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  • Friday’s close was subdued as the risk-off tone died down into the North America session.  
  • A slowdown in global growth and lower expectations for a trade deal between the US and China to be agreed continue to drag on risk-sentiment.  

A contributing factor to the poor mood were the latest numbers from Italy where Italian industrial production fell again in December to 0.8% m/m after a 1.7% m/m drop in November.  

“The deteriorating growth backdrop is bad news for Italy’s fragile budget outlook and will add to the woes being felt in Europe at present,” analysts at ANZ Bank New Zealand explained.

We had Fed speakers Daly, who said the economy is at a self-sustaining pace, and Bullard, who advocates caution on the reduction of the balance sheet and a rethink on the dot plot projections.

As for financial and commodity markets, there was late rally Wall Street due to positive earnings which helped the NASDAQ and S&P 500 to close in the green, although the DJIA bucked the trend to end slightly lower. The dollar moved into a consolidation into the close with the DXY tucked in below the highs at 96.66 in a double top formation. In Europe, the DAX was off just over 1.0% while FTSE 100 was down 0.3%. Gols was mostly sideways, ending up 0.5% at USD1316.6/oz while WTI pared back slither of its recent drop, adding just 0.15% to USD52.7/bbl. The US 10yr treasury yield fell from 2.65% to 2.63%, while 2yr yields fell from 2.48% to 2.45%.  

Currency action

Analysts at Westpac Banking Corporation offered a breakdown of the key movers on the day:

“EUR/USD probed lower at 1.1320. USD/JPY ranged sideways between 109.65 and 109.90.”

“AUD/USD printed lows just above 0.7060 after the RBA’s Statement on Monetary Policy produced even cooler growth forecasts than expected, but the pair then drifted up to 0.7090/0.7100, little changed overall.”

“NZD was flat on the day around 0.6740. AUD/NZD rebounded from 1.0470 to 1.0515.”

“Canada’s Jan employment was much stronger than expected, up 67k after 8k in Dec, though the unemployment rate ticked up from 5.6% to 5.8% as participation rose. USD/CAD sank from just above 1.3300 to lows under 1.3240, making CAD the strongest G10 currency on Friday.”

Key notes from U.S. session:

  • Wall Street stages late rebound, posts small gains for the week

Key events ahead:

There are no scheduled events in Asia to start the week, although mainland China returns from the week-long Lunar holiday. On the other hand, Tokyo is out, so it is likely to be a quiet start to the week.