21/ 01/ 2020

Coronavirus Outbreak in China as the Focus Shifts to Employment Numbers and the GBP

The dollar rose to its strongest level of 2020 on Monday after last week’s run of data confirmed that the U.S. economy is holding up well, while China’s yuan briefly hit a new six-month high. Figures on Friday showed U.S. homebuilding surged to a 13-year high in December. Retail sales also rose and a gauge of manufacturing activity rebounded to its highest in eight months.The strength in the U.S. economy underlines its relative outperformance versus the euro zone, although recent data point to a bottoming out in the European economy, as well as a recovery in China.

The yen pulled ahead and the yuan fell against the dollar earlier today as the spread of a pneumonia-like virus in China sparked a sudden bout of risk aversion and sent Asian stocks skidding.The pound fell on Monday after comments by UK finance minister Sajid Javid stoked fears about weak ties between Britain and the European Union following the country’s departure from the bloc. In an interview with the Financial Times on Saturday, Javid said Britain would not commit to sticking to EU rules in post-Brexit trade talks. That is a threat to businesses that want to ease cross-border checks with the EU once the transition period following Britain’s departure on Jan. 31 terminates at the end of the year. A spokesman for Prime Minister Boris Johnson said that although there will be equivalence of rules at first after Brexit, Britain does not want alignment and would pursue a free trade agreement instead.

Looking ahead, the lack of stats left the majors to take their cues from Monday’s European session and the futures markets. On the monetary policy front, the BoJ delivered its first monetary policy decision of the year. While the BoJ was in focus, it was risk-off earlier in the day. News of the Coronavirus killing a 4th and landing on the doorstep of HK sounded the alarm bells.

19/ 01/ 2020

Week Ahead | Trade Tensions Eased, Economic Data & Central Bank Meetings in Focus

The completion of US-China trade deal phase one was well received by investors. There was an additional bonus of scrapping the label of China as currency manipulator by the US Treasury. The is no time frame for the phase two negotiations yet. But the US is already working with EU and Japan to push WTO changes regarding subsidies and forced technology transfers. 

The euro declined against the U.S. dollar on Friday, as economic data pointed to solid economic growth, and reduced fears about an impending slowdown. U.S. homebuilding surged to a 13-year high in December as activity increased across the board, suggesting the housing market recovery was back on track amid low mortgage rates.It comes after data on Thursday showed that U.S. retail sales increased for a third straight month in December, while a gauge of manufacturing activity in the U.S. Mid-Atlantic region rebounded in January to its highest level in eight months. Sterling declined against dollar on Friday, as weaker than expected UK retail sales data weighed on sterling. British consumers failed to increase their spending for a record fifth month in a row in December, adding to signs of economic weakening that might prompt the Bank of England to cut interest rates this month. Data on Friday showed sales volumes fell by 0.6% from November

The upcoming week will start with a holiday in the US but will be fulfilled with relevant data. It’s going to be an action-packed week, with three major central bank meetings and a storm of economic data likely to keep traders glued to their screens. On Tuesday, Germany will release the January ZEW Survey of Economic Sentiment, seen retreating from December peak. On Thursday, the ECB will announce its latest decision on monetary policy, while the US will release January Consumer Confidence.

16/ 01/ 2020

US-China Phase I Trade Deal Signed, Execution & Phase II Negotiations the Next Focus while the Dollar Await Retail Sales

The US-China trade deal phase one was finally signed but market reactions were muted. Signing of the Phase I trade deal marks an end of the beginning the trade war between the US and China. While the deal covers various areas of great concerns to the US, including China’s imports of US goods and services, China’s handling of intellectual properties, technological transfer and the financial services industry, and renminbi movement. Execution of the promises remains to be seen.

In the currency markets, over the week, Swiss Franc is the strongest one, followed by Euro. Yen is the weakest, followed by Sterling. Dollar is mixed and will look into retail sales data today for the next move.

It’s a particularly quiet day on the Eurozone economic calendar, with finalized German inflation figures due out of the Eurozone.Minor stats including car registration figures for France, Germany, and Italy could draw some attention later this morning, however. While the ECB is also due to release its meeting minutes later today, few surprises are expected. The lack of major stats will leave the majors in the hands of geopolitics and economic data from the U.S. On the data front, the Philly FED Manufacturing Index and U.S retail sales numbers will provide direction later in the day. Sentiment towards the U.S – China trade deal will continue to influence. 

15/ 01/ 2020

Economic Data and US China Trade Deal Phase One Put the GBP and USD in Focus

It was a relatively choppy day for the majors on Tuesday, lack of stats through the European session left the majors struggling for direction ahead of today’s signing of the phase 1 trade agreement. There had been some concern over whether the U.S would actually sign the agreement. Concerns eased, however, after the U.S removed China from its list of currency manipulators. While the phase 1 agreement is market positive, news of tariffs likely to remain until after the Presidential Election was negative on Tuesday.

It’s a busier day on the Eurozone economic calendar, with industrial production and trade figures due out of the Eurozone. We would expect the Eurozone’s industrial production figures to have a greater impact on the day. Forecasts are market negative. Finalized inflation figures out of France and Spain will likely have a muted impact on the majors. From the U.S, wholesale inflation and the NY Empire State Manufacturing Index figures are also due out. While we would expect the manufacturing numbers to influence, the market focus will be on the phase 1 trade agreement.