revoking central-bank independence
- Creating money to finance welfare, industrial strategy and repay debt
- China’s FX edged just below $3 trillion in January after the yuan capped its steepest annual decline in more than 2 decades. Reserves decreased $12.3 bn to $2.998 tn, the PBOC said yesterday, less than the $3.004 tn estimated in a Bloomberg survey.
- Australia will push the case for a Pacific trade deal without the US at a meeting with other potential members in Chile next month, Trade Minister Steven Ciobo said. He added that the TPP remains relevant with the US and the text of the accord would only need minor tweaking to allow for America’s withdrawal.
- Homeowners, consumers and property investors around Australia are making more calls to financial helplines as 3 warning signs back up the spike in demand, according to a Bloomberg report: mortgage arrears are creeping up, lenders’ bad debt provisions have increased and personal insolvencies are near an all-time high.
- Spot gold gained 0.4% to $1,235.82/Oz, testing its 2-month high for the second consecutive session as the precious metal continues to be buoyed amid political uncertainty around the globe.
- Holdings in SPDR Gold Shares, the largest ETF backed by gold bullion, rose for a fifth straight session to log its longest stretch of gains since June last year.
- Resistance is expected around $1,2250/Oz. On the downside, the precious metal should find strong support at the $1,180/Oz level.
- Silver for immediate delivery advanced 1.0% to $17.7945/Oz last night, before paring back gains earlier today. The $18/Oz handle is expected to be a key level of resistance.
- Crude oil futures expiring in March declined 1.5% to $52.17/bbl in New York, and a further 1.8% earlier today, to its lowest level in more than 2 months, after industry data showed US crude stockpiles surged and raising speculation rising supply from US shale producers is offsetting cuts by OPEC.
- Crude supplies rose by 14.2 million barrels last week and government data later today is expected to show stockpiles climbed for a fifth straight week.
- Spot 1.4177
- USDSGD bounced off the 1.4200 handle last night, and looks set to halt 3 consecutive days of gains. The currency pair retreated 0.3% to 1.4150 earlier today.
- Resistance and support points are at 1.4200 and 1.4000 respectively.
- Spot 0.7635
- AUDUSD bounced off its support of 0.7600 last night and was 0.4% higher at 0.7646 earlier today.
- The key support at 0.7600 remains intact, while the recent high near the 0.7700 handle could be tested again soon.
- Spot 1.3176
- USDCAD pared some of its previous session’s 1.4% gain to 1.3200, retreating up to 0.3% or 1.3152 last night.
- Continued oil price weakness continues to be a risk for the Canadian dollar, however the momentum remains biased to the downside for the currency pair.
- The 1.3000 continues to be key, and 2 consecutive daily closes below it should indicate further downside momentum, with the next support below coming in at 1.2800.
- Spot 6.8369
- The PBOC sets its daily reference rate at 6.8849, the weakest since Jan. 17.
- Offshore yuan earlier slid by as much as 0.18% to 6.8475 to the US dollar before erasing almost all losses.
- The 6.8000 remains as a significant support level.
- Spot 112.14
- Yen bulls continue to test the 112 level, with USDJPY falling 0.4% to a session low of 111.81 last night before trading back above the 112 handle earlier today.
- A clean break below 112 could result in a move lower to 110, the 50% retracement level of the currency pair’s rally since Nov. 9.
- Spot 1.2509
- GBPUSD rallied 1.4% to 1.2546, following BoE’s Forbes’ hawkish comments.
- The key resistance at 1.2800 needs to be broken convincingly to signal a possible reversal in trend. To the downside, the 1.2400 support remains crucial.