EU Open - Pound under renewed pressure; Yuan resumes decline
- Equities: Nikkei (-0.34 %), Hang Seng (+0.14 %), CSI 300 (+0.40 %), KOSPI (+0.16 %), ASX 200 (+0.90 %)
- Commodities: WTI Crude $53.71 (-0.52 %), Brent Crude $56.84 (-0.46 %), Natural Gas $3.26 (-0.70 %), Gold $1174 (+0.12 %), Copper $253.90 (-0.27 %)
What traders are talking about:
Pound under pressure
The British Pound came under renewed pressure as concerns about a hard Brexit increase. UK Prime Minister May spoke over the weekend, and said "often people talk in terms as if we are leaving the EU but we still want to keep bits of membership of the EU. We’re leaving, we’re coming out." Meanwhile, Scotland's First Minister Sturgeon stated that she feels that May has no plan in terms of her Brexit strategy and that it is possible that Scotland will have a second independence referendum.
Overall, the Greenback remained bid in Asia and rose against most other major currencies. The solid employment figures from Friday have kept the Dollar supported, as well as global equity markets. The major Asian stock indices are all up on the day, while the S&P closed at a fresh record high on Friday.
In FX, aside from the Pound, the largest move was seen in USD/JPY, which rallied from 117.00 to 117.53. The Euro was quiet overnight, and consolidated within a 20 pips range. Volatility in the commodity currencies was rather low as well.
Citi sees huge move ahead in USD
Citibank's global head of FX strategy Steven Englander said that if Trump's Administration carry out most of their stimulus programme while the labour market continues to strengthen, the Dollar could have a huge extension of its rally. Englander would expect the EUR/USD to decline to 0.90 and the USD/JPY to rise to 130 in such a scenario.
China FX reserves decline further
China's foreign currency reserves stood at 3.011 trillion USD in December, down from 3.052 trillion previously. Reserves decreased by $41.1 billion to a fresh five-year low, and this marks the 10th consecutive quarterly decline. The State Administration of Foreign Exchange said that reserves fell due to efforts to stabilize the Yuan.
The PBoC set today's USD/CNY fix at 6.9262 vs. 6.8668 on Friday. Meanwhile, USD/CNH (offshore Yuan) rallied from 6.83 to 6.89.
Overnight, we got a few econ data releases out of Australia, although nothing major. Building approvals rose 7.0 % month-on-month, higher than expected (4.6 %) and up from -11.8 % previously. Meanwhile, the ANZ Job Advertisements index declined 1.9 %, down from +1.6 % previously.
The Week Ahead
The number of economic data releases this week is rather light, but nevertheless, we’ll get a few important ones.
Today, the focus will be on Euro Zone employment data, followed by speeches by FOMC members Rosengren and Lockhart.
On Tuesday, we will get the latest Australian retail sales figures, followed by Chinese inflation data.
The following day, the key events will be UK industrial and manufacturing production, as well as the latest UK trade figures.
On Thursday, traders will be focused on the ECB meeting minutes and US initial jobless claims data. Later in the day, Bank of England Governor Carney will speak, as well as FOMC members Kaplan and Bullard.
Finally, on Friday, the main events will be the latest Chinese trade figures, and US retail sales.
- 07:00 GMT - German Trade Balance
- 07:00 GMT - German Industrial Production
- 09:30 GMT - Euro Zone Sentix Investor Confidence
- 10:00 GMT - Euro Zone Unemployment Rate
- 14:00 GMT - FOMC Member Rosengren speaks
- 17:45 GMT - FOMC Member Lockhart speaks
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