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Wrap up: Risk improves, US retail sales eyed - Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Bali) - Martina Song, FX Strategist at Westpac, summarizes Thursday's action in the FX arena, a day in which risk appetite managed to improve, with the SP500 rising, US 30-yr bonds dropping, which eventually benefited the likes of the Aussie, Kiwi while punishing Yen and Euro.

    Key Quotes

    Crude squeezed from the lows in the Australia session yesterday, Brent rising from below $30/barrel ($29.70) and WTI just above. Both had gained around 2.5% since the previous close to a little above $31/bbl. This saw a rebound in US energy sector stocks (+4.5%) and the S&P500 closed +1.7%. European equities however were in the red, the Euro Stoxx down 1.6%. Metals were up as well with spot iron ore +1.8% to $40.22/tonne.

    Outperformer AUD initially fell to a four-month low of 0.6910 during the London morning but reversed with the turnaround in global sentiment to near 0.7000, better reflecting yesterday’s strong jobs report which the currency had initially ignored. NZD also fell during the London morning, to 0.6419 (a three-month low), but the rebound was only to 0.6490. AUD/NZD thus rose from 1.0700 to 1.0800.

    EUR slipped from 1.0900 to 1.0835 via 1.0943. The ECB minutes revealed some members continued to push for more stimulus in Dec, rather than merely extending the time horizon, though it also showed their policy decision allows room for further adjustment if necessary. GBP/USD gained from 1.4360 to 1.4445 before settling around 1.4415. The Bank of England kept the policy rate at 0.5%, again voting 8-1. Forward guidance was downgraded, the BoE noting that “when Bank Rate does begin to rise, it is expected to do so only gradually” whereas previously they had said it would rise “more gradually”. USD/JPY appreciated from 117.30 to 118.30.

    US 10 year treasury yields bounced off 2.05% to 2.12%, in line with the rebound in risk appetite. Markets are pricing in a 33% probability of a rate hike by the Mar Fed meeting.

    Australian housing finance is due at 11:30am Syd/8:30am Sing/HK. Approvals pulled back in Oct as credit conditions tightened. For Nov, Westpac expects owner occupier approvals at -1.5% (consensus -0.5%) and the total value loans to fall as well, as housing markets show signs of cooling off.

    In Asia, we have Singapore Nov retail sales. This release may see revisions to Q4 GDP; the first estimate was well above market expectations. Indonesia Dec trade balance is also out.

    US Dec retail sales are expected to fall by 0.1%m/m. Weakness in oil has weighed on nominal gasoline sales over the year. There should be stronger momentum in the ex auto and gas measure, which is set to rise 0.4%. The Jan Empire manufacturing survey should continue to show weak conditions. The preliminary Jan University of Michigan consumer sentiment is expected to pick up slightly to 92.9. We hear from NY Fed President Dudley for the first time since the FOMC Dec decision, speaking on the economy and Fed policy. Dudley’s view tends to be very much in line with the Board of Governors, especially Chair Yellen. William and Kaplan speak again ahead of the blackout period before the Jan FOMC meeting.
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