Key overnight events:
- A relief rally took place in US markets overnight, as the Dow Jones Industrial Average and the S&P500 indices climbed 1.4% and 1.7% respectively.
- Crude oil futures rebounded to an intraday high of $31.77/bbl and continues to remain well-supported at the $30/bbl handle. Prior to hitting a low of $29.93/bbl on Tuesday, crude oil has closed lower every day in 2016.
- Iran’s oil minister Bijan Namder Zanganeh has pledged to boost oil output by 0.5 million barrels a day within weeks of the end of sanctions and by the same amount again 6 months later, as reported by Bloomberg.
- St. Louis Fed President James Bullard, known for his hawkish views, said that the continuing decline in oil prices may delay the return of inflation to the Fed’s 2% target. Thus, dampening expectations of the Fed hiking rates in March.
- The Bank of England voted 8-1 to keep rates steady at 0.5%.
- Spot 1.4387
- USDSGD continues to trade within the tight range of 1.43 – 1.44 over the past 3 days.
- November’s retail sales numbers are due for release later today, with most forecasters expecting sales numbers to accelerate for the first time in 3 months.
- Spot 0.6966
- AUDUSD rebounded of the low of 0.6910 but support has been weak thus far, as the currency pair has struggled to trade above the 0.7000 handle.
- Spot 1.4377
- USDCAD continues to flirt with the 1.4400 level, testing it multiple times last night. A tight intraday range of 1.4340 – 1.4400 has developed. A breakout from either side of it and we could witness USDCAD rising to 1.4450 or declining to 1.4300.
- Bloomberg data shows that the possibility of a Bank of Canada rate cut next week is now up to 48.7%. The odds were below 10% at the start of the year.
- Spot 6.6160
- The PBOC’s reference rate fixing is becoming more of a non-event, as they left it little changed again for the sixth day in a row, at 0.03% weaker.
- USDCNH is headed for its biggest weekly decline since 30th Oct.
- In a 14th Jan note to clients, Credit Suisse is projecting further 75 bps rate cuts and 200bps RRR cuts.
- Spot 8.7741
- Norway’s finance minister Siv Jensen announced that there are no plans for further stimulus despite oil’s decline in prices. In addition, he stated that the weak krone is working in Norway’s favour and that they are used to dealing with the volatile nature of oil.
- Following Jensen’s comments, USDNOK broke below the 8.8000 support, with the next level of 8.6000 a likely near-term target.