- USD/CNH rockets to 6.7250 and talk of PBOC brakes.
- Quick move from 6.7315 high (traded once) back down to 6.7050 in 3 months.
- CNY/CNH spread still blowing out 1,500 seen-widest on record.
- EUR/USD lows of 1.0719 just shy of Tuesday 1.0711 low.
- USD/JPY hits 118.35 low in Asia: 118.42-118.82 in Europe.
- ECB’s Praet – Current policy in place at least until March 2017.
- EZ December final Composite PMI 54.3 vs 54.0 flash and 54.2 November.
- UK December Service PMI 55.5 vs 55.9 previous, 55.6 expected.
- EZ December PPI y/y vs -3.1% previous, -3.1% expected.
- Spain December Service PMI 55.1 vs 56.7 November.
- Caixin China Services PMI for Dec 50.2 from 51.2 in November lowest since July 2014.
- AXJ currencies and equities hit hard on spike in risk aversion.
- MSCI emerging index hits the lowest level since July 2008.
- North Korea successfully conducts first H-bomb test.
- (0815 ET/1315 GMT) The ADP National Employment Report for December is likely to show a gain of 192,000 jobs.
- (0830 ET/1330 GMT) The U.S. Commerce Department releases international trade data for November. The trade gap is likely to widen to $44 billion.
- (0830 ET/1330 GMT) Statistics Canada is set to release trade balance data which likely show a deficit of C$2.60 billion in November, compared with a deficit of C$2.76 billion in October.
- (1000 ET/1500 GMT) U.S. factory orders report for November is expected to show that new orders for manufactured goods dropped 0.2 percent after gaining 1.5 percent in October.
- (1000 ET/1500 GMT) The Institute for Supply Management releases its index of non-manufacturing activity for December, which is expected to rise slightly to 56.0 from 55.90.
- (1030 ET/1530 GMT) EIA releases its crude oil stocks change for the week ending Jan 1.
- (1400 ET/1900 GMT) The Federal Open Market Committee releases minutes from its meeting of Dec. 15-16, where it raised interest rates for the first time in nearly a decade. Fed’s move signalled faith that the U.S. economy had largely overcome the wounds of the 2007-2009 financial crisis.
Key Events Ahead
- (1400 ET/1900 GMT) FOMC Minutes (from the Dec 15-16, 2015 meeting).
FX Recap
USD/JPY: The Japanese yen hovers near its 10-week highs against the dollar, driven by a risk-off mood on markets after the sell-off in Chinese equities forced investors to seek safe-haven assets. Pair dropped 0.42% to 118.55 from 119.05 on Wednesday, hitting a low of 118.33 after the People’s Bank of China (PBoC) set the USD/CHY fix, the weakest since August of Japan Governor Haruhiko Kuroda said on Tuesday he is willing to take bold steps if needed to ensure that inflation reaches the central bank’s 2 percent price target. Pair made intraday high at 119.16 and low at 118.33 levels. Major resistance is seen at 120.67 and support is seen at 118.06 levels.GBP/USD: Sterling dropped to its weakest since April against the dollar on Wednesday, with data from the dominant UK services sector pointing delayed economic growth at a time when investors’ focus is on the debate over a “Brexit” from Europe. It fell to $1.4618, its lowest since mid-April with sellers targeting the low of $1.4567 struck on April 13. A drop below that level will take sterling to its lowest since mid-2010. Against the euro, sterling was steady at 73.30 pence. Sterling remains firmly in negative territory shortly after UK services sector slowed growth pace at the end of 2015. The UK PMI in services came a little below expectations at 55.5 in December, down from 55.9 in the previous month and lower than the initial market expectation of 55.6. Pair made intraday high at 1.4680 and low at 1.4619 levels. Initial support is seen at 1.4609 and resistance is seen around 1.4850 levels.NZD/USD: The New Zealand dollar fell more than 1 percent to $0.6639, having dropped more than two cents in one week. It dropped to 78.64 yen. Due to a lack of domestic fundamentals, both commodity currencies, the kiwi and the aussie, are driven by the risk-off market mood spurred by the decline in equity stocks from Asia to the US. The equity sell-off drove safe-haven currencies, such as the yen, higher while the dollar rallied on Chinese weakness and Middle East tensions. It made intraday high at 0.6706 and low at 0.6626 levels. Initial support is seen at 0.6601 and resistance at 0.6896 levels.AUD/USD: The Australian dollar fell to multi-week lows against U.S. dollar and the yen in the face of Chinese growth concerns and sliding commodity prices. It fell around half a U.S. cent to $0.7112, pulling closer to the December trough of $0.7097. A break could open the way to $0.7016, and then to a six-year low of $0.6892. It fell to 3-month lows at 84.25 yen. Pair made intraday high at 0.7170 levels and low around 0.7057 levels. Initial support is seen at 0.7020 and resistance at 0.7320 levels.USD/CHF: Pair significantly leaped on Wednesday as bulls benefited from soaring US yields on the short-end of the curve which hit a five-year high. As mentioned, the macro calendar was empty today but traders were already looking ahead to the rest of the data-filled week. ADP will bring its fresh employment change release on Wednesday, which is widely seen as the forerunner to the crucial non-farm payrolls due on Friday. It made intraday high at 1.0113 and low at 1.0072 levels.
Equities Recap
Global stocks dropped for a fifth day as China allowed the yuan to weaken further, adding worries about the economy and North Korea’s nuclear test intensified geopolitical worries.European markets followed Asia into losses, with Britain’s FTSE, Germany’s DAX and France’s CAC falling 0.7 pct lower to leave MSCI’s 46-country All World index down 0.3 pct in early trading.Tokyo’s Nikkei average ended down 0.99 pct at 18,191.32. China’s blue chip shares were driven sharply higher, with the CSI300 index closing up 1.75 pct and the Shanghai Composite closing up 2.3 pct. HK’s Hang Seng Index edged down 1.0 pct at 20,980.81 points.
Commodities Recap
Crude oil prices touched new 11-year lows as the face-off between Saudi Arabia and Iran over Riyadh’s execution of a Shi’ite cleric was seen extinguishing any chance of major producers cooperating to cut production. Global benchmark Brent crude was down 67 cents or 1.9 pct, trading at $35.75 a barrel and the lowest since 2004. U.S. crude futures dropped 46 cents at $35.51 per barrel after slipping 79 cents on Tuesday.Gold inched higher for a third consecutive session, paring earlier losses as investors sought safety in the metal amid escalating tensions in the Korean peninsula and the Middle East, and worries over the Chinese economy. Spot gold climbed 0.3 pct to $1,080.60 an ounce, after earlier slipping 0.3 pct.
Treasuries Recap
The 10-year U.S. Treasury yield slipped by about 3 basis points to 2.22 percent.UK Gilts started 23 ticks higher than the settlement of 117.47, as predicted, as further weak China data and geopolitical concerns underpinned the open.New Zealand government bonds earned, pushing yields 3.5 to 4.0 bps lower across the curve. Australian government bond futures also rose, with the 3-year bond contract up 2 ticks at 98.020. The 10-year contract climbed 4.5 ticks to 97.2350 in a bullish flattening of the curve. The 20-year contract gained 5.5 ticks to 96.7550.
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