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Forex News Timeline

Monday, February 20, 2017

Political uncertainty seems to have made a comeback in the European bond markets, with German 2-yr yields dropping to a record low of -0.85%, while th

Political uncertainty seems to have made a comeback in the European bond markets, with German 2-yr yields dropping to a record low of -0.85%, while the 10-yr and 5-yr yields on the French government bonds pushing up by 5bps and 8bps respectively.  Bond markets seems to have started pricing-in the increased possibilities for anti-Euro candidates to win elections in France and Italy, with the latest poll for the upcoming French Presidential elections revealing continuous gains for Marine Le Pen and resulting the French-German 10-yr government bond yield spread blows out to 85 bps, the widest level since July 2012.

Research Team at Westpac notes that while NZ’s household spending looks to have made a firm start to 2017, the housing market has had a weak start. K

Research Team at Westpac notes that while NZ’s household spending looks to have made a firm start to 2017, the housing market has had a weak start.Key Quotes“Looking ahead, we are forecasting house price growth to slow this year, and expect that growth in household spending will follow suit.” “In New Zealand there has typically been a close relationship between growth in house prices and consumer spending. That reflects the importance of housing as a major portion of the wealth of New Zealand households. When house prices are rising and the market is turning over rapidly, Kiwis feel more inclined to borrow against some of that wealth and spend it. That means the housing market plays an important role in New Zealand’s economic cycles, and therefore has important implications for the outlook for inflation and interest rates.” “On the one hand, consumer spending looks firm. While retail spending disappointed a bit in the December quarter, with core retail sales volumes rising only 0.6% in the quarter and 4.2% over the year, spending on debit and credit cards in January was particularly strong and will help put spending in the March quarter on firm footing. After a couple of subdued months, card spending rose a whopping 2.5% in January, taking annual growth back towards its recent trend of 5%.” “On the other hand, the housing market had a very weak start to the year. House sales (in seasonally adjusted terms) fell sharply in January, and after several months of decline are down over 20% from their peak last April. At a national level the rate of price growth has slowed considerably over the past few months. But there are again regional differences in the housing market’s performance. In previous hotspots such as Auckland, Hamilton and Tauranga the rate of price growth has slowed since July. But the majority of regions have actually seen an acceleration in house price growth since July; few regions in the North Island are running at below double-digit annual gains. This is somewhat at odds with the latest change to the LVR restrictions, which was to extend the limit on investor LVRs from Auckland to the rest of the country.” “The ongoing need to house a growing population will remain a key factor underpinning housing demand, making it difficult to see an outright decline in prices.” “Pulling it together, if our view on house prices is correct, then we’d expect to see the rate of growth in consumer spending slow from here. This argues for inflation pressures remaining well-contained, meaning that the Reserve Bank can remain on the sidelines for some time to come.”

Research Team at BBH notes that Moody's upgraded its outlook for Russian credit to stable.    Key Quotes “The Ba1 rating is one step below investmen

Research Team at BBH notes that Moody's upgraded its outlook for Russian credit to stable.   Key Quotes“The Ba1 rating is one step below investment grade, but if Russia continues its fiscal consolidation, oil prices stay firm, and the economy continues to emerge from an almost two-year recession, investment grade status may be possible later this year.  Russia's 5-year CDS finished last week near 1.82%, which is just below Italy's CDS (1.87%).  The ruble has appreciated 4.8% this year, tying it with the Taiwan dollar for fourth place among emerging market currencies.” “Last year, the ruble's gain of 20.1% put it in second place behind the Brazilian real, which rose nearly 21%.  Brazil's easing cycle is expected to take another step.  The Selic is expected to be cut by another 75 bp to bring it to 12.25%.  It peaked at 14.25%, and this would be the fourth move in the cycle.  Inflation has fallen much faster.  It has been halved.  Since shortly after the US election last November, the dollar has fallen nearly 13.5% against the Brazilian real.  On February 16 a potential reversal pattern was recorded.  Initial resistance is seen in the BRL3.10-BRL3.15 band.”

Bill Evans, Chief Economist at Westpac, suggests that investors who have traditionally focussed primarily on central banks now focus primarily on Trum

Bill Evans, Chief Economist at Westpac, suggests that investors who have traditionally focussed primarily on central banks now focus primarily on Trump.Key Quotes“One debate is whether current pricing for interest rates; the USD; and the stock market is dependent on a successful fiscal policy outcome for Trump.  Alternatively, pricing might be factoring in some economic reform (particularly banking) and not much more.  The answer is probably that the share market is more optimistic about a successful policy outcome than the bond market. Bank deregulation (freeing up bank lending) would be stimulatory as long as confidence holds and, with the Fed now proclaiming that the US economy is at full employment, the higher bond rates are justified. However, if the share market needs a successful fiscal plan (centred on tax cuts) to hold current levels, then equities would be vulnerable to a marked sell off in the share market should the plan prove to be elusive.” “The problems with a significant tax cut are manifest.  It seems that there are around five Republicans in the deficit hawk camp who are firmly opposed to any policy that is not “revenue neutral” and five are “soft no’s”. The current controversy over Russia will only harden opposition within the party.” “Overall, arbitrary tariffs are likely to be a more distortive mechanism than the Border Tax.  However, that option, linked with some unpopular entitlement reform, might be back-end loaded and more modest tax cuts might constitute a plan that could be manipulated to “look” revenue neutral.” “In such circumstances, the USD would rise further but the inevitable response from other trading countries would likely trigger a disruptive trade war – the recent encouraging lift in global PMI’s and global equity markets would soon dissipate.”

Speaking on the sideline of Eurogroup meeting in Brussels, German Finance Minister, Wolfgang Schaeuble, was noted saying that the Euro exchange rate i

Speaking on the sideline of Eurogroup meeting in Brussels, German Finance Minister, Wolfgang Schaeuble, was noted saying that the Euro exchange rate is too weak for Germany. Key headlines:    •   He can't accept criticism of German trade surplus from IMF and EC
   •   Italy is still a cause for some concern
   •   The structure of EU monetary union is still very fragile
   •   All euro member states must help boost competitiveness Meanwhile, the EUR/USD pair trimmed some of its daily gains but has been treading water above 1.0600 handle.

The pick up in the greenback has prompted EUR/USD to retreat from previous daily tops and re-visit the low-1.0600s. EUR/USD attention to PMIs, FOMC,

The pick up in the greenback has prompted EUR/USD to retreat from previous daily tops and re-visit the low-1.0600s.EUR/USD attention to PMIs, FOMC, Fedspeak           After briefly testing daily lows near 1.0600 the figure during early trade, the pair remains confined to a narrow range, with gains so far capped around the 200-hour sma near 1.0630. In the meantime, the greenback remains steady in the 100.80 region when tracked by the US Dollar Index, a tad lower than recent tops in the 101.00 neighbourhood, all against the backdrop of supportive Fedspeak as of late, hawkish comments by Chair Yellen and positive results from US fundamentals. Looking ahead, advanced PMIs in Euroland are due tomorrow, ahead of the German IFO and the FOMC minutes on Wednesday. The greenback is poised to stay in centre stage in light of the minutes and expected Fedspeak. Adding to the lack of direction in EUR, speculative net shorts have increased to 3-week highs during the week ended on February 14, as shown by the latest CFTC report.EUR/USD levels to watchAt the moment the pair is up 0.01% at 1.0616 facing the next hurdle at 1.0682 (high Feb.16) followed by 1.0688 (20-day sma) and finally 1.0706 (38.2% Fibo of the November-January drop). On the flip side, a breach of 1.0520 (low Feb.15) would target 1.0452 (low Jan.11) en route to 1.0339 (2017 low Jan.3).

According to the analysts at BBH, with rising terms of trade, the long-term decline in business investment in Australia should be winding down.   Key

According to the analysts at BBH, with rising terms of trade, the long-term decline in business investment in Australia should be winding down.  Key Quotes“With a few exceptions, capex has been contracting since the second half of 2012. The 20-quarter average (five years) fell into negative territory in Q2 16.  The decline in the eight-quarter average (two years) has accelerated to stand at minus 4.3%.  It has been negative since Q1 15. The median forecast is for a 0.5% decline in Q4 16 after a 4% decline in Q3 16.  A weaker report could fan speculation of a rate cut in Q2 and reinforce the cap for the Australian dollar near $0.7700.”  

The GBP/USD pair extended bounce off a short-term ascending trend-line support, and has now reversed majority of Friday's disappointing UK retail sale

The GBP/USD pair extended bounce off a short-term ascending trend-line support, and has now reversed majority of Friday's disappointing UK retail sales-led slide to sub-1.2400 level. The pair, however, trimmed some of its gains to session peak level near 1.2480 region and is currently trading around 1.2455-60 region. Despite of the pull-back, the pair has managed to maintain its strong bid tone and in absence of any market moving economic releases, Monday's recovery could be attributed to some short-covering amid largely subdued US Dollar price-action and repositioning ahead of House of Lords debate on Article 50, later during the day. Live – House of Lords debate on Article 50Meanwhile, holiday thin market liquidity conditions, in wake of a holiday in the US markets, could have contributed towards aggravating the move and infusing some volatility around the major. Meanwhile, focus would remain on this week's key event risks - the second estimate of UK GDP growth numbers and the FOMC meeting minutes, which would help investors to determine the next leg of directional move for the major.Technical levels to watchMomentum above session peak resistance near 1.2480 level could get extended towards 1.2500 psychological mark above which the pair seems all set to head towards 1.2565-70 resistance area ahead of 1.2600 round figure mark. On the downside, retracement back below 1.2440 level, leading to a subsequent break below 1.2420 area, could drag the pair back towards the ascending trend-line support near 1.2400 handle, which if broken decisively might accelerate the slide towards 1.2350-45 area before the pair eventually breaks below 1.2300 handle and head towards testing its next support near 1.2260-55 region.   

Altaz Dagha, Research Analyst at BNP Paribas, suggests that the Australian labour market continues to show underlying fragility. Key Quotes “Another

Altaz Dagha, Research Analyst at BNP Paribas, suggests that the Australian labour market continues to show underlying fragility.Key Quotes“Another disappointing update on the labour market in January data again reflects the ongoing theme of part-time job creation at the expense of full-time, and a falling participation rate. Overall, while these data are unlikely to sway the Reserve Bank of Australia from moving away from a neutral stance in the near term, it confirms to us that the central bank is unlikely to be in a position to tighten over the next twelve months, particularly after the soft Q4 CPI print.” “Curve steepeners, both in the belly and the long end, still make sense, in our view. With risks still skewed towards further easing this year but the level of rates already low, the market is unlikely to price in a prolonged easing cycle. Paying 2y1y/3y1y should perform if the market prices in an easing bias again, but also if there is a global, long-end selloff. We also continue to recommend 5s10s steepeners, as the segment has lagged the move in the broader curve.”  “Cross market trades offer protection in a sell-off. The underlying weakness in the labour market data, in addition to the soft AU Q4 CPI print earlier in the month, leaves us comfortable recommending longs in the front end at current levels. However, given the drag of global rates, we prefer to be received on a cross market basis versus the US. The market has again priced in a modest tightening bias for Q1 2018 following the US led sell-off this week, and rolldown in the 1y1y space has increased to 3bp/month. Even so, AU has outperformed US during the past week’s sell-off so we are comfortable with the view that front-end rate differentials will compress further, as the AU front end remains relatively anchored whilst the US is vulnerable to a further repricing. We maintain our recommendation to be received 1y1y AU-US targeting a move to 5bp.” 

Canada reports retail sales and consumer prices in the days ahead and will garner maximum investors’ attention suggests research team at BBH.  Key Qu

Canada reports retail sales and consumer prices in the days ahead and will garner maximum investors’ attention suggests research team at BBH. Key Quotes“Weak auto sales are expected to have flattened the headline to zero after a 0.2% increase in November.  However, excluding auto, Canadian retail sales may have risen 0.6% after an unchanged report in November.  Recall that Canada had also had strong jobs growth in December, and this may warn of upside risks.  Consumer prices likely rose in January.  The median expectation is for a 0.4% increase, which due to the base effect would lift the year-over-year rate to 1.6% from 1.5%.”

Analysts at BNP Paribas note that at her semi-annual testimony to Congress, Chair Yellen confirmed that the Fed is in no rush, but “expects the evolut

Analysts at BNP Paribas note that at her semi-annual testimony to Congress, Chair Yellen confirmed that the Fed is in no rush, but “expects the evolution of the economy to warrant further gradual increases in the federal funds rate.”Key Quotes“She also noted every FOMC meeting is “live.” Combined with very strong data, the probability of a 25bp hike at the March meeting has risen to 44% from 28% in a week and June is 78% priced in.” “Yellen said the FOMC expects to unwind its balance sheet gradually when the process of normalising rates is well underway and keeping a larger balance sheet than pre-crisis levels may be desirable. Last week, we outlined our view on balance sheet reduction and expect it to begin in early 2018.” “The 10y term premium could increase by 100bp over the next few years through ‘passive’ tightening, due to higher fiscal deficits (USD 800bn and  USD 1000bn in 2017 and 2018, respectively), resulting in higher Treasury issuance. Significantly increased issuance and a constant Fed balance sheet would cause a higher proportion of Treasury debt to be held by ‘private’ investors. Lagged by a year, this metric correlates with the 10y term premium.” “While we expect balance sheet roll-off to begin in 2018, markets will likely begin to price the its impact on long-end term premia sooner. Therefore, the FOMC will likely embark on a tightening campaign at both the ends of the curve.”

Research Team at BBH notes that the Japan reported its January trade balance earlier today and the trade deficit was larger than expected, as exports

Research Team at BBH notes that the Japan reported its January trade balance earlier today and the trade deficit was larger than expected, as exports disappointed and imports surprised on the upside. Key Quotes“It was the first deficit since last August.  There is a large seasonal component, and in most commentary it is attributed to the Chinese New Year.  We are a bit skeptical and note that for more than 20-years, which means that even before China became Japan's largest trading partner, the seasonal pattern was evident.   The January trade balance always deteriorates from December.  Moreover, Japan's exports rose to China (3.1% year-over-year) while shipments to the US and Europe fell (6.6% and 5.6% respectively).  Exports of motor vehicles fell 6.7% year-over-year in value terms.  Crude oil imports surged 36^ in value terms.  Exports were off 0.3% in volume terms.    The shortfall of JPY1.087 trillion was the largest since January 2015.”  

Patrick Jacq, Research Analyst at BNP Paribas, notes that the rally in core markets has paused as risk-on returns. Key Quotes “After being well supp

Patrick Jacq, Research Analyst at BNP Paribas, notes that the rally in core markets has paused as risk-on returns.Key Quotes“After being well supported by flight-to-quality trades in late January, core EGBs have suffered a limited sell-off as better supply and demand conditions, and the return of a temporary risk-on mode, support semi-core and peripheral paper.” “This setback in core bonds could persist until the end of February, but we note that supply and demand conditions will turn less favourable again in March in France, Italy and Spain, and the political environment could support the Bund. In the Netherlands there will be elections in March, and net supply will be positive. We see room for core EGB yields to rise slightly in the very near term, but we expect firmer support for the Bund by the end of February. The 0.45% area on the 10y Bund yield should provide firmer support for the Bund. Keep slight short exposure  in the 10y area.” “The short end of the curve remains well protected. There have been signs that the short end is still well protected during a sell-off, and outperforms significantly in rallies. Going into the ECB’s final targeted longer-term refinancing  operation (TLTRO) in March, the 4y area could outperform other areas in both swaps and cash. Hedges of the TLTRO will fuel receiving interest in the 4y swap area. 4y semi-core could also outperform other areas of sovereign curves. At -0.14%, the 4y OAT May-21 looks attractive (the TLTRO should be at -0.30/-0.40% for most large banks). The very long end should continue to underperform, as inflation expectations continue to rise.”

The simmering political drama in Italy may be taking a turn as the former Prime Minister Renzi stepped down as the head of the center-left PD, which s

The simmering political drama in Italy may be taking a turn as the former Prime Minister Renzi stepped down as the head of the center-left PD, which sets up a formal leadership context, probably in April or May notes analysts at BBH.  Key Quotes“It would seem to reduce the chances of an early election.  Parliament's term ends in February 2018.   There is still risk that the left-wing of the PD splits off to form their own party, although polls suggest it would not do well in an election.  Estimates suggest, such a schism could see a score of Deputies and a dozen Senators leave.  It could weaken the current PD government and work to the benefit of the 5-Star Movement, which is having its difficulties in governing the city of Rome where it had won a local election last spring.” “In contrast to the political drama, the economic impulses have told a story of steady growth and prices (excluding energy).  Markit will report the preliminary February PMIs.  The composite is expected to ease slightly to 54.3 (from 54.4).  To put it in perspective, consider that the three-month average is 54.2 and the six-month average is 53.6.  The 12-month average is 53.3.  It is the picture of slow and steady improvement.  The January reading of 54.4 was the highest since the time series began in early 2014.  Similarly, quarterly GDP has averaged roughly 0.4% a quarter for the past four, eight, and 12 quarters.”

In view of the Kit Juckes, Research Analyst at Societe Generale, Fed officials sounded less dovish than they did a few months ago. Key Quotes “That’

In view of the Kit Juckes, Research Analyst at Societe Generale, Fed officials sounded less dovish than they did a few months ago.Key Quotes“That’s not the same at all as sounding hawkish. With inflation edging higher, the tendency to dither is alive and well. The dollar benefits, but only because policy is SO easy in Japan, the eurozone and Beijing. It will be case of two steps up for the dollar followed by at least one back down. That’s going to leave investors tempted to buy dips in higher-yielding and commodity-sensitive currencies, too.” “There is virtually no correlation between the Fed’s favourite measure of inflation, the core PCE deflator, and wage growth. There’s a weak relationship between inflation and unemployment (an r-squared of 12% between PCE and the unemployment rate). But there IS a decent (negative) correlation between wage growth and unemployment (the correlation is better between wages and the broader U-6 measure of unemployment. This suggests that a 1% fall in the U-6 unemployment rate from here (to 8.4%) would drag wage growth above 3%, but what it would do for inflation is much less clear.” “All this means that as unemployment falls towards the Fed’s definition of full employment, and as core PCE moves towards the 2% target, the FOMC is on track to raise rates two or three times this year (SG thinks two). But because the tightness of the labour market is having a very uncertain impact on inflation itself, the Fed has licence to continue market-watching and is unflustered by a real Fed Funds rate of -1% when real GDP growth is just under 2%.” “So Treasury yields, in both real and nominal terms, continue to grind higher but only very slowly. For every two steps up, there is at least one back down. The dollar is following the path of rates without satisfying the bullish consensus much. And investors, who feared a ‘riskoff’ period as monetary policy tightened, are sent off in the direction of higher-yielding currencies. The global economy is supported by easy Fed, BOJ, ECB and PBOC policies, and commodity prices are rising. No wonder 2017’s best currencies include the RUB, AUD, BRL and ZAR, all up by over 6% against the dollar and 5% against the euro.”

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, Cable’s stance stays neutral-to-negative in the short term. Key Quotes “GBP/

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, Cable’s stance stays neutral-to-negative in the short term.Key QuotesGBP/USD continues to consolidate around its 55 and 100 day moving averages at 1.2418/09, we maintain a negative bias but patience is needed. A close below here will introduce potential to the 1.2253 the 18th January low. The intraday Elliott counts have finally turned more negative and we look for some weakness this week”. “We suspect that prices will need to go sub 1.2250 in order to alleviate immediate upside pressure and trigger losses to the 1.1988/80 recent low. Immediate support is the 1.2347 February low”.    

UK PM Theresa May's spokesman was out on wires, via Reuters, saying that the government has no intentions of revoking Article 50.  She further added

UK PM Theresa May's spokesman was out on wires, via Reuters, saying that the government has no intentions of revoking Article 50.  She further added that PM May is determined to see Britain's automotive industry continue to flourish. Meanwhile, the GBP/USD major extended recovery from Friday's sub-1.2400 level and mantained its strong bid tone, albeit remained below 1.2500 psychological mark. 

The House of Lords will start its 2-day debate on Article 50 at 1530h GMT. Expectations are for the bill to pass without amendments despite it potenti

The House of Lords will start its 2-day debate on Article 50 at 1530h GMT. Expectations are for the bill to pass without amendments despite it potentially faces more challenges to be modified than the previous debate at the House of Commons. It is unlikely that the House of Lords dare to defy the result from the public referendum and the large majority favouring the bill when it passed through the House of Commons. Ultimately, the 2-day debate should then pose no threat to PM Theresa May’s intentions to trigger Article 50 at some point in March (likely end of month), while the reaction on the FX space should be fairly muted.What is the House of Lords?The House of Lords scrutinises bills that have been approved by the House of Commons. It regularly reviews and amends Bills from the Commons. While it is unable to prevent Bills passing into law, except in certain limited circumstances, it can delay Bills and force the Commons to reconsider their decisions. In this capacity, the House of Lords acts as a check on the House of Commons that is independent from the electoral process. Bills can be introduced into either the House of Lords or the House of Commons

The USD/CAD pair gained some fresh traction for the second consecutive day on Monday but still remains confined within 6-day old broader trading range

The USD/CAD pair gained some fresh traction for the second consecutive day on Monday but still remains confined within 6-day old broader trading range below the very important 200-day SMA. On Friday, the pair did attempt a break through the recent trading range but failed to sustain its move above 1.3100 handle. On Monday the pair was seen reattempting to build on to its move back above 1.3100 handle despite of a positive trading sentiment surrounding oil markets, which tends to benefit the commodity-linked currency - Loonie. In fact, WTI crude oil has now moved back above $54.00/barrel mark, with a gain of over 0.50%, and might contribute towards restricting any immediate sharp upside for the major.  Meanwhile, a subdued greenback price-action, with the key US Dollar Index stuck in a narrow band near 100.85 region, has not be supportive of the pair's up-move on Monday.  With the US markets closed on Monday, traders would take cues from the release of monthly Canadian Wholesale Sales data in order to grab some short-term trading opportunities. Moreover, market sentiment surrounding the greenback and oil market would also collaborate towards determining the pair's movement, if any, on Monday.Technical levels to watchCurrently trading around 1.3110-15 region, any subsequent move above 1.3125 region (Friday’s high) might confront resistance at 200-day SMA near 1.3140 region above which a fresh bout of short-covering has the potential to lift the pair beyond 1.3200 handle towards 50-day SMA resistance near 1.3220 region. On the flip side, sustained weakness below 1.3080, leading to a subsequent break below 1.3055-50 region, might continue to find support near 1.3020-10 region. A convincing break below 1.3020-10 support would turn the pair vulnerable to continue drifting lower in the near-term.   

In view of the analysts at BBH, European politics remains very much in the fore but it is a work in progress, and it is too early to expect an end gam

In view of the analysts at BBH, European politics remains very much in the fore but it is a work in progress, and it is too early to expect an end game.  Key Quotes“Even the finance ministers meeting to start the week is unlikely to resolve matters with Greece.  Greece does not need funds until July.  One of the rules of brinkmanship is that has to go to the brink.” “The key issue now is whether the IMF capitulates, contribute funds and agrees that Greece needs to achieve a  3.5% primary budget surplus next year, or whether Germany (and the Netherlands) accept that Greece is a European problem that Europe can and should address without the IMF's money (but perhaps with its expertise). A Reuters report at the end of last week suggested the former, while other reports pointed to some softening of the German stance on the necessity of the IMF.” “Just as many investors began feeling more comfortable with French politics, reflected in the 10-year spread narrowing from 77 bp on February 6 to 66 bp on February 16, a new twist to the drama unfolding.  There was an initiative to run a united left ticket, the Socialists, to be led by its left-wing candidate Hamon, the former Socialist, Melenchon's faction and, the Greens, under Jadot's leadership.  Such a coalition is seen taking votes away from Macron, who had moved into second as Fillion is snarled in a scandal.  A left candidate running against Le Pen would give the National Front its best chance of winning the second round.  The prospects spooked investors, and the premium widened again.  The 10-year spread rose back to 73 bp before the weekend.  The two-year premium rose to 32 bp, the highest since the mid-2013.  It stood at 11 bp at the end of 2016.”

According to the analysts at Deutsche Bank, the commitment to keeping yields stable in the face of rising US short-term and long-term yields should pu

According to the analysts at Deutsche Bank, the commitment to keeping yields stable in the face of rising US short-term and long-term yields should push JPY/USD higher even if the BoJ hasn’t kept 10yr yields exactly at zero.Key Quotes“This, especially with commodity prices rising and the BoJ’s balance sheet growing quickly again, should help to raise inflation expectations. We don’t expect much by way of fiscal stimulus, but there’s enough momentum in the economy – growth above potential – to expect inflation to rise above 1% by Q3 this year, although we don’t see it reaching 2% without a consumption tax increase. So there will remain perhaps an easing bias to policy, but we don’t expect any change in policy this year.”

Analysts at BBH note that the Fed's leadership--Yellen, Fischer, and Dudley--sounded increasingly confident about the trajectory of the economy and pr

Analysts at BBH note that the Fed's leadership--Yellen, Fischer, and Dudley--sounded increasingly confident about the trajectory of the economy and prices.  Key Quotes“While a March hike may seem soon, but May is looking particularly interesting.  As we have argued, the Fed is a bit hamstrung by its own transparency measures.  It has regularly scheduled quarterly press conferences, which are used to explain policy and policy views (economic projections).  In effect, this halves the number of "live" meetings to four. As the pace of normalization is poised to accelerate, it is clearly in the Fed's interest to re-animate, as it were, the other half.” “To do so requires the Fed to raise raises at a non-quarterly meeting, and May is next to such opportunity.  Others are drawing the same conclusion from the Fed's comments, especially Yellen's testimony.  Last week, the implied yield on the March Fed funds futures contract ticked up one basis point to 0.69% yield.  The implied yield on the May contract rose 3.5 bp to 0.785%.  The June contract's implied yield rose three basis points to 0.85%.” “Some caution that the market has a Fed hike and tax reform discounted.  Short-term positioning, they argue, is already extremely long dollars.  While some tax reform may indeed be anticipated, and Yellen acknowledged that the anticipation of fiscal stimulus might be helping elevate equity prices, remember the argument is that due to the economic identities and purchasing power parity that the dollar will rise to offset the border tax (20%-25%).  Clearly, with the dollar down against all the major currencies so far this year, it is hard to say tax reform is fully reflected in current prices.” “It is true that one hike in H1 17 has been largely discounted.  A second has also been priced into the strip, but the market is pricing in about a one in four chance of a third hike.  This has room to adjust.  And the speculative market does not appear to be extremely long dollars.  The latest CFTC Commitment of Traders report that covers through February 14, show the net short euros to be near seven-month lows, and the speculative participants are short US dollars against the Canadian, Australian and New Zealand dollars.  In fact, the speculators in the futures have not had such a large net long Canadian dollar position in five months.  The net long speculative position in Australian dollars is the largest in more than two months.  Since the end of last year, speculators have cut the net short yen positions by a third.” “The FOMC minutes release is the highlight for the US this week.  After the Yellen's recent testimony and comments from various other officials, it the minutes is unlikely to add much to the already available information set.  It may be interesting to see how the Fed's balance sheet was discussed and the preliminary thinking about fiscal policy initiatives.”   

“Yellen batted away concerns that Dodd-Frank was inhibiting lending and bank profitability. She pointed to the dramatic increase in commercial and industry loans and the health of US banks both in absolute terms and about other countries that did not impose it (like European banks).   Dodd-Frank may eventually be treated like the Affordable Care Act.  Rather than dismantling it and replacing it, much of which requires 60 votes in the Senate vs. the 54 held by Republicans), relaxing the discretionary enforcement, some repealing, some modifying or replacing, but when all is said and done, much will also likely remain.”

Research Team at Deutsche Bank expects the US Fed to be still in “wait and see” mode for the time being, wanting to know what and how policies are lik

Research Team at Deutsche Bank expects the US Fed to be still in “wait and see” mode for the time being, wanting to know what and how policies are likely to be implemented by the new Administration, as well as how they are likely to be received by the US private sector.Key Quotes“We continue to expect no action at the March FOMC meeting, but recent data suggest that there will be active discussion of a possible rate hike as soon as May. Our house call is for two rate hikes this year assuming inflation settles down and remains relatively quiescent this year. But the risks are increasingly to the upside of this call.”

The daily Opinionway poll is out on wires and revealed further gains for Le Pen in the second round of the upcoming French Presidential elections.  K

The daily Opinionway poll is out on wires and revealed further gains for Le Pen in the second round of the upcoming French Presidential elections. Key poll results:   •   Le Pen to get 27% in 1st round of election, Macron 20%, Fillon 20%
   •   Macron to beat Le Pen in run-off Vote in with 58%/42% Vs 60/40% on Friday
   •   Fillon Would Beat Le Pen In Run-Off Vote With 56% Vs 44%

Analysts at BBH note that the US President Trump is expected to provide details of his tax plan when he addresses both houses of Congress at the end o

Analysts at BBH note that the US President Trump is expected to provide details of his tax plan when he addresses both houses of Congress at the end of the month.   Key Quotes“Remember, many economists has argued that the border adjustment would "automatically" send the dollar sharply higher.  Also, lowering corporate tax schedules may get the headlines, but it is the effective tax rate that is key.  Will loopholes by closed?  Will it be revenue neutral, as scored by nonpartisans such as the Congressional Budget Office (CBO)?  Will debt servicing remain tax deductible?” “We are persuaded that the reason that capital expenditures are not more robust is not that interest rates are too high or that businesses do not have access to capital.  Therefore, even if tax reform boosted after-tax profits, it would not necessarily boost investment or growth or employment. It would more likely boost returns to shareholders by funding share buyback programs and dividend payouts.” “The US President bemoans the poor economy he inherited.  The New York Fed's GDP tracker see Q1 growth a little more than 3%, while the Atlanta Fed's model is a little below 2.5%.  The point is that after a little disappointment in Q4 16, when the US economy appears to have grown at what the Fed regards as the sustainable pace (~1.8%), the economy appears to have re-accelerated.  Practically every economic report last week, including consumer prices, retail sales, and industrial production, and the Empire and Philly February surveys, were above expectations.”

In view of the analysts at Natixis, in the United Kingdom, there is a high chance that the unelected House of Lords, in which Theresa May does not hav

In view of the analysts at Natixis, in the United Kingdom, there is a high chance that the unelected House of Lords, in which Theresa May does not have a majority, will secure some amendments in the Brexit bill.Key Quotes“The government plans to complete the legislative process by March 7 and send the final bill to the monarch for royal assent on March 8. There is a risk that the passage of the Brexit bill in the House of Lords would be delayed until late March.”

Germany's Central Bank, the Bundesbank (Buba), published its latest monthly report, which provides bank’s detailed analysis of current and future econ

Germany's Central Bank, the Bundesbank (Buba), published its latest monthly report, which provides bank’s detailed analysis of current and future economic conditions.Key Points:German economy should strengthen in 2017 due to industrial & construction activity and lower unemployment Against a backdrop of a very dynamic order intake, strong impulses can be expected from manufacturing  Long expected gradual strengthening of the global economy finally seems to be underway US policy shift bears both upside and downside risks Homes in German cities are 15-30% over priced in 2016 

According to news agency Reuters and at his visit to the European Council today, US VP Mike Pence said: US To Remain A ‘Full Partner’ Of EU And Europ

According to news agency Reuters and at his visit to the European Council today, US VP Mike Pence said: US To Remain A ‘Full Partner’ Of EU And European Allies Against Terrorism. US To Search For ‘New Common Ground’ With Russia Was Asked By Trump To Deliver Message Of Continued Partnership With EU

United Kingdom CBI Industrial Trends Survey - Orders (MoM) above forecasts (3) in February: Actual (8)

Spain Trade Balance dipped from previous €-1.25B to €-2.45B in January

Kit Juckes, Research Analyst at Societe Generale, suggests that the Friday’s Eurozone current and financial account data did nothing to alter a view o

Kit Juckes, Research Analyst at Societe Generale, suggests that the Friday’s Eurozone current and financial account data did nothing to alter a view of current Euro vulnerability and long-term, (major) potential upside.Key Quotes“The current account surplus reached EUR 47bn in December, and EUR 362bn over the year as a whole. It just keeps on growing. Meanwhile, bond flow data show foreigners were net sellers of EUR 197bn last year, EUR 66bn in December alone, while Europeans bought EUR 363bn in foreign bonds last year. So, huge current account surplus easily recycled with even bigger net outflows from bond investors thanks to ECB policies and perhaps investor nerves ahead of the French election that show up in foreigners shunning European bonds even if it doesn’t show up in yields.” “Take away the political risk, take away a little more of the ECB buying and do anything to reverse the widening in the Treasury/Bund spread and the conditions for a very sharp Euro rebound would be in place. In the mean time, the Euro remains slightly vulnerable short term. And frustratingly rangebound”

The ounce troy of the precious metal is trading on the defensive on Monday, meandering within a narrow range and posting marginal losses around $1,235

The ounce troy of the precious metal is trading on the defensive on Monday, meandering within a narrow range and posting marginal losses around $1,235.Gold cautious ahead of FOMC minutesPrices for the black gold remains in a tight range today against a backdrop of scarce activity following the President’s Day holiday in the US, while cautiousness is expected to grow bigger as we get closer to the FOMC minutes, to be released on Wednesday. Bullion stays under pressure in the meantime, as recent Fedspeak and testimonies by Chief Janet Yellen have boosted expectations of a rate hike by the Federal Reserve as soon as at the March meeting. Adding to the offered bias around the yellow metal, the US Dollar Index remains in a firm note for the third week in a row so far today, always propped up by supportive Fedspeak and auspicious results from the US docket.Gold key levelsAs of writing Gold is retreating 0.19% at $1,236.95 and a breakdown of $1,217.30 (low Feb.15) would expose $1,211.02 (100-day sma) and finally $1,185.60 (low Jan.26). On the flip side, the next up barrier is located at $1,241.20 (high Feb.17) followed by $1,243.90 (high Feb.8) and then $1,260.85 (200-day sma).

Lee Hardman, Currency Analyst at MUFG, notes that the euro has weakened modestly during the Asian trading session which has resulted in the EUR/USD ra

Lee Hardman, Currency Analyst at MUFG, notes that the euro has weakened modestly during the Asian trading session which has resulted in the EUR/USD rate falling back towards support from its 55-day moving average at around the 1.0600-level.Key Quotes“The euro has been undermined by concerns over rising European political uncertainty ahead of today’s Eurogroup meeting. European finance ministers are not expected to reach an agreement to extend financing to Greece as early as at today’s meeting. The market will be watching closely to see what progress has been made following the meeting.” “The main trigger for the euro’s decline were comments on Friday from French Socialist candidate Benoit Hamon stating that he was open to forming an alliance of the left in the upcoming French Presidential elections. He told Info radio that “what we need to discuss is the conditions under which we could come together and who in the end could - - between Yannick Jadot, Jean-Luc Melenchon and myself - - be best suited to embody the left in the second round of the French presidential race with a program that could be shared”. The comments triggered a sell-off in the French government bond market on Friday.” “The market is wary that forming an alliance of the left parties would increase their chances of making it through the first round of the French Presidential election. For example, the latest Ifop opinion poll revealed that Hamon received 14 percent of the vote and Melenchon 11.5 percent which when simplistically combined could prove sufficient to reach the second round. In reality even if the parties joined together, it would not necessarily be the case that they would retain all of their combined support. Nevertheless, it is making the market wary that such an outcome could increase the risk of Marine Le Pen becoming President, and would also represent a less market friendly alternative to either Republican candidate Fillon or independent Macron.” “However, the probability of the left parties forming an alliance is still seen as unlikely. It was highlighted by comments over the weekend from both Socialist candidate Hamon and far-left campaigner Melenchon. Far-left campaigner Jean-Luc Melenchon stated that Benoit Hamon’s campaign was going nowhere and that he wasn’t about to hitch a ride on a socialist “hearse”, while Benoit Hamon hit back stating that “I wouldn’t run after Melenchon, I don’t run after anyone”. It was been reported that both candidates are scheduled to meet this week. The developments add further to uncertainty over the French Presidential election. Independent Macron is still seen as the favourite although his lead over Republican Fillon has also shown signs of slipping over the last week. Overall, we continue to believe that upcoming political risk in Europe will remain a weight on the euro during the first half of this year.”

Having posted a session high at 0.7690 level, the AUD/USD pair reversed majority of the daily gains and has now moved back to neutral territory around

Having posted a session high at 0.7690 level, the AUD/USD pair reversed majority of the daily gains and has now moved back to neutral territory around 0.7670-75 band.  Earlier during Asian session on Monday, the pair rebounded from lows and recovered back closer to 0.7700 handle amid consolidative price-action surrounding the greenback. In addition, upbeat copper prices lend additional support to commodity-linked currencies - like the Aussie, and collaborated to the pair's up-move.  The momentum, however, lacked conviction as investors seemed reluctant to take initiate big bets amid thin market liquidity conditions in wake of President Day bank holiday in the US. Moreover, traders also seemed to readjust their positions ahead of RBA meeting minutes, scheduled for release during early Asian session on Tuesday.Technical outlookOmkar Godbole, Analyst cum Editor at FXStreet notes, "last week’s Doji candle and another failure to close above 0.77 handle points to indecision. Also note the Doji is preceded by a Dragon Fly Doji." "On the daily chart, we have a bearish price RSI divergence. A break below 0.7610 would add credence to the exhaustion seen on the weekly chart and divergence on the daily chart. The spot could test 0.75 levels then. Such a move could also yield a bearish crossover the daily DMI. However, bears should not get too ambitious given the fact that the ADX line is losing height and is pointing lower, which suggests weak momentum."    

Reuters reports comments from Defense Secretary Jim Mattis, after he gave an interview on his first trip to Iraq as Pentagon chief. Mattis noted, "We

Reuters reports comments from Defense Secretary Jim Mattis, after he gave an interview on his first trip to Iraq as Pentagon chief. Mattis noted, "We're not in Iraq to seize anybody's oil. By saying the above, Mattis tried to distance himself from remarks by President Donald Trump.    Trump told CIA staff in January: "We should have kept the oil. But okay. Maybe you'll have another chance."

The European Commission (EC) spokeswoman Natasha Bertaud was on the wires last hour, via Reuters, noting that the news of Junker resigning from EC’s p

The European Commission (EC) spokeswoman Natasha Bertaud was on the wires last hour, via Reuters, noting that the news of Junker resigning from EC’s presidency is "pure fabrication."

The GBP/USD pair faded a rally to daily tops near 1.2485 region and reverted towards the mid-point of 1.24 handle. The spot is last see exchanging han

The GBP/USD pair faded a rally to daily tops near 1.2485 region and reverted towards the mid-point of 1.24 handle. The spot is last see exchanging hands at 1.2461, up +0.42% on the day. Further GBP pullback remains on the cards – Danske BankThe major witnessed two-way trading action so far this session, as traders gear up for the  House of Lords debate on UK PM May’s Brexit plan due later this session. Also, low liquidity and irregular volatility amid holiday-thinned trading exaggerates the moves in GBP/USD. The immediate focus now remains the UK CBI’s industrial trends due out shortly, while the Article 50 trigger debate is likely to hog the limelight ahead of Tuesday’s UK Public Sector Net Borrowings data and BOE Carney’s speech.GBP/USD Levels to consider             The upside barriers are lined up at 1.2483 (daily high), 1.2500 (round figure) and 1.2570 (Feb 16 high). While supports are aligned at 1.2400 (key support) and 1.2389 (50-DMA) and below that at 1.2344 (Feb 7 low).    

Morten Helt, Senior Analyst at Danske Bank, believes there is room for further weakness around the Sterling. Key Quotes “Slower UK GDP growth driven

Morten Helt, Senior Analyst at Danske Bank, believes there is room for further weakness around the Sterling.Key Quotes“Slower UK GDP growth driven by weaker private consumption growth and weak wage growth supports our view that the Bank of England (BoE) will remain on hold in the coming 12 months”. “We still think the market’s pricing of the BoE is too optimistic. Hence, relative rates are most likely to be GBP negative, in our view. We still expect EUR/GBP to trade higher in coming months, driven by Brexit uncertainty. We forecast EUR/GBP to trade at 0.87 on 3M”.    

Having witnessed a bullish opening gap in Asia this Monday, oil futures on NYMEX accelerates gains and now looks to test Jan-end highs reached at 54.3

Having witnessed a bullish opening gap in Asia this Monday, oil futures on NYMEX accelerates gains and now looks to test Jan-end highs reached at 54.34 levels. The black gold is seen breaking higher from last week’s consolidation range, in wake of latest CFTC data, which showed that the investor optimism on WTI oil prices reached an all-time high amid high compliance to the OPEC output cut deal.However, it remains to be seen, for how long oil can survive above $ 54 mark, as increase in US rigs count and record stockpiles continue to undermine the sentiment around the commodity.  Later today, oil prices are expected to remain buoyed amid subdued trading activity as the US will be closed on Monday for the Presidents Day holiday. Focus shifts towards the API crude inventory report due out on Tuesday and the official US government figures on the US crude stockpiles, which will be published by the EIA on Wednesday.WTI technical levels         A break above $ 54.50 (psychological levels) could yield a test of $ 55.24 (Jan 3 high). While a breach of support at $ 53.73 (daily low) would expose the 50-DMA support of $ 53.06.

Karen Jones, Head of FICC Technical Analysis at Commerzbank, has not ruled out a potential visit to the 0.9945/33 band. Key Quotes “USD/CHF has seen

Karen Jones, Head of FICC Technical Analysis at Commerzbank, has not ruled out a potential visit to the 0.9945/33 band.Key QuotesUSD/CHF has seen rejection from the 55 day ma at 1.0105 and is correcting lower, currently we are unable to rule out slippage to .9945/33 the uptrend, prior to another upside attempt. We view the market as having based recently at the .9861 low, (we suspect that the market has turned at the 200 day ma and the 55 week ma)”. “While above .9945/33 we would expect it to generate some upside interest to 1.0248 11th January high and the 1.0328 2015 and 1.0344 December 2016 highs”.    

Lee Hardman, Currency Analyst at MUFG, notes that the pound has started this year off on a stable footing defying expectations so far that it would we

Lee Hardman, Currency Analyst at MUFG, notes that the pound has started this year off on a stable footing defying expectations so far that it would weaken as the UK moved closer to triggering Article 50 by the end of March.Key Quotes“The government appears on course to trigger Article 50 as planned although could face more of challenge in passing the Brexit legislation through the House of Lords this week than they faced from the House of Commons. The House of Lords has a stronger footing to push back from and propose amendments to the bill although it will ultimately be passed. It will be very difficult for the unelected House of Lords to defy the result of the public referendum and the large majority in favour of the bill when it passed through the House of Commons. The developments should have limited impact on the pound.” “Rising political risk in Europe continues to offer some support for the pound even as there are tentative signs that the UK economy is starting to lose some cyclical momentum in the near-term. The release on Friday of the latest UK real sales report for January revealed weak growth for the second consecutive month. The report has reinforced expectations that households are starting to feel the hit from higher inflation. Consumer spending appears set to expand more modestly in the first half of this year. For the UK economy as a whole, a pick-up in export growth and business investment could provide some offset to slower consumer spending.”

The bout of buying pressure around the British Pound is now dragging EUR/GBP to test fresh daily lows in the 0.8500 neighbourhood. EUR/GBP weaker on

The bout of buying pressure around the British Pound is now dragging EUR/GBP to test fresh daily lows in the 0.8500 neighbourhood.EUR/GBP weaker on GBP sellingThe European cross met increasing selling pressure at the beginning of the week, coming down to test 2-day lows in the vicinity of 0.8500 the figure, shedding nearly a cent since Friday’s peak just below the 0.8600 limestone. Nothing expected data wise the euro area while advanced manufacturing/services PMIs are due on Tuesday. In the UK, CBI’s Industrial Trends is up later in the morning while the House of Lords will start a 2-day debate on Article 50 in the afternoon. Tomorrow, UK’s Public Sector finance figures are due along with the speech by Governor M.Carney. In the meantime, extra gains in the cross appear capped by the 4-month resistance line, today in the mid-0.8600s, while initial support emerges in the 0.8460/50 band.EUR/GBP key levelsThe cross is now retreating 0.46% at 0.8520 and a break below 0.8482 (low Feb.16) would expose 0.8465 (200-day sma) and finally 0.8451 (low Feb.14). On the other hand, the next resistance is located at 0.8595 (high Feb.17) ahead of 0.8648 (high Feb.6) and then 0.8658 (4-month resistance line).

Greece Current Account (YoY) increased to €-0.933B in December from previous €-1.191B

Livesquawk reported headlines from La Repubblica earlier on the day, citing that Jean-Claude Juncker in the next one month could leave the presidency

Livesquawk reported headlines from La Repubblica earlier on the day, citing that Jean-Claude Juncker in the next one month could leave the presidency of the European Commission (EC). The Italian daily added that EC vice chairmen Katainen and Timmermans are the top candidates to replace Juncker.

The GBP/JPY cross staged a goodish recovery on Monday and has managed to reverse majority of Friday's disappointing UK retail sales-led slide to the v

The GBP/JPY cross staged a goodish recovery on Monday and has managed to reverse majority of Friday's disappointing UK retail sales-led slide to the very important 200-day SMA support.  Currently trading back above 141.00 handle, testing session peaks, the cross caught fresh bids after disappointing Japanese trade balance data, which helped the cross to build on Friday's rebound from sub-140.00 level (200-day SMA support). Adding to this, positive trading sentiment around equity markets further weighed on the Japanese Yen's safe-haven demand and is supportive of the pair's recovery on Monday. Meanwhile, a strong recovery in the GBP/USD major was also seen collaborating to the strong bid tone surrounding the GBP/JPY cross. Moreover, a fresh wave of short-covering, in wake of the ongoing rebound from 200-day SMA, could also be attributed to the pair's strong up-move in the past hour or so.  In absence of any fresh fundamental trigger, in-terms of economic releases, market focus would be on any fresh news / developments surrounding the House of Lords debate on the Brexit bill, scheduled to start from 3pm GMT.Technical levels to watchImmediate resistance is pegged near 141.35-40 region above which the recovery trend could get extended towards 142.40 horizontal hurdle with some intermediate resistance near 142.00 round figure mark. On the downside, 140.60-55 region now becomes immediate support to defend, which if broken could accelerate the slide back below 140.00 psychological mark towards retesting 200-day SMA support near 139.50 region.  

Bloomberg ran a story on the European Central Bank (ECB) this Monday, noting that the bank officials begin to wonder how they’re going to signal the e

Bloomberg ran a story on the European Central Bank (ECB) this Monday, noting that the bank officials begin to wonder how they’re going to signal the end of the stimulus era. According to Eurosystem officials familiar with the matter, a proposal by Executive Board member Yves Mersch to review the ECB’s guidance on future actions has focused policy makers’ minds on the challenge of mapping an exit from quantitative easing and negative interest rates, Bloomberg reports.

The bulls were rescued by fresh support once again just ahead of 1.06 handle, sending the EUR/USD pair back to test the upside barrier located at 5-DM

The bulls were rescued by fresh support once again just ahead of 1.06 handle, sending the EUR/USD pair back to test the upside barrier located at 5-DMA (1.0627).EUR/USD clings to 1.0600Currently, the spot peeks into the green zone near 1.0620, extending its side-trend into the European session, with sentiment divided between weaker treasury yields and firmer European equities. However, subdued trading activity seen around the greenback versus its main competitors lends support to EUR/USD somewhat. While the EUR traders cheer upbeat German PPI data, which arrived at +0.7% m/m versus +0.3% expectations.Markets now eagerly await Germany’s Bundesbank monthly economic report for fresh incentives, in absence of significant economic events and amid slowing volumes as the US markets remain on a holiday today.  EUR/USD rallies should struggle near 1.0730 – CommerzbankEUR/USD Technical Levels In terms of technicals, the pair finds the immediate resistance 1.0627/33 (5-DMA/ daily high). A break beyond the last, doors will open for a test of 1.0666 (100-DMA) and from there to 1.0683 (20-DMA). On the flip side, the immediate support is placed at 1.0582 (daily S3) below which 1.0520 (Jan 6 low) and 1.0500 (psychological levels) could be tested.  

The buying interest around the Sterling is gathering extra traction at the beginning of the week, now lifting GBP/USD to the area of daily highs in th

The buying interest around the Sterling is gathering extra traction at the beginning of the week, now lifting GBP/USD to the area of daily highs in the 1.2450/60 band.GBP/USD supported near 1.2400The pair is reverting last Friday’s sell off to the 1.2400 neighbourhood, as the offered tone around the greenback appears to be intensifying following the European opening. Looking to the broader picture, spot remains well within the consolidative pattern seen since early February, likely between 1.2600 and 1.2400, while GBP stays under pressure in light of the recent disappointing results from the UK docket, Brexit uncertainty, a steady-to-cautious BoE and extreme speculative positioning. On the data front, CBI’s Industrial Trends is up later in the morning, while UK’s Public Sector finance figures and the speech by Governor M.Carney are expected tomorrow.GBP/USD levels to considerAs of writing the pair is up 0.35% at 1.2452 and a breakout of 1.2518 (20-day sma) would open the door to 1.2550 (high Feb.14) and finally 1.2715 (high Feb.2). On the other hand, the immediate support lines up at 1.2379 (low Feb.15) ahead of 1.2344 (low Feb.7) and finally 1.2250 (low Jan.19).

Hong Kong SAR Unemployment rate remains unchanged at 3.3% in January

Following Friday's slump to multi-day lows, the EUR/JPY cross staged a minor recovery bounce on Monday and move back above 120.00 psychological mark.

Following Friday's slump to multi-day lows, the EUR/JPY cross staged a minor recovery bounce on Monday and move back above 120.00 psychological mark. Currently trading around 120.10-15 region, today's disappointing Japanese trade balance data, coupled with a slight improvement in investors' risk-appetite, which tends to dent the Japanese Yen's safe-haven demand, helped the cross to bounce of 119.75-70 support area. Adding to this, a modest recovery witnessed around the EUR/USD major further supported the pair's recovery back beyond 120.00 handle.  Looking at the technical picture, the cross on Friday confirmed a breakdown through 6-day old trading range and hence, any recovery attempts might get sold into near the trading range support break-point turned resistance near 120.25-30 region. Technical levels to watchA sustained recovery back above 120.25-30 resistance has the potential to lift the cross back towards 121.00 hurdle, which if cleared would negate any near-term bearish bias and pave way for continuation of the recovery move further towards 121.40-50 horizontal resistance. On the flip side, decisive break below 119.75-70 support would confirm the break down and might drag the cross below Feb. monthly lows support near 119.50 region towards testing 100-day SMA support near 119.15-10 region.  

The Canadian Dollar is trading on a firmer note on Monday, prompting USD/CAD to navigate within a rangebound theme below the 1.3100 handle. USD/CAD f

The Canadian Dollar is trading on a firmer note on Monday, prompting USD/CAD to navigate within a rangebound theme below the 1.3100 handle.USD/CAD focus on oil, riskSpot has failed to extend the recent breakout of the 1.3100 mark seen last Friday, although it has so far managed to revert part of the initial negative tone and trade closer to 1.3100 following the opening bell in Euroland. In the meantime, CAD keeps struggling between crude oil dynamics and the Fed-BoC policy divergence when comes to pick a driver for the price action, while speculative positioning showed net longs have climbed to the highest level since early September on the week to February 14, according to the latest CFTC report. Data wise today, Canadian Wholesale Sales are only due later today amidst an expected drain of activity following Canadian Family Day holiday and US Presidents’ Day holiday.USD/CAD significant levelsAs of writing the pair is losing 0.02% at 1.3092 facing the next support at 1.3007 (low Feb.16) seconded by 1.2977 (low Feb.2) and then 1.2967 (low Jan.31). On the other hand, a surpass of 1.3127 (high Feb.17) would aim for 1.3146 (200-day sma) and finally 1.3215 (high Feb.7).

Hungary Gross Wages (YoY) declined to 5.7% in December from previous 8.2%

Denmark Consumer Confidence rose from previous 4.5 to 4.8 in February

In the Eurozone, analysts at Natixis are keeping their scenario unchanged as they continue to believe that the current peak in inflation is temporary

In the Eurozone, analysts at Natixis are keeping their scenario unchanged as they continue to believe that the current peak in inflation is temporary and will not last beyond April.Key Quotes“Indeed, inflation rate should slow down gradually thereafter. Thus we do not expect a change in the current monetary stance by the ECB, yet the ECB is likely to face some pressures to tighten its policy. The acceleration of inflation comes to support our scenario of a deceleration of growth from now on due to its effect on consumers spending.”

According to the analysts at Deutsche Bank, US President Trump will have considerable scope to reshape the Fed in the coming months. Key Quotes “By

According to the analysts at Deutsche Bank, US President Trump will have considerable scope to reshape the Fed in the coming months.Key Quotes“By April, there will be at least three vacancies on the seven-seat Board of Governors for Trump to fill. This potential for a dramatic Fed shakeup has started to come into focus for markets.” “At this point there is substantial uncertainty about who could replace Chair Yellen. There has been little indication from the Trump administration about possible candidates, and the range of outcomes seems wider than in the past, given that Trump's economic team is composed of individuals that were previously relatively unknown in policy circles and who have not been associated with past administrations.” “Based on Trump's past comments, the makeup of his economic advisors and appointments, and the political leanings of Congressional Republicans, it would seem that he may prefer a candidate that: (1) has significant experience in markets and/or business (i.e., a market practitioner rather than an academic economist), (2) does not have strong hawkish leanings that would work against Trump's growth agenda, and (3) does not forcefully reject greater Congressional oversight of the Fed.” “Who occupies the Chair's seat would be critical for markets in any environment. But Yellen's replacement could be even more important, as he or she may well preside over an economy that is near full employment and that is given a large dose of fiscal stimulus. This raises the risk that the Fed could fall behind the curve.” “There is the potential for more contention on the Committee going forward. The FOMC has become more centrist in recent years, with the number of dissenting votes, especially among Fed Governors, unusually low. These numbers were much higher during the 1970s and 80s, when Fed leadership appointed by one Administration faced dissenting votes by new governors appointed under the next Administration. Looking ahead, less consensus and more dissents would seem likely if there is a shift away from the center at the top of the Fed leadership, especially if some of the centrists now in office remain until their terms run out.”

The USD/CHF pair was seen consolidating Friday's sharp recovery move back above parity mark and seesawed between tepid gains and minor losses.  Curre

The USD/CHF pair was seen consolidating Friday's sharp recovery move back above parity mark and seesawed between tepid gains and minor losses.  Currently holding just above 100-day SMA near 1.0025 region, the pair struggled for a firm direction on Monday as investors refrained from building on any fresh positions amid thin market liquidity conditions in wake of Presidents' Day bank holiday in the US. Meanwhile, a subdued US Dollar price-action has also failed to provide any fresh impetus for the major, albeit has managed to tread water in wake of positive trading sentiment surrounding equity markets, which tends to weigh on the Swiss Franc's safe-haven appeal.  In absence of any major market moving releases, market sentiment surrounding the greenback would continue to be an exclusive driver of the pair’s movement ahead of this week’s key event risk – FOMC meeting minutes on Wednesday. Technical levels to watchFrom current levels, any upside momentum is likely to confront immediate resistance near 1.0050-55 region above which the pair seems to head towards testing 1.0075-80 resistance ahead of 1.0100 round figure mark. On the flip side, weakness back below parity mark, leading to a subsequent break below 0.9975 horizontal support, seems to drag the pair back towards 0.9970-65 horizontal support, en-route 0.9930 support area.  

Research Team at Natixis notes that in the United States, J. Yellen’s comments and the upward surprise on core inflation pushed forward expectations f

Research Team at Natixis notes that in the United States, J. Yellen’s comments and the upward surprise on core inflation pushed forward expectations for the next rate hike.Key Quotes“The market is now putting a 44% probability on the possibility of having a rate hike in March (versus 24% last week) and 62% for May (versus 39%). For the moment we stick to our view that the next hike will be in June but if we keep having positive surprises on inflation metrics, then a rate hike in May would become more likely.”

Jack Di-Lizia, Strategist at Deutsche Bank, suggests that more modest-than-expected rises in last week’s inflation and wage prints help take some pres

Jack Di-Lizia, Strategist at Deutsche Bank, suggests that more modest-than-expected rises in last week’s inflation and wage prints help take some pressure off the MPC for now, justifying the market’s more dovish repricing of near term BoE meeting datesKey Quotes“At the same time, underlying drivers of price pressures in the UK remain strong, with forward indicators pointing to continued price acceleration, which should in turn help support pay growth.” “In sum, the likelihood of a more hawkish lean in the near term has reduced, with the MPC’s set of judgments from the February IR passing their first test from the data.” “From a trade perspective, we therefore see less potential for near term meeting dates to cheapen, and exit the short Nov-17 MPC.” “However, the flattening of the money market curve further out is harder to reconcile with expectations that prices will remain above target throughout the horizon.  A repricing of the current pace of hikes would support a steepening of the money market curve from the 1Y1Y point in particular and we recommend steepeners in 1Y1Y-3Y1Y Sonia.” “We maintain the short 5Y ASW where valuations remain historically rich relative to upcoming supply/demand dynamics and the short 30Y gilts, which despite recent steepening pressure sees room for additional cheapening.”

Michael Every, Head of FMR at Rabobank, lists down the key economic releases from across the globe for the week ahead. Key Quotes “On the export fro

Michael Every, Head of FMR at Rabobank, lists down the key economic releases from across the globe for the week ahead.Key Quotes“On the export front, today has already seen Japanese January exports rise just 1.3% y-o-y vs. 5.0% expected, while imports surged 8.5% vs. 4.8% expected. That will be as welcome as a bus crash with PM Abe and the BOJ. The highlight of the rest of the day is Eurozone consumer confidence for February, seen unchanged yet again at -4.9.” “In terms of the rest of the week, tomorrow we have the Japanese Nikkei PMI, RBA minutes, and European and Markit services and composite PMIs, while BOE Governor Carney speaks in Parliament. In the US it is the Markit manufacturing and services PMIs. There are also several Fed speakers.” “Wednesday sees the RBA’s Lowe speaking in Sydney; Aussie wages; the German IFO survey; another look at Q4 UK GDP; final Eurozone CPI; Canadian retail sales; and US existing home sales, ahead of the FOMC minutes – will they point to March? In Brazil, we will also have a Selic rate decision, where a further hefty cut is expected.” “Thursday has just Aussie Q4 CAPEX spending, and Friday Canadian CPI and US final Michigan confidence.”

Analysts at Citi appear to have turned optimistic on the red metal, projecting supply deficits alongside recovering Chinese demand to keep the prices

Analysts at Citi appear to have turned optimistic on the red metal, projecting supply deficits alongside recovering Chinese demand to keep the prices higher this year.Key Quotes via CNBC:"Copper supply set to under-perform demand for much of the next half decade. As the global economy departs from several years of stagnation, so too does the outlook for copper pricing.” “The combination of stronger than expected Chinese demand, a clear lack of visible copper inventory build, an end to cost deflation, and the U.S.-centric reflation story after the Trump election victory sparked positive price momentum through the latter stages of 2016,"  "The much-vaunted wall of supply that hit copper in 2016 failed to drown the red metal in excess supply."  Meanwhile, COMEX copper futures rally +0.81% to $2.73/ pound, extending the rebound from $ 2.682 levels.

The greenback rose against the Japanese Yen, helping the USD/JPY pair to move back above 113.00 handle and snap three consecutive days of rejection mo

The greenback rose against the Japanese Yen, helping the USD/JPY pair to move back above 113.00 handle and snap three consecutive days of rejection move from 115.00 psychological mark.  Currently trading around 113.15 level, the pair caught fresh bids after Japanese trade balance figures missed expectations. In fact, the country's Merchandise trade balance for January came-in to show a deficit of ¥1086.9 billion versus ¥636.8 billion deficit expected and ¥641.4 billion surplus recorded in December.  Meanwhile, a bullish consolidation around the US Dollar also supported the bid tone surrounding the major. This coupled with a slight improvement in investor's risk appetite, which tends to weigh on the Japanese Yen's safe-haven appeal, further assisted the pair to reverse majority of its losses posted on Friday. Investors, however, might be reluctant to initiate and carry big positions ahead of the US national holiday on Monday, which might collaborated towards restricting further upside for the major.Technical levels to watchImmediate resistance is seen near 113.50 level (Friday’s high) above which the pair is likely to aim towards reclaiming 114.00 handle and head towards testing 114.15-20 horizontal resistance. On the flip side, weakness below 113.00 handle might now find support at 112.85 level, which if broken is likely to accelerate the slide towards 112.40 intermediate support ahead of 112.00 round figure mark.  

Senior Analyst at Danske Bank Stefan Mellin sees the Swedish Krona slowly appreciating in the next months. Key Quotes “We think that the Riksbank re

Senior Analyst at Danske Bank Stefan Mellin sees the Swedish Krona slowly appreciating in the next months.Key Quotes“We think that the Riksbank remains too optimistic on inflation and if it decides to end QE this summer, which we believe, it may want to delay hikes instead in order to mitigate excessive SEK appreciation and keep inflation expectations close to target”. “We still do not see a first hike before well into next year. The macro backdrop and valuation still suggests that EURSEK will head lower, but when considering the likely Riksbank reaction over the coming months, we have a relative flat forecast trajectory. We forecast EUR/SEK at 9.40 in 3M”.    

According to Micaella Feldstein, research analyst at Natixis, the 1.0525-1.0543 area (61.8% Fibonacci retracement of the 1.0340-1.0831 wave / Jan 3rd,

According to Micaella Feldstein, research analyst at Natixis, the 1.0525-1.0543 area (61.8% Fibonacci retracement of the 1.0340-1.0831 wave / Jan 3rd, 2017- Feb 2nd, 2017) interrupted the downside for EUR/USD, preventing the emergence of a downside bubble on the daily chart and paving the way for a rally to 1.0735 (daily parabolic).Key Quotes“Breaking above this barrier would be very encouraging and would enable the pair to recover further to the key 1.0819-1.0831 barriers (daily Bollinger upper band); levels already tested in December 2016 and also at the end of January 2017/ beginning of February 2017.” “A break of these last barriers would be needed to initiate a lasting rally in the coming weeks to the 1.0913 threshold (9-month moving average) and to 1.0986 (monthly Bollinger moving average). The supports stand at 1.0573, at 1.0525-1.0543, at 1.0491 and at 1.0390-1.0404.”

Analysts at Bloomberg note that investor optimism on WTI oil prices reached an all-time high as the OPEC delivers on pledges to reduce production.  A

Analysts at Bloomberg note that investor optimism on WTI oil prices reached an all-time high as the OPEC delivers on pledges to reduce production.  According to the latest CFTC data, Money managers’ net-long position in WTI increased by 30,951 futures and options to 390,338, the most in data going back to 2006. Longs rose 3.1% to an all-time high, while shorts tumbled 30%. Bloomberg reports, “Hedge funds boosted their net-long position on WTI, or the difference between bets on a price increase and wagers on a decline, by 8.6 percent in the week ended Feb. 14, U.S. Commodity Futures Trading Commission data show. After some hesitation in the previous week, it was the fifth time this year that they’ve upped their bullish stance, and the third they took it to a new record.” Tim Evans, an energy analyst at Citi Futures, noted, “"Money managers have confidence that there will be either a further, ongoing investor flow that will keep prices elevated, OPEC cuts will continue and start reducing inventories, or increased demand will reduce supply in the second half of the year." 

Germany Producer Price Index (MoM) above expectations (0.2%) in January: Actual (0.7%)

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, occasional bullish attempts should face strong resistance around 1.0730. Key

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, occasional bullish attempts should face strong resistance around 1.0730.Key QuotesEUR/USD saw a decent rebound from 1.0521 last week. This has so far merely delayed our negative bias as no resistance of note has been eroded and it still remains capped by the 20 day ma at 1.0688 and the 3 month downtrend at 1.0725. Our focus remains on recent lows at 1.0352/40”. “The market will remain directly offered below short term downtrend at 1.0725. Above here lies 1.0820/26, which represents the 50% retracement and the top of the cloud”.    

Turkey Consumer Confidence fell from previous 66.9 to 65.7 in February

Germany Producer Price Index (YoY) came in at 2.4%, above forecasts (1.9%) in January

The greenback is clinging to its daily gains at the beginning of the week, now lifting US Dollar Index to the boundaries of the critical barrier at 10

The greenback is clinging to its daily gains at the beginning of the week, now lifting US Dollar Index to the boundaries of the critical barrier at 101.00 the figure.US Dollar looks to Trump, FOMC, FedspeakThe index has started Monday with a smile, extending the positive momentum for the third session in a row for the time being. However, a more sustainable breakout of the key 101.00 handle seems to require a stronger catalyst, particularly after the hawkish tone from Chief Yellen at her recent testimonies appeared insufficient to spark another durable leg higher. US markets will be closed today due to the Presidents’ Day holiday, leaving the buck to the mercy of the broader risk appetite trends. Looking ahead, the FOMC minutes (Wednesday) and a slew of Fed speakers throughout the week should keep the focus on USD in an otherwise calm calendar. From the perspective of the speculative community, USD net longs continued to retreat during the week ended on February 14, back to levels last seen in late October, as per the latest CFTC report.US Dollar relevant levelsThe index is gaining 0.05% at 100.94 facing the next resistance at 101.29 (55-day sma) followed by 101.75 (high Feb.15) and finally 101.95 (23.6% Fibo of the November-January up move). On the flip side, a break below 100.40 (low Feb.16) would aim for 100.15 (100-day sma) and then 100.03 (low Feb.8).

Research Team at Danske Bank, suggests that we have a very light data calendar ahead of us today where US markets are closed due to President's Day.

Research Team at Danske Bank, suggests that we have a very light data calendar ahead of us today where US markets are closed due to President's Day.Key Quotes“The data calendar for this week is also relatively light. The most interesting data points are preliminary European and US PMIs, which will give an indication of the condition of the industrial cycle. We look for an increase in the US, while the index for Europe is likely to show that the recent upward trend has ended. However, both indices will show that activity remains solid.”

“In the UK, focus is on the Article 50 debate in the House of Lords, which begins today. The bill is not expected to be delayed and the UK remains on track to trigger Article 50 by the end of March, perhaps at the EU summit in Malta on 9-10 March.” “In the euro area, we expect slightly weaker consumer confidence in February in line with the turn in other sentiment indicators. That said, as the unemployment rate continues to decline, we expect consumer confidence to remain at a high level, thereby pointing to continued solid growth in private consumption.”

The Japanese trade balance report showed a bigger-than expected trade deficit, which knocked-off the yen across the board, helping USD/JPY to stage a

The Japanese trade balance report showed a bigger-than expected trade deficit, which knocked-off the yen across the board, helping USD/JPY to stage a recovery above 113 handle. While the Aussie also traded with gains amid higher copper and crude prices. Further, weaker treasury yields also boosted the attractiveness of the higher-yielding emerging market currency AUD. Later today, we have nothing of significance in terms of economic data is due to be reported from across the globe. However, second-tier data in the German PPI and UK CBI Industrial Order Expectations will be released in Europe. Besides, Germany’s central bank, Bundesbank, monthly economic report will be also published. While NA session offers the Canadian monthly wholesale sales data. We have nothing from the US, as the American markets are closed today in observance of Presidents' Day.Main topics in AsiaFed’s Mester believes monetary policy isn’t the cure for low productivity Dr. Loretta Mester, President of the Federal Reserve Bank of Cleveland, while speaking in Singapore said the US economy is on a sound footing, but the low US productivity conundrum may not be solved by monetary policy.  Japan Merchandise Trade Balance  Japan Merchandise Trade Balance Total below forecasts (¥-636.8B) in January: Actual (¥-1086.9B) Japanese Yen remains undervalued, BIS REER at lowest since Feb 2016 The Bank for International Settlement (BIS) published Real Effective Exchange Rate (REER) data last Friday for the month of January. Asian stocks waver amid holiday in US Asian stocks wavered on Monday morning amid holiday in US and as investors await further details from President Trump on economic policies - fiscal stimulus, tax cuts.Key focus for the week ahead                                                   EUR/USD bounces-off 1.0600 amid thin trading Next on tap for EUR/USD remains the German PPI data, which may have virtually no impact on the euro, while traders may closely eye the German Bundesbank monthly report for fresh impetus amid a light, holiday-thinned trading session today.   House of Lords to debate UK PM May’s Brexit plan A coalition of Labour, Liberal Democrat, crossbench and some Conservative peers will come together today to force changes to the government’s Brexit bill, which seeks to give PM Theresa May the power to trigger article 50. Silver: Anticipate further advance - Natixis Micaella Feldstein, Research Analyst at Natixis, suggests that the silver contract has recovered markedly since the end of last December (when it bottomed at 15.70). Dollar factors: Fed in focus - Westpac Analysts at Westpac explained the US dollar factors in respect to its peers in the FX space and the Fed.

In view of the analysts at Natixis, given that a small ascending channel has developed in the daily chart of NOK/SEK since the start of January and th

In view of the analysts at Natixis, given that a small ascending channel has developed in the daily chart of NOK/SEK since the start of January and that the weekly stochastic has turned around sharply, it is likely that the pair will head towards the resistance at 1.0730 (weekly Bollinger moving average and upper band of daily Bollinger).Key Quotes“There will need to be a breakout above this last level to envisage a more pronounced rebound over the next two to three weeks towards 1.0902 (descending resistance trendline), which is the last obstacle before the resistance at 1.0995 (upper band of weekly Bollinger).” “Take advantage of any pullbacks towards 1.0650 to buy the NOK/SEK, with as first major target 1.0903 (setting the stop loss below 1.06).”

Having posted a session low near 0.7660 region, the AUD/USD pair regained traction and snapped two consecutive days of losing streak. Currently tradi

Having posted a session low near 0.7660 region, the AUD/USD pair regained traction and snapped two consecutive days of losing streak. Currently trading around 0.7675-80 band, testing session peaks, positive sentiment surrounding commodity space, especially Copper, is seen supporting commodity-linked currencies - like the Aussie. Moreover, a subdued US Dollar price-action, amid thin liquidity conditions in wake of a holiday in the US, is lending additional support to the pair's recovery from session low.  Looking at the broader picture, the pair remains well supported near 0.7600 handle but has failed to sustain its move above 0.7700 mark. Hence, it would be prudent to wait for a decisive break through this broader trading range before determining the next leg of directional move.Technical levels to watchImmediate resistance is pegged near 0.7695-0.7700 region above which the pair is likely to immediately dart towards 0.7720-30 resistance area before attempting a move towards Nov. daily closing highs resistance near 0.7760 region. On the flip side, weakness back below 0.7670, leading to a subsequent weakness below session low support near 0.7660-55 region, is likely to drag the pair towards the lower end of recent trading range support near 0.7610 level.  

Reuters quoting sources familiar with the matter, citing that the Chinese fx trading platform operator adjusted yuan midpoint mechanism today. Source

Reuters quoting sources familiar with the matter, citing that the Chinese fx trading platform operator adjusted yuan midpoint mechanism today. Sources added, “China's trading platform operator used shorter reference period of RMB trading vs currency basket to calculate midpoint.”

EUR/USD attempted a tepid-bounce from a dip to 1.0600 levels, and now heads back towards daily tops previously posted at 1.0633. EUR/USD holds 1.06,

EUR/USD attempted a tepid-bounce from a dip to 1.0600 levels, and now heads back towards daily tops previously posted at 1.0633.EUR/USD holds 1.06, but for how long?Currently, the spot trades almost unchanged at 1.0615, as investors await fresh cues from the sentiment on the European markets, with the US dollar extending its upside consolidation phase into Europe amid weaker treasury yields and a non-event FOMC member Mester’s speech. However, it remains to be seen if the major sustains the recovery mode, as the technical indicators point towards further downside risks, particularly below a break of 1.0520 levels. EUR/USD: RSI and MACDs are consistent with losses – BBHNext on tap for EUR/USD remains the German PPI data, which may have virtually no impact on the euro, while traders may closely eye the German Bundesbank monthly report for fresh impetus amid a light, holiday-thinned trading session today.  EUR/USD Technical Levels In terms of technicals, the pair finds the immediate resistance 1.0626/33 (5-DMA/ daily high). A break beyond the last, doors will open for a test of 1.0666 (100-DMA) and from there to 1.0683 (20-DMA). On the flip side, the immediate support is placed at 1.0582 (daily S3) below which 1.0520 (Jan 6 low) and 1.0500 (psychological levels) could be tested.  

On March 15th the Netherlands will elect a new Tweede Kamer (lower house), and by extension a new government notes research team at Rabobank. Key Quo

On March 15th the Netherlands will elect a new Tweede Kamer (lower house), and by extension a new government notes research team at Rabobank.Key Quotes“Echoing the British ‘Leave’ in the EU-referendum and the election of Donald Trump as president of the US, the latest opinion polls show a rise of populism in the Netherlands as well. What are the odds of Geert Wilders and his eurosceptic PVV forming part of the new government?” “We have identified three scenarios. In the most likely scenario, the PVV wins the elections, but fails to form a government. In the second scenario, the VVD wins the elections and forms a government. In the least likely scenario, the PVV wins and manages to form a government.” “It’s important to point out that it is not set in stone that any future coalition will govern for a full four-year term. Similarly, it’s difficult to assess exact policy changes in both scenarios, given that many parties are involved, which implies heavy bargaining and compromising.”

Lysu Paez Cortez, Research Analyst at Natixis, notes that the emerging markets are proving resilient and are continuing to perform well in the opening

Lysu Paez Cortez, Research Analyst at Natixis, notes that the emerging markets are proving resilient and are continuing to perform well in the opening months of 2017.Key Quotes“Considering the growth outlook for emerging economies has not really come in for an upward revision, that political uncertainties loom menacingly on both sides of the Atlantic and that interest rates are expected to rise in developed countries this year (with the Federal Reserve expected to kick start the process in June), the resilience of emerging markets could be explained by the improvement in sentiment regarding global growth, the most recent data as regards growth and industrial activity (i.e. the PMI) having proved better than expected. Although macroeconomic indicators are more positive in developed countries, the economic fundamentals of emerging countries have also improved slightly since the start of the year.” “Emerging equity markets and exchange rates on the up After the sharp selloff triggered by Donald Trump’s victory in the US presidential election last November, the MSCI EM index has risen sharply since 26 December 2016. With a gain of 9.5% year-to-date, the index is back at 940 points, which corresponds to its levels of mid-2015.  The stabilisation of crude oil prices (agreement by OPEC and non-OPEC producers to curb the supply of crude seems to be taking hold) and the rebound in the price of other commodities are also positive factors for a number of emerging countries.  Also, emerging currencies have continued to appreciate against the US dollar, retracing their losses at the end of 2016. The Russian ruble, Brazilian real and South African rand have spearheaded this recovery, with gains of 7%, 6.3% and 6.2%, respectively. The one currency to have bucked this trend is the Turkish lira, which is down 4% year-to-date.   “Flows into emerging bond markets have surged to a 19-week high... Investment flows into emerging markets have remained upbeat, with investors displaying a marked preference for local currency bonds. Inflows by nonresident investors reached $2.5bn in the week ended 10 February, which constitutes a 19-week high, while investment flows into emerging equity markets were positive for the third successive week at $1.5bn.  Latin America continued to be favoured most by investors, inflows into bond markets reaching $900m, followed by Emerging Asia with $712m and Emerging Europe with $700m in the week ended 10 February. Year-to-date, inflows into Latin America total $3.2bn. Next is Emerging Europe with $2.7bn and Emerging Asia with $1.1bn. Overall, inflows into emerging markets total $12bn year-to-date, with $7.7bn having been channelled into emerging bond markets and $5bn into equity markets.” “Growth in emerging countries is looking up, even though it is rather heterogeneous, drawing strength from an improvement in industrial production and trade, notably exports. The IIF’s EM Growth Tracker rose for the third consecutive month in January. At the same time, the outlook for emerging economies remains for limited growth, with significant exposure to global policies, notably the impact on global trade were Donald Trump’s economic policy to favour protectionism.” “The keen appetite for emerging assets could be in the nature of a technical correction after the strong selloff triggered by Donald Trump’s victory last November, but it may also be explained by uncertainties over the formation of the new US administration and over precisely when the economic policies promised by Donald Trump during the election campaign will actually be implemented, with any delay in this area or in the Federal Reserve’s monetary tightening likely to be supportive of emerging assets.”

Analysts at ANZ present their economic assessment of the NZ economy and the likely impact on the kiwi interest rates and appropriate currency strategy

Analysts at ANZ present their economic assessment of the NZ economy and the likely impact on the kiwi interest rates and appropriate currency strategy.Key QuotesEconomic overview: The supply side is responding to considerable housing pressures in Auckland, but barely sufficiently to keep up with demand. Two challenges, namely cost escalation and capital constraints (especially in the multi-dwelling space) risk curtailing the supply side response further. Finding skilled labour is an additional issue. While there are some natural ways the ‘market’ could offset demand-side strength (increased inter-regional migration and larger household sizes), headwinds to supply growth reinforce how correcting Auckland’s housing imbalances and affordability challenges is a multi-decade undertaking. In data this week, dairy prices are expected to slip, while trends in migration and visitor arrival figures (next week) should stay strong.”  “Interest rate strategy: Short-end rates continue to range trade. And while they are yet to gravitate lower towards levels more in line with the RBNZ’s projections, they have ample scope to do so. However, with cross-currents aplenty (mortgage-related paying, talk of tax cuts, and upbeat Fedspeak versus the high TWI and RBNZ dovishness), the market is eager to pay into dips, so any dips will be shallow. Better-than-expected US data and the chorus of Fed governors has been noticed at the short-end of the US curve, with a March hike now “live”, but US Treasuries remain range-bound. From our viewpoint, the risk is we see a break higher in Treasury yields, with knock-on consequences locally. However, with Japanese bonds holding steady, German bund yields lower and UK gilt yields back at their lows for the year, the overall global bond backdrop is less menacing than it might have been.”  “Currency strategy: The USD looks set to be in the box-seat over the next month. It has become increasingly clear that the Fed has met its dual mandate, meaning the March FOMC meeting is “live”. New Zealand still has solid credentials, so we expect it to remain in a holding pattern for now. And while we can see some pro-cyclical elements of the economy turning, we do not believe they are sufficient to materially influence NZD direction yet. For that we need to see the global liquidity cycle turn.”

The GBP/USD pair traded quite choppy so far this session, initially spiking to 1.2440 levels in early Asia, before meeting fresh supply, which knocked

The GBP/USD pair traded quite choppy so far this session, initially spiking to 1.2440 levels in early Asia, before meeting fresh supply, which knocked-off the rate back to daily lows just ahead of 1.24 handle. The spot is last see exchanging hands at 1.2418, up +0.08% on the day.   The major looks vulnerable, as the pound remains exposed to further downside risks ahead of the House of Lords to debate UK PM May’s Brexit plan due later in the week. While last week’s disappointing UK retail sales, jobs and CPI continue weigh on investors’ minds. Looking ahead, in absence of key macro events from both the UK and US today, attention turns towards the UK GDP figures and Fedspeaks due on the cards later this week. The US markets are closed today in observance of Presidents’ Day.GBP/USD Levels to consider             The upside barriers are lined up at 1.2441/42 (daily high/ 5-DMA), 1.2468 (10-DMA) and 1.2500 (round figure). While supports are aligned at 1.2400 (key support) and 1.2389 (50-DMA) and below that at 1.2344 (Feb 7 low).  

Micaella Feldstein, Research Analyst at Natixis, suggests that the silver contract has recovered markedly since the end of last December (when it bott

Micaella Feldstein, Research Analyst at Natixis, suggests that the silver contract has recovered markedly since the end of last December (when it bottomed at 15.70), breaking above important technical thresholds at 16.45 (monthly Bollinger moving average), at 16.79 (daily Bollinger lower band) and at 17.44-17.51 (rising trendline).Key Quotes“An upside channel was able to emerge on the daily chart and the weekly indicators have turned around.” “Considering the above, dips are seen as corrective and we anticipate further advance towards 18.27-18.35 (daily Bollinger upper band) and 18.50 (weekly Bollinger upper band). The clearance of the latter would unleash strong upward potential to 18.85 (declining trendline), the 19 barrier (Fibonacci extension) and 19.36 (Fibonacci extension).”

Netherlands, The Consumer Spending Volume declined to 2.5% in December from previous 2.8%

Gold prices on Comex extends its bearish streak into a second day today, although moves away from daily lows, as the bulls find some support from ongo

Gold prices on Comex extends its bearish streak into a second day today, although moves away from daily lows, as the bulls find some support from ongoing weakness in the US treasury yields across the curve.Gold bounces-off lows near 10-DMACurrently, gold trades -0.32% lower at $ 1135.15, looking to regain $ 1240 mark.  Gold trims losses, although the recovery lacks follow-through amid a lack of fresh fundamentals and thin liquidity, as the US remains on a holiday today.From a wider perspective, gold is seen consolidating near 3-month tops and looks for the next push higher, as uncertainty over the US economic policies continue to persist in wake of Trump’s administration. Although timing of the Fed rate hikes, especially after Fed’s Yellen hawkish testimony last week, keeps the gold investors on the edge, restricting further upmoves. Meanwhile, the US CFTC data showed on Friday that speculators cut their net long position in COMEX gold for the first time in three weeks in the week to Feb. 14.Comex Gold Technical Levels                                   The metal has an immediate resistance at 1240 (round figure) and 1261.24 (200-DMA). Meanwhile, the support stands at 1224.72 (20-DMA) below which doors could open for 1202.37 (100-DMA).  

According to IMM data for the week ended 14 February, leveraged funds’ net long NZD continued to rise (to 64% vs. 56% last week) notes research team a

According to IMM data for the week ended 14 February, leveraged funds’ net long NZD continued to rise (to 64% vs. 56% last week) notes research team at Nomura.Key Quotes“This is the highest level of NZD positioning since November 2016. On the other hand, asset managers’ net short positioning rose to 90% vs. 80% last week.” “CAD: Leveraged funds’ net long positioning in CAD continued to increase for the fourth consecutive week (to 36% vs. 26% last week). This the highest level of net long positioning since May 2016. Meanwhile, asset managers’ net long positioning in CAD remained flat at around 69%.” “EUR: Leveraged funds’ net short positioning in EUR rose marginally for the second week (to 48% vs. 47% last week). Asset managers’ net long positioning in EUR fell for the third consecutive week to 18% vs. 23% last week.” “MXN: Leveraged funds’ net short positions in MXN for the second week to 48% vs. 52% last week. Max net short positioning in MXN in the last year stands at 77%, which was last seen in October 2016. Assets managers’ net long positioning in MXN remained flat on the week at 86%.”

Bloomberg run a story on dismal Japanese trade data, offering afterthoughts from a couple of economists. Trade deficit for January was 1.1 trillion y

Bloomberg run a story on dismal Japanese trade data, offering afterthoughts from a couple of economists. Trade deficit for January was 1.1 trillion yen ($9.6 billion), compared with expectations for a deficit of about 625.9 billion yen. Key Economist takeaways:The slowdown in exports seen in January is just temporary and there’s no change to the view that Japan’s economy is driven by external demand while domestic forces remain weak, according to Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. "Exports are still on the recovery track," said Kodama. "The global economy is steadily recovering.” Bob Baur, the chief global economist at Principal Global Investors, said on Bloomberg TV that he "wouldn’t get too excited about any one-month number." "Exports were really good in the fourth quarter," said Baur. "Imports are better than people think, and that means somebody is buying, which I think is positive in the longer term for Japan."

Research Team at ANZ notes that the UK’s January retail sales data were disappointing, with sales falling for the third month in a row. Key Quotes “

Research Team at ANZ notes that the UK’s January retail sales data were disappointing, with sales falling for the third month in a row.Key Quotes“Ex-auto fuel sales dropped 0.2% m/m following a revised 2.2% m/m drop in December. Sales at household goods stores fell 0.6% and non-store retailing was down 4.1%. Over the past six months sales have been flat. The notion of a booming consumer (a source of strength) is fading and as inflation picks up, that will erode consumer’s purchasing power (particularly given slow wage growth). One of BOE Governor Carney’s key judgments (and reasons for keeping rates low) was that consumers will falter, and so far that looks to be panning out.”

Ernst & Young (EY) accountants' ITEM Club, a non-governmental forecasting group, noted the following in their latest report: The UK is likely to hit

Ernst & Young (EY) accountants' ITEM Club, a non-governmental forecasting group, noted the following in their latest report: The UK is likely to hit his 2016/17 deficit reduction target with 3 billion pounds to spare Cites recent better-than-expected growth Longer-run budget outlook "remained sombre" The OBR will paint a marginally better picture of the UK economy and public finances in the short term, but fiscal policy faces major challenges on both the revenue and spending sides in the longer term

The USD/JPY pair finally broke its bearish consolidative mode to the upside and regained 113 handle amid some renewed buying interest seen around the

The USD/JPY pair finally broke its bearish consolidative mode to the upside and regained 113 handle amid some renewed buying interest seen around the US dollar against most of its major peers. However, negative treasury yields restrict any upside attempts in the major. The spot is last seen exchanging hands around 113.09, having tested 20-DMA located at 113.17. The major ended its 3-day decline and now attempts a minor pullback, as the yen got hit somewhat by bigger-than expected Japanese trade deficit figures. The data released today showed a rise in the Japanese trade deficit to JPY 1,086.9 billion in January.  Amid holiday-thinned markets, traders digest the Bank for International Settlement (BIS) published Real Effective Exchange Rate (REER) data published last Friday, which revealed that the Japanese Yen remained undervalued (below 100.00) in January. The REER stood at 76.06, at the lowest since February 2016.USD/JPY Technical levels to watch  The major finds immediate resistance at 113.17/26 (20 & 5-DMA). A break above the last, the major could test 113.47 (10-DMA) and 114 (round figure) beyond the last. While to the downside, the immediate support is seen at 112.80 (daily low) next at 112.58 (Feb 17 low) and below that at 112.03 (Feb 2 low).  

Analysts at ANZ note that the commodities in general ended the previous week on low, with higher equity markets and stronger USD reducing investor app

Analysts at ANZ note that the commodities in general ended the previous week on low, with higher equity markets and stronger USD reducing investor appetite and the ANZ China Commodity Index ended the week down 1.6%.Key Quotes“Liquidity in crude oil markets remained extremely low, with prices ending the week largely unchanged. In fact, Brent oil traded in a very tight range of only USD1.70/bbl over the course of the week. This low volatility is the result of the market caught between the exuberance of production cuts from OPEC and concerns over rising inventories in the US. To compound things, the oil rig count in the US rose again last week, and at 597, is the highest since October 2015. We continue to view the trend of rising inventories and drilling activity in the US as expected consequence of rising prices after OPEC’s production cut agreement. However, it still remains unlikely to negate the impact of the falling output from OPEC, and as such we expected prices to eventually push higher.”“Base metals failed to react to further supply side issues, with rising concern about Chinese demand weighing on prices. Anglo America was the latest company to be forced to shut an operation, with the Soldado copper mine in Chile halted after the company’s plans for redesign were rejected by the regulator. While relatively small (36kt/y), it comes at a critical time for the copper market with the two largest mines; Escondida and Grasberg currently closed as well. However traders were focused on China, where surging credit is raising concerns that the PBOC will tighten soon.”“Iron ore prices rose slightly but ended the week higher. Steel and iron ore futures prices have been on a roller coaster ride this week, which has kept physical traders in two minds. According to SteelHome data, port inventories of iron ore rose slightly to 127.6 million tonnes last week. However we continue to hear that demand for high-grade ore remains strong, which should continue to support prices.”“Gold prices treaded water, with the stronger equity markets and USD negated by the continued safe haven buying as political uncertainty remains high. With expectations of three rate hikes and a stronger USD, political uncertainty will remain the driver of prices in the short term.”“Agriculture markets were weaker across the board. Grains continued to sell off as a lack of concerns over production added some uncertainty over whether the grains in crops prices over recent weeks can be justified.”

EUR/USD failed to cut through 10-DMA hurdle of 1.0633 earlier today and fell to 5-DMA level of 1.0613 levels. The common currency ended Friday on a we

EUR/USD failed to cut through 10-DMA hurdle of 1.0633 earlier today and fell to 5-DMA level of 1.0613 levels. The common currency ended Friday on a weaker note at 1.0608 levels. The Bank for International Settlement (BIS) Real Effective Exchange Rate (REER) data for January published last Friday shows the EUR remained undervalued. The REER stands at 89.75; which is the lowest since November 2015. Eurozone producer price index due later today could be ignored by the markets. Meanwhile, traders would scan the Bundesbank report for cues on policy makers’ view on growth and inflation. Trading volumes could be thin on account of the President’s day holiday in the US.EUR/USD Technical LevelsA breakdown of 1.06 (50-DMA + zero figure) could yield a sell-off to 1.0561 (Feb 14 low), under which a major support is seen at 1.0522 (Feb 15 low). On the other hand, a break above 1.0633 (10-DMA) would expose 1.0679 (Feb 16 high). A violation there could yield a rally to 1.0741 (100-DMA).  

As per Livesquawk report, the Hong Kong Interbank Offered Rate (HIBOR) also known as offshore Yuan rates are on the rise this Monday morning. Earlier

As per Livesquawk report, the Hong Kong Interbank Offered Rate (HIBOR) also known as offshore Yuan rates are on the rise this Monday morning. Earlier today, the People’s Bank of China (PBOC) said it would inject CNY 40 billion via 28 day reverse repos, CNY 70 billion via 7 day reverse repos and CNY 60 billion via 14 day reverse repos.

Asian stocks wavered on Monday morning amid holiday in US and as investors await further details from President Trump on economic policies - fiscal st

Asian stocks wavered on Monday morning amid holiday in US and as investors await further details from President Trump on economic policies - fiscal stimulus, tax cuts. Japan’s Nikkei fell 0.25% earlier today following the release of a bigger trade deficit figure. The index was last seen trading 10 points higher around 19,245 levels. The index was helped by the uptick in the USD/JPY pair. Australia's shares fell 16 points or 0.30% with the industrials sub index falling 1.70%. South Korea's Kospi index traded flat. The Shanghai Composite Index added 0.35%, while Hong Kong’s Hang Seng Index rose 0.55%. The data released in Japan showed exports rose 1.3% in January from a year earlier, which is significantly lower than a 4.7% increase expected by economists.

AUD/JPY clocked a low of 86.48 earlier today before turning positive to trade around 86.80 levels. The move higher has put an end to the two-day losin

AUD/JPY clocked a low of 86.48 earlier today before turning positive to trade around 86.80 levels. The move higher has put an end to the two-day losing streak.Offered tone around Yen gathered paceThe offered tone around the Japanese Yen gathered pace after the data released in Japan showed a sharp rise in the imports led to a jump in the trade deficit in January. Exports increased at an annualised 1.3% in January and imports rose 8.5%. Markets were expecting imports to print at 4.7%. The Japanese total trade deficit rose to JPY 1,086.9 billion in January. The sharp rise in imports was largely due to an annualised rise in energy import costs. Oil prices have rallied from $30 to $52 levels over the last 12 months.AUD/JPY Technical LevelsA break above 86.80 (Feb 14 low) would open doors for an extension of the rally to 87.21 (5-DMA) and 87.46 (previous day’s high). On the other hand, a breakdown of support at 86.74 (10-DMA) could yield a pullback to 86.48 (session low) under which the losses could be extended to 86.30 (previous day’s low).  

The Bank for International Settlement (BIS) published Real Effective Exchange Rate (REER) data last Friday for the month of January. The Japanese Yen

The Bank for International Settlement (BIS) published Real Effective Exchange Rate (REER) data last Friday for the month of January. The Japanese Yen remained undervalued (below 100.00) in January. The REER stood at 76.06; the lowest since February 2016. A reading below 100.00 is a sign that the currency is undervalued and the reading above 100.00 indicates overvaluation. The ‘undervalued’ status of the Japanese Yen contradicts the fact that Japan logged its second-biggest current account surplus on record in 2016. The data released today showed a rise in the Japanese trade deficit to JPY 1,086.9 billion in January. However, the data should be taken with a pinch of salt as January is usually a weak month for exports on account of the Lunar New Year. Meanwhile, the rally in oil prices boosted the import bill.USD/JPY Technical LevelsThe Dollar-Yen pair clocked a low of 112.79 earlier today and was last seen trading around 113.13. A break above 113.21 (10-DMA) would expose 113.52 (5-DMA) and 114.00 (zero figure). On the other hand, a breakdown of support at 112.79 (session low) could see the spot revisit the sliding trendline support seen around 112.50. A daily close below the same would expose 112.05 (Feb 2 low).    

Friday’s GBP/USD closing level of 1.2405 is the lowest since Jan 23, which should not come as a surprise given the back-to-back weak UK data release. 

Friday’s GBP/USD closing level of 1.2405 is the lowest since Jan 23, which should not come as a surprise given the back-to-back weak UK data release.  UK inflation, labor data and Friday’s retail sales number, all pointed to a slowdown in the post-Brexit economic boom. Many are speculating that the boom may have come to an abrupt end as consumers feel the pinch of higher imported inflation. Pound mildly undervalued as per BIS dataBank for International Settlement (BIS) monthly real effective exchange rates released on Feb 16th showed the Pound is hovering just below 100.00 levels. A reading above 100.00 means the currency is overvalued, while a reading below 100.00 means the currency is undervalued. Pound may be mildly undervalued, although it could get worse later this year on the back of record current account deficit to GDP ratio and Brexit fears. GBP/USD Technical LevelsThe spot clocked a high of 1.2441 earlier today and was last seen trading flat lined around 1.2410. A break above 1.2444 (5-DMA) would expose 1.2524 (Feb 16 high), above which a major hurdle is seen at 1.2548 (Feb 14 high). On the downside, a breakdown of support at 1.2387 (previous session’s low) could open up downside towards 1.2346 (Feb 7 low) and 1.23 (zero figure). 

Analysts at ANZ noted that liquidity in crude oil markets remained extremely low, with prices ending the week largely unchanged.  Key Quotes: "In fa

Analysts at ANZ noted that liquidity in crude oil markets remained extremely low, with prices ending the week largely unchanged. Key Quotes:"In fact, Brent oil traded in a very tight range of only USD1.70/bbl over the course of the week.  This low volatility is the result of the market caught between the exuberance of production cuts from OPEC and concerns over rising inventories in the US. To compound things, the oil rig count in the US rose again last week, and at 597, is the highest since October 2015. We continue to view the trend of rising inventories and drilling activity in the US as expected consequence of rising prices after OPEC’s production cut agreement.  However, it still remains unlikely to negate the impact of the falling output from OPEC, and as such we expected prices to eventually push higher."

A coalition of Labour, Liberal Democrat, crossbench and some Conservative peers will come together today to force changes to the government’s Brexit b

A coalition of Labour, Liberal Democrat, crossbench and some Conservative peers will come together today to force changes to the government’s Brexit bill, which seeks to give PM Theresa May the power to trigger article 50. Peter Mandelson, an architect of New Labour, called on Sunday for peers “not to throw in the towel” too quickly as he believes the government could be pushed on the back foot in the Lords on the issues of a meaningful parliamentary vote at the end of negotiations and guaranteed rights for EU citizens in the UK.

AUD/USD is trading at 0.7661 vs a high of 0.7679 and a low of 0.7658 AUD/USD is offered after the PBoC set the CNY mid-point at 6.8743 vs. the previo

AUD/USD is trading at 0.7661 vs a high of 0.7679 and a low of 0.7658 AUD/USD is offered after the PBoC set the CNY mid-point at 6.8743 vs. the previous 6.8456 and injecting 70bln 7-day reverse repos, CNY 60b in 14-day reverse repos and CNY 40b in 28-day reverse repos. Meanwhile, its is a quiet start to the week and the US is out today on a public holiday. Fed's Mester was speaking earlier but there were no comments on rates. He said that US economy is on sound footing. Price action wise, the Aussie ran out of energy at 0.7730 and appears in need of consolidation inside a 0.7600-0.770 range as noted by analysts at Westpac.AUD/USD 1-3 month: The same analysts sight the Aussie lower to 0.7400. "The US dollar’s impressive post-election rally may have paused, but still has potential to rise further during the months ahead. The Fed’s assertive tightening bias plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that coal and iron ore are likely to sustain a good portion of their dramatic rises, and economic data for Q4 and Q1 should improve, but these forces are subservient to the US dollar’s trend. Australia’s AAA rating will remain an issue into the May budget."AUD/USD levels Currently, the market continues to be supported by the 20-day sma at 0.7643. The market recently eroded the 2013-2017 downtrend and cleared the 0.7645 Fibo resistance. Analysts at Commerzbank explained that there is scope to the 0.7778/0.7850 2016 highs and the 38.2% retracement. "Directly above here lies the 200-month ma at 0.7930. Very near term we would allow for a dip to 0.7470/0.7490 ahead of further gains ..."  

Dr. Loretta Mester, President of the Federal Reserve Bank of Cleveland, while speaking in Singapore said the US economy is on a sound footing, but the

Dr. Loretta Mester, President of the Federal Reserve Bank of Cleveland, while speaking in Singapore said the US economy is on a sound footing, but the low US productivity conundrum may not be solved by monetary policy.  Mester added that the central bank will take ‘time’ to shed the mortgage bonds in the Fed’s portfolio. 

The People's Bank of China (PBOC) set the Yuan reference rate at 6.8743 against the dollar compared to Friday's setting at 6.8456.

The People's Bank of China (PBOC) set the Yuan reference rate at 6.8743 against the dollar compared to Friday's setting at 6.8456.

Analysts at Westpac explained the US dollar factors in respect to its peers in the FX space and the Fed. Key Quotes: "As recently as 8 February, mar

Analysts at Westpac explained the US dollar factors in respect to its peers in the FX space and the Fed.Key Quotes:"As recently as 8 February, market pricing for the Fed to raise the funds rate by 25bp to 0.75-1.00% on 15 March was around 20%. After Fed chair Janet Yellen’s semi-annual testimony last week, pricing had jumped to around 40%. Yellen didn’t drop any bombshells but overall she retained her positive outlook on the US labour market, on inflation being on track to return to the 2% target and didn’t express the sort of concern about the global economy we heard this time last year, when China-driven jitters doused any thought of a quick follow-up to the Dec 2015 rate rise.  That being the case, there isn’t an obvious reason why the Fed would wait until say June to move again. Perhaps some FOMC members will make the case for waiting until there is greater clarity on the fiscal policy of the new administration. But mostly, Fed officials have been arguing for 3 hikes this year even without assuming a fiscal boost. Beyond the debate over the short end, the 10 year Treasury yield rose to 2.52% last week, 3 week highs, reinforced by strong data on business sentiment, prices and retail spending. All this sounds very bullish for the US dollar.  Yet price action has been very volatile. Long dollar positioning seems likely to produce significant unwinds at times. Still, it is hard to ignore the rebound in US yields and the Fed’s optimistic tone. We expect USD to find buyers on dips against most majors.  This week in the US we have Fed minutes, prelim Feb Markit PMIs, new and existing home sales along with Kashkari, Harker and Lockhart. President Trump’s address to a joint session of Congress 28 Feb is shaping up as a key date too - he could finally outline some precise markers on tax cuts/reforms and infrastructure beyond campaign promises."

Analysts at Nomura offered their USD/CNY fix projects for today. Key Quotes: "Our model1 projects the fix to be 361 pips higher than the previous fi

Analysts at Nomura offered their USD/CNY fix projects for today.Key Quotes:"Our model1 projects the fix to be 361 pips higher than the previous fix (6.8817 from 6.8456) and 108 pips higher than the previous official spot USD/CNY close of 6.8709.  The basket implied change is 132 pips higher than the previous official spot USD/CNY close (6.8841 from 6.8709)."

Analysts at Brown Brothers Harriman explained that the euro peaked on February 2 near $1.0830 and trended lower through February 15 when it reached al

Analysts at Brown Brothers Harriman explained that the euro peaked on February 2 near $1.0830 and trended lower through February 15 when it reached almost $1.0520.  Key Quotes:"It reversed higher and reached nearly $1.0680 the following day." "This is five hundredths of a penny beyond the 50% retracement objective of the decline in the first half of February." "However, sellers emerged ahead of the weekend and pressed the euro back to nearly $1.06. It may prove sticky around $1.0580, and a break of $1.0520 is needed signal the next leg lower, toward $1.0450 initially and then the low seen in December and January in the $1.0340-$1.0350 area. " "The RSI and MACDs are consistent with losses, though the Slow Stochastics have levelled off in over-extended territory."

Currently, USD/JPY is trading at 112.87 with a high at 113.01 and low at 112.73. With the US out on holidays today, USD/JPY is stuck within a narrow

Currently, USD/JPY is trading at 112.87 with a high at 113.01 and low at 112.73. With the US out on holidays today, USD/JPY is stuck within a narrow sideway range around the 113 handle while the dollar remains consolidated after attracting a bid last week and despite the yields falling back and stocks unable to maintain the momentum of continuous record highs last week. Weekend politics: Greece debt mounting and so too are investor's concernsUSD/JPY has been giving back over 50% of last week's gains through the 113 handle and 114 handle en route to the 115.00 psychological level - although as stocks started to slow down, the yen picked dup the pace and took the baton for investors looking for a safer haven while trying to unravel the various news stories fro around the world. Datawise, Japan Trade balance came in for January in Yen terms as -1086.9bn vs. expected Yen -625.9bn.USD/JPY levels"The US dollar peaked against the Japanese yen in the middle of last week, just shy of JPY115, and the 50% retracement of the decline since reaching JPY118.60 at the start of the year," noted analysts at Brown Brothers Harriman.Other key quotes:"The JPY112.90-JPY113.30 band offers the immediate cap on the buck.  The JPY111.60 area is also important to support. It corresponds to a 38.2% of the dollar's recovery from last summer, and it is where a base was formed earlier this month." "The technical indicators are not generating strong signals and, although the five-day moving average crossed above the 20-day at midweek for the first time since January 6, it has not been impulsive, of the risk of being whipsawed."     

United Kingdom Rightmove House Price Index (YoY) dipped from previous 3.2% to 2.3% in January

United Kingdom Rightmove House Price Index (MoM) increased to 2% in January from previous 0.4%

Analysts at ANZ noted that the UK January retail sales data were disappointing, with sales falling for the third month in a row.  Key Quotes: "Ex-au

Analysts at ANZ noted that the UK January retail sales data were disappointing, with sales falling for the third month in a row. Key Quotes:"Ex-auto fuel sales dropped 0.2% m/m following a revised 2.2% m/m drop in December. Sales at household goods stores fell 0.6% and non-store retailing was down 4.1%.  Over the past six months sales have been flat. The notion of a booming consumer (a source of strength) is fading and as inflation picks up, that will erode consumer’s purchasing power (particularly given slow wage growth).  One of BOE Governor Carney’s key judgments (and reasons for keeping rates low) was that consumers will falter, and so far that looks to be panning out."

Japan Adjusted Merchandise Trade Balance declined to ¥155.5B in January from previous ¥356.7B

Japan Merchandise Trade Balance Total below forecasts (¥-636.8B) in January: Actual (¥-1086.9B)

Japan Exports (YoY) below expectations (4.7%) in January: Actual (1.3%)

Japan Imports (YoY) above expectations (4.7%) in January: Actual (8.5%)

NZD/USD has caught a bid after the initial sell-off from above the 0.72 handle from a high of 0.7202 and a low of 0.7171.  NZD/USD drifted below the

NZD/USD has caught a bid after the initial sell-off from above the 0.72 handle from a high of 0.7202 and a low of 0.7171.  NZD/USD drifted below the hourly 50 sma at the close of last week's trade with the dollar that managed to keep with a bid despite a drop in yields and a stock market struggling to keep up with the momentum of late at all time record highs across the three benchmarks.  Weekend politics: Greece debt mounting and so too are investor's concernsThe bird has been better bid as a whole for the year on the back of a strong NZ economy nd a rise in dairy prices, but February has not ben kind to the currency with a resurgence in the greenback. Data wise, we have seen today's services PMI  for January arriving at 59.5 vrs the prior 58.4 While US markets are closed today, analysts at Westpac expect momentum to remain negative with price targeting 0.7130 today.NZD/USD 1-3 month:  The same analysts are expecting the month ahead to see NZD/USD extending beyond 0.7500 (Sep high) if the US dollar continues to register disappointment in the Trump Administration’s policies. "Further ahead, though, the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD lower to 0.7000. Granted, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend."NZD/USD levelsThe price remains above the 50-d sma at 0.7131 today and there s still some way to go to the downside until the descending resistance line is broken at 0.7000.   

Analysts at Westpac offered an economic wrap. Key Quotes: "The Conference Board’s US leading index rose 0.6% (vs 0.5% expected). This is a minor ind

Analysts at Westpac offered an economic wrap.Key Quotes:"The Conference Board’s US leading index rose 0.6% (vs 0.5% expected). This is a minor indicator for markets but it does endorse the improvement in sentiment and economic indicators since the US election. Eight of the 10 components made positive contributions.Economic Event Risks TodayEurozone: Feb consumer confidence. Confidence printed -4.9 in Jan which is a high dating back to early 2015. Consumer confidence gained some momentum in late 2016 after a poor start to the year and a downturn around Brexit. Though recent GDP and manufacturing surveys have been more positive, given the ongoing political uncertainty that foreshadows 2017, it is difficult to see the index strengthening much further.US: A bank holiday today, but FOMC official Mester gives a speech titled “View from the Federal Reserve” at a GIC Central Banking Series event in Singapore."

Further to the weekend politics, Weekend politics: Greece debt mounting and so to are investor's concerns, the German Chancellor Angela Merkel was hit

Further to the weekend politics, Weekend politics: Greece debt mounting and so to are investor's concerns, the German Chancellor Angela Merkel was hitting the wires on Saturday that the euro was too low for Germany, as reported by Reuters, adding that she made clear that Berlin had no power to address this "problem" because monetary policy was set by the independent European Central Bank.Key Quotes: "Comments seemed aimed at addressing recent criticism from a top trade adviser to President Donald Trump, who has accused Germany of profiting from a "grossly undervalued" euro." ""We have at the moment in the euro-zone of course a problem with the value of the euro," Merkel said in an unusual foray into foreign exchange rate policy." ""The ECB has a monetary policy that is not geared to Germany, rather it is tailored (to countries) from Portugal to Slovenia or Slovakia. If we still had the (German) D-Mark it would surely have a different value than the euro does at the moment. But this is an independent monetary policy over which I have no influence as German chancellor."" "The euro has fallen nearly 25 percent against the dollar over the past three years, touching a 14-year low of $1.034 in January."

Possible risk-off start to trade today? The weekend news was more of the same concerns in the EU as the main subject matter for forex markets to get

Possible risk-off start to trade today?The weekend news was more of the same concerns in the EU as the main subject matter for forex markets to get their teeth stuck into this week. Greece is taking back the headlines after dominating the FX space back in the summer of 2015 when a three-year bailout plan was agreed by the Eurozone finance ministers after Athens backed it. The agreement demanded tax rises and more tough spending cuts in return for Greece's third bailout in five years.  However, just a couple of years into the agreement, we have started to see Greece's debt problems rear its ugly head again, just at a time when we are headed towards the Dutch and French elections that are on the horizon at a time where globalisation has never been so under threat from the likes of Brexit and Trumps protectionist proposals to put USA first and make it "great again" - all of which are very concerning to investors. A fresh Greek crisis on the cards? With mounting concerns this week from Greece's economy that is shrinking again, the debt crisis that it faces is again threatening a break with the EU, and in-fact, Germany said recently that Greece must implement reforms or leave the EU.  The weekend news from The Guardian reported that "quitting the euro is back on the table" with a headline that read, "From bad to worse': Greece hurtles towards a final reckoning..." Key Quotes:"The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.""The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.""With the Netherlands holding general elections next month, and France and Germany also heading to the polls in May and September, fears of the dispute becoming increasingly politicised have added to its complexity....""In talks with Christine Lagarde . . . Merkel agreed to discuss the issue during a further meeting between the two women to be held on Wednesday...""...The IMF has steadfastly refused to sign up to the latest bailout, arguing that Greek debt is not only unmanageable but on a trajectory to become explosive by 2030. Berlin, the biggest contributor of the €250bn Greece has so far received, says it will be unable to disburse further funds without the IMF on board...""With talk of Greece’s exit from the euro being heard again, farmers, trade unions and other sectors enraged by the eviscerating effects of austerity have once more come out in protest.""Like every crisis government before it, Tsipras’s administration is acutely aware that salvation will come only when Greece can return to the markets and raise funds. What happens in the weeks ahead could determine if that is likely to happen at all.""Even if the latest impasse is broken and a deal is reached with creditors soon, few believe that in a country of weak governance and institutions it will be easy to enforce. Political turbulence will almost certainly beckon; the prospect of “Grexit” will grow."Other headlines and weekend news:"Merkel calls for joint efforts with Russia to battle Islamist terrorism" - Reuters China will suspend all imports of coal from North Korea until end year - ReutersIran sees oil output reaching 4 million bpd by April, aims for 4.7 million bpd - ReutersMarket reactions:USD/JPY 112.88 (closing price) to 112.73 (opening price) - minor risk-offUSD/CHF 1.0027 (closing price) to 1.0200 (low) minor risk-offEUR/USD 1.0604 (low) to 1.0621 (high) - funding /carry trade

New Zealand Producer Price Index - Output (QoQ) climbed from previous 1% to 1.5% in 4Q

New Zealand Producer Price Index - Input (QoQ): 1% (4Q) vs previous 1.5%