Broad-based US dollar weakness was the main underlying theme in Asia at the start of a new week, as markets price-in dovish expectations from the FOMC decision amid the recent reports of a pause in the Fed normalization. The Antipodeans rallied in tandem with the Chinese Yuan heading into the crucial US-China trade talks scheduled later this week. The Kiwi was the best performer, up near 0.50% at 0.6870 – over five month tops. The Aussie hit weekly tops above 0.72 handle, but the gains were capped by downbeat Chinese industrial profits data. In contrast, the USD/JPY pair traded on the offers below the hourly 200-SMA near 109.50 levels amid a non-event BoJ minutes and positive tone seen around the Asian equities. Meanwhile, the pound was the weakest this session, as the bulls took a breather after Friday’s upsurge. The EUR/USD pair consolidated the bullish momentum above the 1.1400 level.
On the commodities front, both crude benchmarks dropped more than a percent amid mounting economic slowdown concerns and rising US output while gold futures on Comex traded firmer above the key 1300 psychological level, underpinned by negative Treasury yields.
Main Topics in Asia
Irish foreign minister is not seeing need for further compromise on back stop
UK’s Johnson: PM May plans to reopen Brexit withdrawal agreement – Telegraph
WTO to launch an investigation on US tariffs on China
UK PM May told cabinet ministers she will rule out no deal – Sun
Gold paring back gains for a test of 1300 key psychological level
BoJ Minutes: It is appropriate to continue easing persistently
US President Trump: Another shutdown is certainly an option
China Premier Li: China’s economy has potential and ample space for growth
Oil drops on rising US output, economic slowdown
Yuan rises to six-month highs against the US dollar
China’s industrial profits drop 1.9% y/y in December
Asian stocks trade in green as US government reopens temporarily
Key Focus Ahead
The macro calendar remains data-light stepping into a new week, with no first-tier economic releases on the cards from both sides of the Atlantic that would leave markets at the mercy of the risk sentiment and Brexit-related headlines.
In the NA session, all eyes will be on the speeches by the ECB President Draghi at 1400 GMT and BOE Governor Carney at 1430 GMT for fresh trading impetus across the fx board.
Meanwhile, the main focus this week remains on the UK Parliamentary vote on the UK PM May’s Brexit Plan B, Australian Q4 CPI report and FOMC decision.
EUR/USD: Focus on Draghi speech after biggest single-day rise since Sept. 20
The dovish Fed expectations could keep the USD on the defensive ahead of the FOMC rate decision. Draghi may repeat last week’s dovish message, capping gains in the EUR.
GBP/USD gathering pace for a test of 1.3220 ahead of Carney
The GBP/USD pair continuous to trade cautiously around the 1.32 handle, as the bulls await fresh Brexit-related headlines for a retest of three-month highs at 1.3217 reached last Friday.
Huge Week Ahead- Tech Earnings, Brexit Amendment Vote, FOMC, Trade Talks, and NFP
This week is highlighted by tech earnings, votes on key amendments in UK Parliament on Tuesday, Super Wednesday with an FOMC decision and US-China trade talks and the non-farm payroll report on Friday.
Trump Ends US Shutdown But That Won’t Help the Dollar
The longest ever US government shutdown delayed many economic reports and investors are left with nothing but small glimpses into how the economy is doing. That will change in the next few days with the Federal Reserve’s monetary policy statement “¦
Gold Price Forecast: dovish Fed expectations & golden cross favors strong move above $1,300
If the Fed sounds more dovish than expected, then the bullish move in the yellow metal could gain further traction. The metal bears, however, would make a strong comeback if the Fed sounds less dovish than expected.
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