The US dollar erased yesterday’s advance after fairly-dovish comments from Fed Chair Janet Yellen. Asian equities remained mixed, with losses in Hong Kong, Seoul and Sydney offsetting gains in Tokyo, Shanghai and Singapore. Gold maintained above the key $1,200/Oz ahead of Donald Trump’s inauguration later today.
- Speaking at the Stanford Institute for Economic Policy, Fed Chair Janet Yellen said it’s prudent for the Fed to gradually adjust policy over time, and argued that the Fed wasn’t behind the curve in containing inflation pressures but nevertheless can’t afford to allow the economy to run too hot.
- Initial jobless claims for the week ended Jan. 14th fell to 234,000, from 249,000 the previous week, lower than the forecasted 252,000 and registering its lowest reading in 40 years.
- Housing starts in December rose 11.3% month-on-month, swinging from a decrease of 16.5% in November and surpassing expectations of a 9.0% gain.
- The Philadelphia Fed Business Outlook gauge jumped to 23.6 in January, from 19.7 last month, marking its fastest pace since Nov. 2014.
- Treasury Secretary nominee Steven Mnuchin told lawmakers the long-term strength of the USD is crucial and said President-elect Donald Trump’s comments that the currency was too high weren’t meant as a longer-run policy. Mnuchin also backed the Volker Rule and did not advocate throwing out tough regulations, sparking a sell-off in bank shares.
- The S&P 500 Index declined 0.4%, with real estate stocks leading losers. The Dow Jones Industrial Average erased its 2017 gain, suffering its worst losing streak since November as investors stayed cautious a day ahead of Trump’s presidential inauguration.
- The US dollar pared some of its recent gains, following Yellen’s; the Bloomberg Dollar Spot Index slipped 0.2 while the Dollar Index fell 0.3%.
- Treasuries slumped on the back of better-than-expected US economic data, with the benchmark 10yr yield rising 4bps to 2.47%, a 2017 high.
- Manufacturing sales in November last year rose 1.5% form a month earlier, swinging back to positive territory following decrease in activity in the month prior; analysts were expecting a 1.0% gain.
- The ECB kept rates and asset purchases unchanged at EUR 80 billion a month, as policymakers affirmed the intention to run asset purchases until at least the end of 2017, with the monthly pace of purchases being trimmed to EUR 60 billion a month from April onwards as announced last month.
- ECB President Mario Draghi stated he sees no convincing signs of an uptick in inflation, despite the euro-area inflation rate almost doubling in December to 1.1% but still remaining well below the central bank’s target of 2%.
- German Finance Minister Wolfgang Schaeuble earlier responded to the ECB’s decision by saying his government will face “political problems” explaining the policy to the public. A surge in headline inflation last month in Germany sparked a media outcry and calls for the ECB to pullback on stimulus.
- China’s 4Q GDP grew 6.8% year-on-year, surpassing 3Q’s 6.7% expansion, as well as the median estimate of 6.7% amongst analysts surveyed by Bloomberg. On a year-to-date basis, GDP gained 6.7%, matching expectations but was, however, at the slowest pace since 1990.
- Industrial production in December rose 6.0% year-on-year, lower than the expected 6.1% and prior month’s gain of 6.2%.
- Retail sales grew 10.9% from a year earlier, a faster pace compared to 10.8% in November and analysts’ expectations of 10.7%.
- Fixed-asset investment excluding rural areas expanded 8.1% for the full year, less than the 8.3% forecasted.
- Spot gold rebounded off the $1,200/Oz handle, gaining as much as 0.5% to $1,208.15/Oz earlier this morning following US dollar weakness.
- The $1,200/Oz support is turning out to be key; if gold can continue to hold above it, it could generate enough momentum to test its next resistance at $1,230/Oz. $1,180/Oz represents the support level below.
- Silver for immediate delivery briefly gained above the $17/Oz handle, gaining 0.8% to log a session-high thus far of $17.0700/Oz.
- Crude oil futures expiring in February closed 0.6% higher in New York and added a further 0.4% to $51.57/bbl earlier today, after a government report indicated that supplies at Cushing – the delivery point for WTI oil, dropped last week by the most since October.
- Spot 1.4249
- USDSGD pared its advance over the past 2 days, falling 0.3% to 1.4236 after failing to recapture the 1.4300 handle.
- The currency pair looks likely to remain range-bound between 1.4300 and 1.4150 for the time being.
- Spot 0.7575
- AUDUSD climbed to a 2-month high, rising 0.5% to 0.7588 earlier, helped on by better-than-expected Chinese 4Q GDP numbers.
- The currency pair has risen 12 out of the past 13 sessions, and has advanced more than 5% since the turn of the year.
- The key price to monitor continues to be 0.7500. Should the currency pair maintain above it, it could signal a possible move to the next resistance at 0.7650 or even 0.7750.
- Spot 1.3295
- USDCAD erased earlier gains of as much as 0.5% to 1.3353, and was little changed around the 1.3300 handle in Asia this morning after Yellen’s comments reignited US dollar weakness.
- Spot 6.8362
- The PBOC weakened its yuan fixing today, by 0.18% to 6.8688 to the US dollar.
- USDCNH declined 0.2% to 6.8343, as the US dollar weakness persists and China economic growth accelerates for the first time in 2 years.
- Spot 114.59
- USDJPY was little changed, after erasing overnight gains which saw the currency pair trade above the 115 resistance.
- Spot 1.2372
- GBPUSD looks set to gain for the fourth straight day after climbing 0.3% to 1.2372 earlier today.
- GBPUSD’s recent advance from a 3-month low has helped the currency pair break out of its post-Brexit downtrend, and a strong close above the 1.2400 handle should confirm it.