EU Open - Dollar mixed; stock markets extend gains; Turkish Lira tumbles to fresh record low

Markets Overview:

  • Equities: Nikkei (+0.38 %), Hang Seng (+0.70 %), CSI 300 (-0.46 %), KOSPI (+1.46 %), ASX 200 (+0.19 %)
  • Commodities: WTI Crude $50.96 (+0.28 %), Brent Crude $53.71 (+0.13 %), Natural Gas $3.24 (-1.16 %), Gold $1189.38 (+0.13 %), Copper $261.65 (+0.15 %)

What traders are talking about:

Traders are waiting for Trump

Overnight, markets have been relatively calm. Asian stock markets picked up the positive sentiment from the US session (NASDAQ closed at a fresh record high), with almost all major APAC indices up on the day.

Commodities generally rose as well, with Oil prices slightly up on the day, and precious & industrial metals as well.

In FX, there was not much going on due to a lack of economic data and events. The Dollar had a mixed performance and is little changed from the Sydney open. Traders are now looking forward to the press conference by President-elect Donald Trump at 11 AM (New York Time), which will be his first since he won the elections.

Yuan steady

China's central bank set today's reference rate at 6.9235 (vs. 6.9234 yesterday), almost unchanged. There was not much of volatility in the offshore Yuan either, as USD/CNH consolidated in a 6.89-6.9150 range. The currency has calmed down following a turbulent start into the new year, but this is unlikely to persist, especially with President-elect Donald Trump entering the White House in nine days.

Turkish Lira tumbles to record lows

The Turkish currency remains under pressure and posted a fresh record low against the Dollar overnight. USD/TRY rallied to from 3.7870 in the early Asian session to a high of 3.8944. The Lira is getting no rest amid rising inflation in Turkey and inaction from the central bank. Further, political risks are additionally fuelling the selling of the currency.

Gold remains bid

Analysts at Citibank suggest that Gold is lagging, given the USD rally, and that their model signals significant downside ahead for the precious metal. While Citi is right about the negative correlation, it is not difficult to explain why Gold has been performing well recently. There is a lot of things that have traders/investors concerned in 2017: Uncertainty about what the upcoming Trump presidency will bring, elections in key EU member states, China, Brexit. Therefore, it is possible that Gold will remain bid, even if the Dollar strength persists.

Oil inventories

The latest US crude oil inventory data from API (private survey) showed a 1.53 million barrel build, while the market expected a figure of 1.2 million. Official data from the US government agency will be released today at 1530 GMT. Oil did not react much to the news, but already had a significant decline during yesterday's NY session. WTI tumbled from $52.40 at the NY open to a low of $50.70.

Goldman Sachs remains bearish on GBP

Analysts at the US-based investment bank maintained their bearish view on the Pound and expect to see further losses as the market starts to further price in a hard Brexit scenario.

From GS:

“Cable moved from 1.229 on Friday's close to 1.216 today. This is a testament to how vulnerable the Pound is to the repricing of a 'hard Brexit' scenario, as well as, in our view, the extent to which periods of Sterling strength are the result of markets not discounting the new reality appropriately, a reality that we have fully incorporated into our outlook for the currency since the referendum in June and that we have reiterated several times since.

But, in our view, Sterling is 'actionable' and soon set to become even more 'unfashionable', despite the recent move lower, as coming political events will only increase uncertainty on the future relationship between the UK and the EU.”

The currency has been under increased pressure following the speech from UK Prime Minister May last weekend. Overnight, GBP/USD nearly reached 1.22 in the early Asian session, as stops above 1.2190 got triggered. However, it quickly retraced those gains and eventually settled around 1.2160.

Economic Calendar:

  • 09:30 GMT - UK Manufacturing Production
  • 09:30 GMT - UK Industrial Production
  • 09:30 GMT - UK Trade Balance
  • 15:30 GMT - US Crude Oil Inventories

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