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Hot Reuters Morning Benchmark \ Dow Jones Morning Briefing

Tadhg Gaelach

Tadhg Gaelach

Premium Account
Jan 14, 2016
Message body


"Deadline of deadlines" in Brexit divorce talks this week
Theresa May must deliver her offer on a Brexit divorce package this week if she wants EU leaders to grant Britain's request for talks on future free trade when they meet next week, EU diplomats and officials said. Failure could mean a delay until February, adding to the risk of businesses scaling back investment plans in Britain as uncertainty clouds the outlook beyond Brexit in March 2019. Additionally, UK finance minister Philip Hammond commented that Britain will need a "new paradigm" to sell financial services to the EU after Brexit as existing trade deals the EU has with foreign countries do not go far enough.

EU exec to propose deeper euro zone integration to unite EU
The European Commission will propose deeper euro zone integration that would help unite the broader EU rather than just the single currency area. The Commission is likely to say that the European finance minister, a post that would only be set up in 2025, should be in charge of overseeing structural reform efforts and coordinating economic and fiscal policy in the euro area. The Commission is also likely to call for a swift completion of the EU's banking union by setting up a Europe-wide bank deposit insurance scheme, something that Germany insists can only happen after the bad loans on banks' books fall sharply.

BOJ's Masai advocates sticking with "powerful easing", warns on side-effects
Bank of Japan board member Takako Masai on Wednesday advocated sticking with ultra-easy monetary policy due to uncertainty over how fast inflation will rise, while warning that the central bank should remain on guard against the possible side-effects. Despite a strengthening economy, Masai conceded that it was taking longer than expected to eradicate Japan's sticky deflationary mindset, or public perceptions that prices won't rise ahead. Separately, Japan's economy was expected to expand slightly faster in the third quarter than first estimated, a poll found, buoyed by strong capital spending and showing robust exports and business investment supporting the economy.

EU adopts tax haven blacklist, British territories spared
EU finance ministers adopted a blacklist of 17 jurisdictions deemed as tax havens in an unprecedented step to counter worldwide tax avoidance, although they did not agree on financial levies for the listed countries. Blacklisted countries may no longer be used by EU institutions for international financial operations, and transactions involving them could be subject to closer scrutiny. EU states have not been screened and will not be on the list. The commission said none of the 28 members of the bloc can be classified as a tax haven, as all have agreed to respect EU tax standards.

PREVIEW - China Nov data to show economy facing pressure from debt, pollution crackdowns
A raft of Chinese data in coming weeks is expected to show the world's second-largest economy came under growing pressure in November as the government intensified crackdowns on polluting industries and financial risks. Besides ramped-up efforts to shut down factories in some provinces to reduce winter smog, authorities unveiled fresh regulatory measures last month for the financial sector, clamping down on high-risk lending and halting some dubious infrastructure projects that would swell local governments' debt. Economists believe such measures will lead to a slight moderation in China's growth in the fourth quarter to around 6.7 percent, after a forecast-beating 6.9 percent in the first nine months of the year.


Brexit deal hinges on enlightened obfuscation

Obfuscation offers the only hope of a breakthrough in deadlocked Brexit talks. Prime Minister Theresa May’s best hope is to fudge tough decisions, and use the threat of a chaotic exit – or another election – to quash dissent.


Regulatory angst curbs investor appetite for European banks
Uncertainty about the timing and scope of regulatory efforts to strengthen Europe's financial system is adding to investor caution about increasing exposure to European over U.S. banks, even as the economy and earnings improve.

Buy sterling on a "Brexit breakthrough"? Not yet, say investors
Sterling investors remain hesitant about chasing the rallying pound higher even as the British government said it was close to an agreement with the European Union on how to move Brexit talks onto trade next year.




US Treasury 10s indicated 2.348%, JGB 10s 0.052%, Bund 10s 0.309%
• US-Japan-Germany respective 2s indicated 1.812%, -0.142%, -0.780%
• JGBs steady but stuck in narrow range
• Weakness in short-end JGBs stalls on some dip-buying
• 6mo auction better than feared; stop at -0.1382%, -0.11% some had thought
• JGB futures move in narrow 150.84/150.94 range
• Large offers at 150.95 cap upside
• At 150.89, futures up 2 ticks on day
• Tokyo risk off, Nikkei from 22,528 to 22,234, at 22,248 -1.7% on day
• AXJ down too - SSEC 0.6%, HSI 1.25%, KOSPI 0.9%, STI 0.6% and TWI 1.5%
• ASX and NZX50 off too, around 0.5% each
• Commodities weak, Dalian iron ore -2.4%, Shanghai rubber -3.2%
• Tokyo rubber down too after overnight copper and gold plunges

Currency Summaries

• Risk-off in Asia, USD/JPY, JPY crosses Nikkei all down, US yields soggy
• USD/JPY from early 112.62 high to 112.19 before steadying
• USD633 mln in option expiries at 112.25-30 bypassed on way down
• More below though, supportive - 112.00 USD598 mln, 111.75-80 1.1 bln
• Market heavy from 5-DMA at 112.76, daily Ichi kijun 112.79
• Ascending 100-HMA at 112.55 pierced, 112.24 base of hourly Ichi cloud too
• Risk-off sentiment, long liquidation felt in most JPY crosses too
• EUR/JPY 133.19 to 132.70, breaks below ascending 200-HMA at 133.00
• Also back in daily Ichi cloud, top 132.98, 55-DMA below at 132.70
• GBP/JPY from 151.99 NY retracement high to 151.44 Asia open and then 150.59
• On top of Brexit no-deal, reports of Cabinet revolt
• AUD/JPY reverses course after move to 86.19 yesterday, Asia 85.68 to 85.05
• Move down exacerbated by weaker than eyed GDP data
• NZD/JPY steady between 77.26-50 but downtrend since September 21 intact
• Nikkei off 1.6% at writing at 22,260, US Treasury 10s @2.348%


• EUR/USD opened Asia at 1.1826 after falling as low as 1.1800 in NY
• The EUR/USD was sidelined during the Asian session and traded 1.1817/48
• Technical support is found at 1.1795/1.1800 where 21 & 100 day MAs converge
• Resistance at yesterday's 1.1876 high and break above eased downward pressure
• Key to direction will be US/DE yield spread in the 2 to 5 year yields
• German Industrial Orders and US ADP jobs data out today


• Cable steady in Asia despite Brexit no-deal, reports of Cabinet revolt
• Asia range 1.3405-43, support ahead of 1.3400, ascending 200-HMA 1.3411 now
• Upside likely limited on political to-do; Asia risk-off
• Below 1.3400, support from pre-1.3350 - low yesterday 1.3370, 11/29 1.3341
• EUR/GBP Asia 0.8799-0.8825, steady, mostly above 200-DMA at 0.8800

• USD/CHF steady in Asia, 0.9865-82, near 0.9888 high yesterday
• Flat daily Ichi kijun 0.9887, top of daily Ichi cloud 0.9876
• Flat hourly Ichi kijun 0.9863, ascending 55-DMA below at 0.9843
• EUR/CHF in tight 1.1671-85 range in Asia, quiet, few flows, little interest
• On hold just below recent highs, trend high Friday 1.1737

Market Briefs
• Trump to recognise Jerusalem as Israel capital, upending decades of U.S. policy
• Trump lawyer denies Deutsche Bank got subpoena on Trump accounts
• US House tax positions begin to emerge ahead of talks with Senate
• US Democrats flex muscles as Congress confronts a government shutdown
• Australian citizenship threatens government with nine more MPs in doubt
• AU Q3 GDP q/q, 0.6%, 0.8% last, f'cast 0.7%, 0.9% rvsd
• AU Q3 GDP y/y, 2.8%, 1.8% last, f'cast 3.0%
• Bitcoin surges above $12,000 to record high on relentless demand
• "Deadline of deadlines" in Brexit divorce talks this week
• Plot to kill British premier May foiled- Sky News
• Britain needs "new paradigm" for financial services trade with EU - Hammond
• EU exec to propose deeper euro zone integration to unite EU on Wed
• BoJ Policy Board Masai sticks to Kuroda majority line, economy/CPI to rise
• Current policy appropriate but some concerns over QQE side-effects, CPI
• Foreign direct investment in Japan notched record in '16 - Nikkei
• Japan to help finance China's Belt and Road project - Nikkei

Looking Ahead - Economic Data (GMT)

• 07:00 DE Oct Industrial Orders m/m, f' cast -0.3%, 1.0% last

Looking Ahead - Events, Auctions, Other Releases (GMT)

• N/A ECB Governing council meeting - Frankfurt
• N/A ECB's Juncker speaks on ESM fund bailout - Brussels
• 07:30 Riksbank's Ohlsson speaks at a seminar - Stockholm
• 10:30 ECB's Mersch speaks at a conference - Frankfurt
• 11:00 Riksbank's Jansson speaks at a seminar - Stockholm
• 15:00 Bank of Canada key policy rate announcement - Ottawa
See North American Open for a detailed listing of US/NorAm releases, events

AUD/USD to be capped by weak consumer spending

Australia's Q3 GDP was weaker than forecast, but at +2.8% year on year it still satisfied the 'trend growth' that the RBA was hoping for. What will concern the RBA is the weak consumer spending component of the GDP. Consumer spending edged up just 0.1% against expectations of +0.4%. The RBA has been fretting over the high household debt, rising house prices in some capital cities, weak wage growth and the potential negative impact it will have on the consumer. While those worries persist, the RBA won't even consider moving towards a tightening bias. The 2-year Australian yield has fallen 6 BPs today to 1.79% and is 3 BPs lower than the 2-year US Treasury yield, which trades at 1.82%. The AUD/USD will have trouble sustaining any rallies while the differential between the US and Australian 2-year yield widens in favour of the USD.
Tadhg Gaelach

Tadhg Gaelach

Premium Account
Jan 14, 2016
Message body


EU parliament details UK concessions on rights
Britain will guarantee rights for as yet unborn children who join EU parents after Brexit and accept EU judges' rulings on such rights, according to a draft European Parliament resolution seen by Reuters. The document, drafted on Monday for a vote next week before an EU summit that may launch talks on a future EU-UK free trade pact, also confirms that Prime Minister Theresa May has secured agreement from Brussels that British citizens in the EU will be able to live freely in any member state after Brexit. Setting out demands for the new phase of negotiations to be launched at the Dec. 15 summit if May confirms her offers, the parliament stressed that any transition period -- of "not more than three years" -- to avoid a "cliff edge scenario" depends on a deal on the whole divorce package and would mean Britain being bound by all EU structures while no longer having a say on them.

U.S. Senate votes to pursue tax bill negotiations with House
U.S. Senate Republicans agreed to talks with the House of Representatives on sweeping tax legislation, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline. While there are significant differences between the House and Senate bills, both would cut the U.S. corporate tax rate to 20 percent from 35 percent, provide tax relief for "pass-through" enterprises including small businesses where earnings are taxed at individual rates, and both benefit the wealthiest Americans and reduce the tax burden for most middle-class taxpayers. Republicans claim the legislation will spur enough economic growth to pay for the tax cuts with new revenue, but the nonpartisan Joint Committee on Taxation estimates that Senate bill would still add $1 trillion to the federal budget deficit over a decade, even with an economic upswing.

Britain has not formally assessed impact of Brexit on economy -Brexit minister
Britain has not conducted formal sector-by-sector analyses of the impact that leaving the EU will have on the economy, Brexit minister David Davis said, arguing they were not necessary yet. His remarks drew immediate criticism from lawmakers on the committee, who said Davis was contradicting his previous statement that the government had analyses of the sectoral impact that went into "excruciating detail". Meanwhile, lawmakers from the House of Lords EU committee said that Britain will fail to agree a free trade deal with the EU before it plans to leave the bloc in 2019 and should seek a transition period to avoid a worst-case scenario of crashing out without an agreement."

BOJ's Kuroda signals chance of rate hikes, warns of demerits of easing
Bank of Japan Governor Haruhiko Kuroda stressed the need to look at the impact monetary policy has on the banking system and said changes in the economy could trigger a hike in the bank's yield targets, offering the strongest signal to date it may edge away from its crisis-mode stimulus programme. Kuroda said that while it was premature to debate specifics now, the BOJ's future communication would focus on how to exit from quantitative easing without disrupting financial markets. Separately, confidence among Japanese manufacturers held firm in December and service-sector sentiment rose for a second straight month, the Reuters Tankan poll showed, underscoring steady economic growth driven by both external and domestic demand.

China's growth objectives clash with financial stability goal - IMF
China should prioritise financial stability above development goals, as pursuit of regional growth targets and helping firms avoid heavy job losses had led to a surge in debt, particularly at local government level, the International Monetary Fund (IMF) said. Noting a lack of coordination and inadequate systemic risk analysis in a report, the IMF also recommended the formation of a financial stability sub-committee comprising the central bank and three financial regulatory agencies, and an increase in staff for the banking watchdog. The People's Bank of China reacted swiftly to the report's release, saying that while the report is objective and pertinent, the assessment "does not the whole picture."


France and Germany look too alike to bond markets
The gap between benchmark French and German bond yields this week shrank to its smallest since 2009, before the countries that share the single currency were hit by financial shocks that threatened monetary union itself. Such indiscrimination is premature, and stores up fresh problems.


Breaking slow: Asia set to raise rates next year, but still lag Fed
Tighter monetary policy is coming to Asia next year. Yet it will lag the Federal Reserve's rate hikes as Asian central banks balance an exports-led revival in growth with a slowdown in regional locomotive China.

Bitcoin to start futures trading, stoking Wild West worries

Bitcoin fans are salivating over the potential of long-awaited legitimacy for the cyptocurrency when futures trading launches this weekend, but experts worry the risks associated with bitcoin's Wild West-like nature could overshadow the debut.

Behind wage and productivity clouds, world economy is booming
The dark clouds of stagnant wages, widening inequality and chronic productivity across much of the Western world are shrouding one of the most remarkable and easily forgotten facts of the year - the world economy is booming.




US Treasury 10s indicated 2.345%, JGB 10s 0.053%, Bund 10s 0.306%
• US-Japan-Germany respective 2s indicated 1.808%, -0.142%, -0.787%
• JGB yield curve flattens as 30yr auction goes well
• 30yr auction stops at 0.85%, BTC 4.38, tail 0.2, 3.43/1.1bp last
• 40yr yields off 1.5bp after 30yr auction
• Dec/Mar calendar spread widens from 0.05 early to 0.07, good volume
• Dec futures unch at 150.91, range 150.92/150.84
• Nikkei gaps up at open on bargain-hunting, 22,317 to 22,474
• At 22,435, +258 points or 1.2%, half of losses yesterday recovered
• AXJ mixed - SSEC -0.6%, KOSPI -0.8%, STI -0.4%, TWI -0.3%
• ASX +0.6% and NZX50 +0.5%, HSI holding just above par on day
• Dalian iron ore -3.4%, Tokyo rubber -1.3%

Currency Summaries
• Risk back on with Nikkei up over 1% on day, JPY mixed however
• USD/JPY from early 112.21 low to 112.49 before topping out, Japan buys
• Option expiries help cap, USD570 mln 112.50-60, supportive below though
• Total USD1.8 bln between 111.90-112.20 strikes, bids ahead
• Steadier after bounce from daily Ichi tankan, area of 200-HMA yesterday
• Daily Ichi tankan flat, at 111.97, low yesterday 111.99, 200-HMA 112.09
• EUR/JPY bounces from 132.26 low yesterday, Asia 132.49-71
• Back to 55-DMA at 132.66, daily Ichi tankan 132.76, cloud top 132.98
• Cross essentially in 131.16-134.50 range since mid/late-September
• GBP/JPY up some from 149.71 low yesterday, Asia 150.11-53, risk still down
• AUD/JPY soggy, trade data miss helps, Asia 84.80-85.04, bias down
• NZD/JPY soggy too, bounce to 77.42 met by sales, fall to 77.06

• EUR/USD opened Asia 0.25% lower at 1.1796 - third day of lower daily low
• It was very quiet for the EUR/USD in Asia with light flows changing hands
• EUR/USD traded in a 1.1792/1.1805 range & was near the top into the afternoon
• EUR/USD is tending lower in short-term but momentum lower is fairly weak
• The price is hanging around 1.1800/05 where 21 & 100-day MAs converge
• Next support is at 50% of 1.1553/1.1961 move at 1.1757
• A break back above 1.1850 would relieve the downward pressure
• EZ GDP and German Industrial Output is out later today

• Cable soggy in Asia, 1.3375-97, holding above 1.3358 low yesterday
• Talk stops building sub-1.3350, Fibo 38.2% of October-December rise
• 50% retracement of 1.3027-1.3550 10/6-12/1 move at 1.3288
• GBP to remain hostage to news regarding Brexit
• EUR/GBP stationary in Asia, indicated at 0.8812, 200-DMA 0.8801

Market Briefs
• Bitcoin rises above $14,000 on Bitstamp to record high
• China's growth objectives clash with financial stability goal - IMF
• BoJ Gov Kuroda - Sticks to script, QQE/YCC working, sustainable
• JP economy doing better, optimistic on achieving CPI target
• Japan to spend Y2.9 trln on policy efforts in supplementary budget -Nikkei
• JP Dec Reuters Tankan mfg index +27, non-mfg +34, Nov +27, +31 Mar +28, +31
• End-Nov foreign reserves Y1.261 trln, -$317 mln from October
• MoF flow data week-ended 12/2 - Japanese buy net Y603.9 bln foreign stocks
• Y208.1 bln for-bonds, Y56.9 bln for-bills sold, foreigners sell Japan stks
• Net Y167.1 bln sold, also Y1.0169 trln bills, Y221.8 bln JGBs bought
• Fitch - Japan GDP +1.5% in '17, +1.3% in '18, longest expansion since '01?
• U.S. Senate votes to pursue tax bill negotiations with House
• Trump's eldest son questioned in U.S. Congress about Russia
• EU parliament details UK concessions on rights
• Britain to propose new language on Irish border, Irish PM says
• Germany's SPD leader to ask rank-and-file to back new government
• AU Oct Trade Balance G&S (A$) 105 mln, 1,745 mln last, f'cast 1.375 mln, 1.604 mln rvsd

Looking Ahead - Economic Data (GMT)
• 07:00 DE Oct Industrial Output m/m, f'cast 1.0%, -1.6% last
• 08:30 GB Nov Halifax House Prices m/m, f'cast 0.2%, 0.3% last
• 08:30 GB Halifax House Price 3m, y/y, f'cast 3.9%, last 4.5%
• 10:00 EZ Q3 GDP Revised q/q, f'cast 0.6%, 0.6% last
• 10:00 EZ GDP Revised y/y, f'cast 2.5%, 2.5% last

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 07:00 Riksbank's Floden speaks at a conference - Stockholm
• 08:00 ECB General council meeting - Frankfurt
• 09:00 Riksbank's Skingsley takes part in a conference - Paris
• 13:30 Fed's Dudley speaks at an event - New York
• 15:00 ECB's Draghi holds a news conference - Frankfurt
See North American Open for a detailed listing of US/NorAm releases, events

Tadhg Gaelach

Tadhg Gaelach

Premium Account
Jan 14, 2016
Message body


Japan big manufacturers' mood improves in Oct-Dec - govt
Large Japanese manufacturers turned more optimistic about economic conditions in the October-December quarter, a government survey showed, in another upbeat sign for an economy on a record run of growth. The business survey index of sentiment at large manufacturers stood at plus 9.7, up from plus 9.4 in July-September, according to the joint survey by the Ministry of Finance and the Economic and Social Research Institute. The buoyant mood coincides with a record economic expansion: GDP climbed an annualised 2.5 percent in July-September for the seventh straight quarter of growth, the longest rising streak in data going back to 1994.

China's Nov producer prices ease to 4-month low as pollution curbs bite
China's producer price inflation slowed to a four-month low in November as factory activity softened due to the government's efforts to curb pollution, cooling demand from factories for raw materials. Producer prices rose 5.8 percent from a year earlier - the lowest since July, the National Bureau of Statistics said. The rise was slightly less than market expectations and compared with the previous month's 6.9 percent increase. China's consumer inflation, which has stayed well within Beijing's 2017 target of 3 percent this year, also slowed more than expected in November to 1.7 percent from 1.9 percent previously, as food prices fell.

Britain's May hails new optimism in Brexit talks after deal
Prime Minister Theresa May will hail "a new sense of optimism" in Brexit talks, telling parliament Britain and the EU should sign off on a deal at a summit this week "to move forwards together" to discuss future trade ties. But the discussion of Britain's trade relationship with the EU after Brexit contains many pitfalls and could widen differences among her top team of ministers over how Britain should look after it leaves the bloc. Additionally, Brexit minister Daniel Davis said that Britain is aiming to secure a comprehensive free trade deal with the EU along the lines of the deal negotiated last year between the EU and Canada.

UK consumers cut spending in run-up to Christmas - Visa
Squeezed British consumers reined in Christmas travel plans and bought fewer new cars last month, setting the stage for the first fall in festive spending in five years, credit card company Visa said. The downbeat message came alongside a cut by the British Chambers of Commerce to its economic outlook for the next two years as the business organisation sees inflation rising faster than pay for the next two years. Visa said inflation-adjusted consumer spending last month was 0.9 percent lower than in 2016. This was a smaller decline than October's 2.1 percent drop but still enough to make annual falls in spending likely for the first time since 2012 for both the Christmas season and 2017 overall.

Hotly anticipated bitcoin futures surge 21 percent on debut
Bitcoin futures jumped more than 20 percent in their eagerly anticipated U.S. debut, which backers hope will encourage wider use and legitimacy for the world's largest cryptocurrency even as critics warn of the risk of a bubble and price collapse. The one-month bitcoin contract opened trade at $15,460, dipped briefly and then rose to a high of $18,700. Experts had worried that the risks associated with the currency's Wild West-like nature could overshadow the futures debut, but so far the price action has been unlike the wild swings seen in the past few weeks.

Powell faces early test of policy view as tax cuts near approval
Incoming Federal Reserve chair Jerome Powell, chosen by U.S. President Donald Trump to keep the recovery humming, appears set to let an expected trillion dollar tax cut run its course through the economy as weak wage growth and inflation buttress his view that the economy remains underpowered.




US Treasury 10s indicated 2.381%, JGB 10s 0.050%, Bund 10s 0.301%
• US-Japan-Germany respective 2s indicated 1.797%, -0.152%, -0.778%
• JGB trading theme all about rollover to Mar futures contract
• Dec/Mar calendar spread narrows to 0.04, last 0.05
• Fears of short-squeeze in Dec contract ease
• Last trading day of Dec contract is Wednesday
• Cash trading very subdued
• At 150.91, Dec futures off 5 ticks on day, range 150.93/150.84
• Small gap up at TSE open but Nikkei initially off, 22,900 to 22,787
• Bid since and, at 22,893, up 82 points or 0.4% on day
• AXJ up too - SSEC 0.4%, HSI 0.5%, KOSPI 0.2%, STI 0.6%, TWI 0.9%
• ASX and NZX50 up too - just above par and +0.5%
• Dalian iron ore +1.4%, Shanghai and Tokyo rubber off

Currency Summaries
• USD/JPY, JPY crosses better bid after strong US jobs report Friday
• Market more risk on too on Wall St rally, Nikkei +0.3%, USD 113.45-69
• Nearby option expiries tether - USD113.35-50 total USD909 mln
• More below at 113.00-10, total USD1 bln, supportive
• Pair tracking top of daily Ichi cloud up, at 113.52 today, leveling off
• Tech support from now flat hourly Ichi kijun at 113.41
• EUR/JPY bid with USD/JPY, Asia 133.56-88, tracking away from Ichi cloud
• Daily cloud top 132.98, flat kijun/55-DMA 132.76, 132.69
• GBP/JPY down from 153.41 high Friday after announcement of Brexit deal
• Still buoyant however, Asia 151.63-152.31
• AUD/JPY buoyant, 85.17-47, resistance from 200-HMA at 85.86
• NZD/JPY surges, 77.60 to 78.38 on news Adrian Orr next RBNZ Gov-designate

• EUR/USD opened Asia at 1.1765 after recovering from 1.1730 low Friday
• Recovery due to weak AHE in US payrolls and in part due to EUR/GBP reversal
• EUR/USD sidelined in Asia, on buoyant side, 1.1761 to 1.1784
• Mostly between descending 55, ascending 100 DMAs, 55 at 1.1760, 100 1.1801
• Fibo 61.8% retracement of 1.1553-1.1961 move at 1.1709, support pre-1.1700
• Option expiries supportive too - 1.1740-50 E443 mln, 1.1700 E972 mln
• Resistance too from option expiries - E1 bln up at 1.1800 strike
• Descending 100-HMA 1.1795 above, top of hourly Ichi cloud 1.17994
• Range trading likely ahead of Wednesday's FOMC decision, ECB Thursday
• EUR/GBP bid, bounce from 0.8690 trend low to 0.8806 Friday, Asia 0.8785-93
• Some resistance from ascending 200-DMA at 0.8803
• EUR/CHF quiet, Asia 1.1681-95, holding at recent highs, 1.1737 Dec 1 peak

• Cable down from 1.3521 high Friday after news of Brexit deal
• Asia 1.3380-1.3402, still buoyant but market awaiting further news
• EU Summit Thursday too, a lot can happen till then

• USD/CHF also down after push up to 0.9978 Friday, Asia 0.9917-37
• Pair still above ascending daily Ichi cloud top, today at 0.9907
• Base of hourly Ichi cloud/100-HMA 0.9905, 100-HMA 0.9931, cloud top 0.9935

Market Briefs
• Hotly anticipated bitcoin futures surge 21 percent on debut
• US Senator Collins says undecided on final tax bill vote
• Britain's May hails new optimism in Brexit talks after deal
• UK consumers cut spending in run-up to Christmas - Visa
• After Brexit, UK aims for trade deal with EU that tops Canada pact
• Japan to revise up growth forecasts, big mfg mood improves in Q4
• JP Nov money supply M2 +4.0% y/y, M3 +3.4%, broadest liquidity +3.9%
• KKR's tender offer for Hitachi Kokusai a success, $2.2 bln deal - Nikkei
• New Zealand will shortly move to extend bright line test -finmin
• NZ Gov appoints Adrian Orr as next Reserve Bank governor
• Speculators increase net-short dollar bets to $4.28 billion -CFTC

Looking Ahead - Economic Data (GMT)
• No significant events.

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 08:00 BoF's de Galhau opens a conference - Paris
See North American Open for a detailed listing of US/NorAm releases, events

Week Ahead-All about central banks
There will be a slew of central bank meetings in the week ahead, including the SNB, ECB, BOE and the Fed, which will be the main event. The Fed is widely expected to hike 25 BPs to 1.25%-1.50% - so it will be the statement, dot-plot forecasts and Yellen presser that will influence market price action. The last dot-plot indicated the Fed was on track to hike rates three more time in 2018 - while the market is pricing in less than two 25 BP hikes. Most analysts believe the Fed will keep the 2018 dot plots largely in line with the previous result, but there are some looking at the possibility the Fed may be a bit more aggressive due to the ongoing jobs growth and the growing possibility of fiscal stimulus emanating from the Republican tax plan. The ECB and BOE also meet in the week ahead, but they should be non-events. The ECB will likely be low key and will probably upgrade growth and inflation forecasts due to the run of solid EZ data since they last released their forecasts. The BOE raised rates in November and is expected to remain on hold this week.
Tadhg Gaelach

Tadhg Gaelach

Premium Account
Jan 14, 2016
Message body


Japan's October machinery orders jump in show of resilience
Japanese machinery orders bounced back in October with a faster increase than expected, re-affirming the resilience of capital spending - a key driver in the economy's near two-year expansion. Core machinery orders, a volatile data series regarded as an indicator of capital spending in the coming six to nine months, climbed 5.0 percent in October from the previous month, the Cabinet Office said. Separately, a poll found that economists fear that the Bank of Japan's ultra-low interest rates could hurt banks' ability to do business if they are kept too long.

With rate hike in the bag, Fed may hint at Trump effect on economy
The Federal Reserve is widely expected to raise interest rates, but, more significantly, it may give its strongest hint yet on how the Trump administration's tax overhaul could affect the U.S. economy. Recent bullish data, highlighted by continued solid job gains and a jump in economic growth, has prompted some analysts to speculate that the central bank's new projections will reflect an expectation of four rate increases next year. There are also signs inflation may be firming after a lengthy bout of weakness. Fed policymakers have been stymied at how price rises have remained persistently below the central bank's 2 percent target despite labor market strength and a growing economy.

POLL-China's property price rally to stall in 2018 as small city boom wanes
China's home price growth is likely to stall in 2018 as a surprise boom in smaller cities is expected to lose steam while measures to tighten credit and other property curbs continue to constrain the market, a poll showed. China has imposed an array of measures to crack down on property speculation since early 2016, but prices in October still crept up 5.4 percent from a year earlier, largely driven by a buying frenzy that has spread from the big metropolises to the country's less-regulated smaller centres. A softening but still resilient property market in the year ahead, underpinned by steady prices, would be welcome news for China's policymakers, who are keen to keep the market stable, as they ramp up efforts to tackle an alarming build-up in debt.

ADB lifts Asia's 2017 growth outlook to 6 pct on firm exports, China
The Asian Development Bank (ADB) raised its economic growth estimate for developing Asia to 6 percent for this year from a previous estimate of 5.9 percent, citing stronger than expected exports and China's resilience. The ADB kept its 2018 growth forecast at 5.8 percent. China's economy is projected to expand by 6.8 percent this year, higher than the ADB's prior estimate of 6.7 percent, on strong consumption, the bank said. By region, South Asia will remain the fastest growing region in Asia Pacific, the ADB said, even after the bank cut its 2017 forecast to 6.5 percent from 6.7 percent, with India's growth outlook lowered to 6.7 percent from 7.0 percent.

U.S., EU, Japan slam market distortion in swipe at China
The United States, European Union and Japan vowed to work together to fight market-distorting trade practices and policies that have fueled excess production capacity, naming several key features of China's economic system. In a joint statement that did not single out China or any other country, the three economic powers said they would work within the World Trade Organization (WTO) and other multilateral groups to eliminate unfair competitive conditions caused by subsidies, state-owned enterprises, "forced" technology transfer and local content requirements. China, meanwhile, appealed for members to "join hands" and uphold WTO rules to protect globalization in the face of rising protectionism.




US Treasury 10s indicated 2.393%, JGB 10s 0.046%, Bund 10s 0.305%
• US-Japan-Germany respective 2s indicated 1.825%, -0.153%, -0.774%
• JGBs move without clear direction ahead of FOMC
• Long-end a bit heavy ahead of tomorrow's 20-year auction
• March JGB futures up 2 ticks on day, range 151.00/150.89
• Nikkei off from 22,879 early to 22,697 post-Alabama election news
• At 22,747, index off 118 points or 0.5% on day
• AXJ mixed - Shanghai -0.1% and STI 0.4%
• HSI up 0.3%, KOSPI 0.55%, TWI 0.2%, ASX at par and NZX50 just above
• Commodities mixed in Asia, Dalian iron ore +0.9%, rubber futures off

Currency Summaries
• USD/JPY, JPY crosses do little initially in Asia, few but mixed flows
• Reports Trump Alabama US Senate candidate Moore lost hit USD, stocks
• USD/JPY from 113.57 high earlier to 113.12 before steadying
• US yields steady to higher, supportive, US Treasury 10s @2.393%, 2s @1.825%
• Option expiries - 112.00-70 USD3.1 bln+, 113.00 515 mln, 113.30-50 2.2 bln
• Top of daily Ichi cloud still 113.52, rising 55-DMA 112.87, 100-HMA 113.34
• Caution still theme ahead of FOMC announcement, Yellen presser tonight
• EUR/JPY 133.37 to 133.05 before bouncing, daily kijun 132.76, 55-DMA 132.72
• GBP/JPY 151.27 to 150.79, support ahead of flat daily Ichi kijun at 150.18
• AUD/JPY steady, 85.73-97, feel-good effects still of large Unibail M&A
• NZD/JPY 78.68-86, above 78.56 descending 55-DMA, Ichi cloud base 78.77

• EUR/USD opened 0.23% lower @ 1.1742 after weaker ZEW and hotter US PPI weighed
• After a quiet start the EUR/USD moved higher on results of Alabama senate race
• Dem candidate Jones was projected as winning and USD started to edge lower
• The EUR/USD traded to 1.1762 before it was capped and settled around 1.1760
• The market now waits for the FOMC, but DC politics and US CPI may cause moves
• Key resistance at 1.1800/20 where 10, 21 & 100-day moving averages converge
• Support at 61.8 of 1.1553/1.1961move at 1.1709

• Cable mostly quiet in Asia, range 1.3315-33, high post-Alabama election news
• Support from around flat daily Ichi kijun at 1.3306
• Resistance from flat hourly Ichi kijun at 1.3342, descending 55-HMA 1.3351
• Bias down on post-Brexit deal sell-fact flows, CPI last night supportive
• EUR/GBP quiet in Asia, 0.8816-23, 200-HMA below at 0.8804
• Some nearby option expiries today, provide support and resistance
• GBP 1.3345-50 GBP300mln, EUR/GBP 0.8775 E1.3bln, 0.8805 579mln, 0.8850-65 320

• USD/CHF quiet early, off some post-Alabama election news, 0.9918 to 0.9891
• Gradually ascending 200-HMA below at 0.9886, initial support
• Daily Ichi cloud top 0.9930, initial resistance
• EUR/CHF quiet, Asia range 1.1636-43

Market Briefs
• UK's May faces parliamentary showdown with Brexit rebels
• EU readies "David Davis-proof" Brexit summit
• Democrat Jones wins US Senate seat in Alabama in blow to Trump
• Tillerson overture to N.Korea: US ready to talk without pre-conditions
• US, EU, Japan slam market distortion in swipe at China
• Crucial details of US Republican tax plan in flux as deal deadline looms
• ADB puts Asia's growth at 6 pct this year, keeps 2018 forecast at 5.8 pct
• Australia central bank gov: Bitcoin fascination is "speculative mania"
• AU Dec Consumer Sentiment 3.6%, -1.7% last, 4-year high - Wesptac-MI
• New Zealand property sales jump in November, house prices rise
• Japan to keep record-low interest rates in FY2018 budget draft - sources
• JP Oct Machinery orders m/m, 5.0%, -8.1% last, f' cast 3.0%
• JP Oct Machinery Orders y/y, 2.3%, -3.5% last, f' cast -2.8%
• S.Korea to hold emergency meeting on cryptocurrencies, measures expected Friday

Looking Ahead - Economic Data (GMT)
• 07:00 DE Nov HICP Final y/y, f'cast 1.8%, 1.8% last
• 09:30 GB Nov Claimant Count Unem Chng f'cast 3.2k, 1.1k last
• 09:30 GB Oct ILO Unemployment Rate f'cast 4.2%, 4.3% last
• 10:00 EZ Industrial Production m/m, y/y, f'cast 0.0%, 3.5%, -0.6%, 3.3% last

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 09:00 BOJ's Kuroda speaks at an economists' gathering - Tokyo
• 19:00 Fed announces FOMC decision on rates - Washington
• 19:30 Fed's Yellen holds a news conference - Washington
• 23:00 NY Fed's Brainard speaks at a conference - Rochester
See North American Open for a detailed listing of US/NorAm releases, events

The RBA appears to be on hold for the foreseeable future. The latest major data show that inflation pressures are nowhere to be seen and the Australian consumer is being restrained by high household debt. Until those issues are resolved, the RBA will be happy to leave the cash rate at 1.50%. The mood is very different at the Fed. The run of recent data show that unemployment and growth are running at better levels than the Fed had forecast at the beginning of 2017. The market is starting to come around to the Fed's outlook on rate hikes and is pricing in two rate hikes in 2018, up from just one a month ago, but still behind the Fed's forecast of 3 hikes next year on top of today's hike. If the Fed indicates through the dot plots, statement and Yellen presser that inflation will inevitably return to target due to the tightening labour market - the market pricing on Fed hikes will move ever closer to the Fed's forecasts. If that proves to be the case, the AUD/USD should start to trend lower and put 70 cents and lower levels in the frame sometime in 2018. AUD: http://reut.rs/2z4Qpki
Tadhg Gaelach

Tadhg Gaelach

Premium Account
Jan 14, 2016
Message body


PREVIEW-Steady as she goes: ECB likely to keep money taps wide open
The ECB is likely to bump up some of its economic forecasts and may debate tweaking its pledge to keep money at its current, ultra-easy level, but will ultimately reaffirm its policy stance. Meeting just six weeks after agreeing to halve asset buys, policymakers are likely to argue that growth continues to improve but ultra-low borrowing costs are still needed to lift inflation as the recovery remains dependent on the bank's accommodation. The key number to watch will be the ECB's initial forecast for 2020 inflation to see whether rising oil prices push the inflation path higher and how far it is from the bank's target of close-to-but-below 2 percent.

Fed raises interest rates, keeps 2018 policy outlook unchanged
The Federal Reserve raised interest rates to a range of 1.25 percent to 1.50 percent, but left its rate outlook for the coming years unchanged even as policymakers projected a short-term jump in U.S. economic growth from proposed tax cuts. However, as Congress moved closer to a tax overhaul plan that has President Donald Trump "thrilled", Janet Yellen gave a more sobering assessment: a short-term bump is likely, but a longer-term boost is not. Separately, a poll of Wall Street’s top banks showed expectations that the Fed will raise U.S. interest rates three times in 2018, matching the number of rate hikes this year and the central bank's own outlook, as policy-makers turned more upbeat on economic growth and the jobs market.

PREVIEW-Bank of England's Brexit views in focus as rates set to stay on hold
The Bank of England's views on Brexit will be scrutinised by investors when the central bank announces its first policy decision since raising rates for the first time in more than a decade last month. The "very gradual" pace of tightening signalled by the BoE last month reflects both uncertainty about the economic impact of ongoing talks to leave the EU, as well as weak underlying inflation pressures that belie a headline rate at its highest in nearly six years. Separately, Prime Minister Theresa May will urge EU leaders to approve an agreement to move Brexit talks on to a second phase, describing it as a fair deal that offers a good base for a discussion of future ties.

China raises market rates as data shows economic growth moderating
China's central bank nudged up money market rates, increasing rates on reverse repurchase agreements by 5 basis points for the 7-day and 28-day tenors. It increased rates on its one-year medium-term lending facility also by 5 basis points.The symbolic move was the first time the People's Bank of China has raised rates since March, but market interest rates have risen on their own during the interim as the government pursues a range of policies to lower leverage and debt in the economy. The impact of these steps were seen in the National Bureau of Statistics data releases, with industrial output up 6.1 percent in November year-on-year, versus forecasts for an increase of 6.0 percent, but below the 6.2 percent gain in October.

UK RICS house price balance slips to lowest since March 2013
British house prices were flat for the first time in more than four years during the past three months, a closely watched industry survey showed, as falling prices in London and nearby areas dragged down the national average. The Royal Institution of Chartered Surveyors said its monthly house price balance fell to zero in November from +1 the month before, meaning its members were evenly split between those reporting price rises compared with three months ago and those seeing falls. This was the lowest level for RICS's price balance since March 2013, and in line with the average forecast for a decline in a Reuters poll, as tax changes and concerns about Brexit dented demand in central London in particular.

Yellen’s fine legacy gives way to uncertain future
With her fifth and final interest-rate hike on Wednesday, the Federal Reserve boss has put U.S. monetary policy on a path to normalization without spooking markets or hurting growth. Jerome Powell, her successor, may not be so fortunate.




US Treasury 10s indicated 2.363%, JGB 10s 0.045%, Bund 10s 0.307%
• US-Japan-Germany respective 2s indicated 1.793%, -0.158%, -0.796%
• JGBs largely unch, curve flattener
• 5s heavy, long-end bonds firmer on good 20yr auction
• 20yr auction stops at 0.574%, BTC 4.56, tail 0.1bp, last 4.13/0.1bp
• 3mo auction not as strong as WI trading points indicated
• Dealers' inventories said to be very light on foreign demand
• New 3mo paper rallies to -0.22% pre-auction, but auction stops at -0.1786%
• New paper eases to -0.175% post-auction
• Some participants fear BoJ may reduce bill purchases tomorrow
• JGB futures off 3 ticks on day, range 150.97/150.87
• Nikkei on back foot for most of day, 22,786 to 22,650, lower USD cited
• At 22,676, index off 81 points or about 0.4% on day
• AXJ mixed - Shanghai -0.2%, -STI 0.9%, ASX -0.1% and HSI below par on day
• KOSPI +1.3%, TWI +0.6% and NZX50 +0.5%

Currency Summaries
• USD/JPY down from 113.57 to 112.46 yesterday on Alabama, dovish Fed hike
• Passage of Republican tax plan seen in danger, US yields off too
• Asia mostly sees 112.54-79 range, Japan buys early, some Tokyo fix demand
• Easier later on lack of follow, market still net long
• Option expiries today - total USD3.4 bln+ 112.00-70, 113.00 525 mln too
• Resistance from descending hourly Ichi tankan at 112.62 currently
• 55-DMA 112.86 and still rising daily Ichi tankan 112.87 above
• Flat daily kijun support at 112.46
• EUR/JPY so-so buoyant in Asia ahead of ECB, 133.20-50, flows few
• Essentially on hold above tapering Ichi cloud, top 132.60 today
• GBP/JPY 150.65-151.49, between 150.18 daily kijun, 151.56 tenkan pre-BoE
• 27 to 150.79, support ahead of flat daily Ichi kijun at 150.18
• AUD/JPY 85.92 to 86.48 on strong jobs report, highest in month, bias up
• Fibo 38.2% retracement of 9/21-11/27 90.30-84.33 move 86.61, 50% 87.31
• NZD/JPY bid too, 78.81 to 79.21, into 78.77-80.02 daily Ichi cloud

• EUR/USD opened 0.72% higher at 1.1825 after weak US CPI & dovish Fed hike
• EUR/USD consolidated the gains in Asia -trading in a 1.1822/43 range
• Heading into the afternoon it was trading around 1.1835
• EZ flash PMI today and ECB meets later today, but it should be a non-event
• The break and close above resistance at 1.1800/20 was bullish for the EUR/USD
• The 10, 21 and 100-day MAs in that window and it is now support
• There is some fibo resistance at 1.1865/70 with break targeting 1.1940/60

• Cable relatively bid after dovish FOMC hike yesterday, ahead of BoE tonight
• Range 1.3398-1.3449, decent but flow light with MPC announcement in offing
• Well in recent range but support likely stronger below, options to help
• GBP1 yard in option expiries at 1.3300 strike tomorrow
• EUR/GBP 0.8799-0.8825 in Asia, quiet, awaiting ECB and BoE announcements
• Gradually ascending 200-DMA 0.8805, recent pivot

• USD/CHF 0.9841-63 in Asia after post-Fed USD sell-off overnight
• Low late New York 0.9838, some stops eyed sub-0.9835, 0.9800
• Resistance now from ascending 55-DMA above at 0.9866
• EUR/CHF 1.1650-66 in Asia, flows few and interest low
• Looks toppish from around flat daily Ichi tenkan at 1.1667
• Eyes on ECB and SNB announcements later today

Market Briefs
• Fed raises interest rates, keeps 2018 policy outlook unchanged
• US Republicans forge tax deal, final votes seen next week
• US core inflation slows, puts spotlight on 2018 interest rate outlook
• Despite Tillerson overture, White House says not right time for N.Korea talks
• Steady as she goes: ECB to keep money taps wide open
• UK urgently needs Brexit transition deal, and more time after that, lawmakers say
• Bank of England's Brexit views in focus as rates set to stay on hold
• UK RICS house price balance slips to lowest since March 2013
• NZ gov't unveils plans to boost spending, sees slightly lower budget surplus
• AU November employment rises by 61,600 vs 18,000 forecast
• China raises market rates as data shows economic growth moderating
• CN Nov Urban Investment (ytd) y/y, 7.2%, 7.3% last, f' cast 7.2%
• CN Nov Industrial Output y/y, 6.1%, 6.2% last, f' cast 6.0%
• CN Nov Retail Sales y/y, 10.2%, 10.0% last, f' cast 10.2%
• Japan to cut new government bond issuance for 8th straight year - Nikkei
• Japan MoF fata week-ended 12/9 - Japanese buy net Y376.4 bln foreign stocks
• Sell Y487.6 bln bonds, Y55.6 bln bills
• Foreigners buy Y84.8 bln Japan stocks, net Y844.2 bln bonds
• Foreigners buy whopping Y4.534 trln bills on swap basis plays
• Muslim leaders call on world to recognise East Jerusalem as Palestinian capital

Looking Ahead - Economic Data (GMT)
• 07:45 FR Nov CPI (EU Norm) Final m/m, y/y, f'cast 0.1%, 1.3%, 0.1%, 1.3% last
• 08:00 FR Dec Markit Mfg Flash PMI f'cast 57.2, 57.7 last
• 08:00 FR Dec Markit Serv Flash PMI f'cast 55.9, 60.4 last
• 08:00 FR Dec Markit Comp Flash PMI f'cast 59.4, 60.3 last
• 08:30 DE Dec Markit Mfg Flash PMI f'cast 62.0, 62.5 last
• 08:30 DE Dec Markit Services Flash PMI f'cast 54.6, 54.3 last
• 08:30 DE Dec Markit Comp Flash PMI f'cast 57.2, 57.3 last
• 09:00 EZ Dec Markit Mfg Flash PMI f'cast 59.8, 60.1 last
• 09:00 EZ Dec Markit Serv Flash PMI f'cast 56.0, 56.2 last
• 09:00 EZ Dec Markit Comp Flash PMI f'cast 57.2, 57.5 last
• 09:30 GB Nov Retail Sales m/m, y/y, f'cast 0.4%,0.3%, 0.3%, -0.3% last
• 12:00 GB Dec BOE Bank Rate, f'cast 0.50%, 0.50% last
• 12:45 EZ ECB Refinancing Rate, f'cast 0.00%, 0.00% last

Looking Ahead - Events, Auctions, Other Releases (GMT)
• N/A SNB's monetary policy assessment - Bern
• 08:00 Riksbank executive board meeting - Stockholm
• 09:00 Norway's cen bank rate decision announcement - Oslo
• 12:00 BoE's rate decision and minters - London
• 13:30 ECB's Draghi speaks after rate decision meeting - Frankfurt
• 17:25 BoC's Poloz speals at a press conference - Toronto
See North American Open for a detailed listing of US/NorAm releases, events

Asia may follow China's scenic route to higher rates
The day after the US Federal Reserve hiked its benchmark interest rate as expected, China's central bank followed suit. The People's Bank of China lifted its 7-day reverse repo rate to 2.50%, and also raised its 1-year Medium-term Lending Facility by a similar magnitude of 5 basis points to 3.25%. While the moves were anticipated, the main takeaway was the PBOC's eagerness not to spook markets, amid its ongoing deleveraging drive. The PBOC expressed hopes that the smaller-than-expected rate hike would tame market forecasts for future increases. Adding cushioning to the blow, the central bank increased liquidity injections, underscoring the very mild approach to removing accommodative monetary policy that will likely be emulated by other central banks in Asia. If the other ACBs plod along as the Fed keeps pace toward rate normalization, USD/AXJ may be about to complete its tour of the grand canyon of 2017.