Market Review - 30/01/2018 00:54GMT
Dollar rises on short covering ahead of FOMC meeting
The greenback was broadly higher against majority of its peers on Monday ahead of FOMC rate decision on Wednesday as well as rising U.S. Treasury yields.
Versus the Japanese yen, dollar finally gained respite in Asia on Monday after falling for four consecutive sessions last week. Price met renewed initial buying at 108.51 and ratcheted higher to 109.05 in Europe, then to session highs of 109.20 in New York morning on usd's strength and rising U.S. Treasury yieldsm benchmark 10-year yields climbed to a fresh 3-year high of 2.7123%.
Euro briefly fell to 1.2385 in Asia morning and despite staging a rebound to 1.2428 in Europe, broad-based selling in euro sent the pair falling below last Thursday's low at 1.2365 to session lows of 1.2338 in New York due to renewed concerns on German coalition talk. However, broad-bassd pullback in the usd helped euro to stage a rebound to 1.2390 in New York afternoon.
Reuters reported the leader of Germany's Social Democrats (SPD) played down hopes on Monday for swift progress in coalition talks with Chancellor Angela Merkel's conservatives, an SPD source said, amid continued disagreement over several issues including refugees.
The British pound met renewed selling at 1.4158 at Asian open and retreated to 1.4111. Intra-day decline accelerated on cross-selling of sterling vs euro and tumbled to session lows at 1.4026 ahead of NY open. However, cable later rebounded in tandem with euro to 1.4080 in New York.
In other news, Reuters reported the European Union agreed on Monday to offer Britain a 21-month transition period after Brexit next year during which it will keep the "status quo" of EU membership without getting a vote, officials said.
On the data front, the Commerce Department said on Monday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent last month after an upwardly revised 0.8 percent increase in November.
Data to be released on Tuesday:
New Zealand trade balance, imports, exports, Japan household spending, unemployment rate, retail sales, Australia NAB business conditions, France GDP, consumer spending, Germany CPI, HICP, Swiss trade balance, import, export, KOF indicator, Italy business condition, consumer confidence, UK mortgage approvals, EU GDP, business climate, economic sentiment, industrial sentiment, service sentiment, consumer confidence, and U.S. redbook, Case-Shiller home price indices, consumer confidence
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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