Amid fresh Chinese stimulus talks and the US top diplomat Kudlow’s comments refuting the FT reports that Trump turned down trade talks with Beijing, the risk appetite markets received a boost across the financial markets in Asia. The Chinese Yuan firmed up and surpassed the 6.80 level versus its American peer, further fuelling the recovery in the Antipodeans. The Aussie rallied to near 0.7150 levels, having staged a comeback from two-week lows of 0.7115 while the Kiwi emerged the top gainer amid a rise in New Zealand’s Q4 2018 CPI reading. The anti-risk Yen witnessed fresh selling after the Bank of Japan (BoJ) slashed its 2018/19 CPI and GDP forecasts. The USD/JPY pair jumped to multi-day tops of 109.80 before retreating slightly to 109.65 levels. Among the European currencies, both the Euro and the GBP traded modestly flat, as the US dollar attempted a tepid recovery across its main competitors, tracking the uptick in Treasury yields and S&P 500 futures.
On the commodities front, both crude benchmarks looked to stabilize after yesterday’s downslide while gold futures on Comex traded flat near 1283 region. Meanwhile, Comex copper prices advanced nearly +0.50% to 2.674 levels.
Main Topics in Asia
New Zealand Q4 2018 CPI rises +1.9% y/y vs. 1.8% expected
UK’s Shadow Chancellor: Labour likely to support sensible Brexit delay plan
Japan logged trade deficit in December as exports dropped 3.8 percent
PBOC injects CNY 275.5bn in first-ever Targeted MLF operation
China MOF Official: China will add moderate fiscal spending this year
Gold: 100-hour MA is capping recovery rally despite signs of weakness in USD
BoJ keeps policy steady, as widely expected
BoJ slashes 2018/19 CPI and GDP forecasts, risks to economy skewed to downside
Fitch affirms Japan’s A rating, outlook Stable
WTI looks to stabilize near $ 53, API data eyed
USD/CNH Technical Analysis: breaks below 6.80 after failed breakout
Key Focus Ahead
Wednesday’s EUR macro calendar remains light, with no first-tier economic releases on the card and hence, markets will scramble for the minority reports such as the UK CBI industrial orders for some trading cues. Also, in focus will remain the BoJ Governor Kuroda‘s post-policy presser and BOE Deputy Governor Broadbent’s speech (at 0930 GMT), which could offer fresh hints on the BOE rate hike plans, especially after yesterday’s sold UK labor report.
In the NA session, the Canadian retail sales report for November will be released at 1330 GMT. At 1500 GMT, the Eurozone consumer confidence data will be published parallelly with the US Richmond Fed manufacturing index. Markets also see the release of the US weekly fuel stocks report later in the day.
EUR/USD: Bears may be losing steam ahead of ECB
Markets may be done pricing the possibility of the European Central Bank (ECB) turning dovish at the rate decision, scheduled for Thursday. As a result, the currency pair may trade sideways-to-positive ahead of tomorrow’s ECB rate decision. As of writing, it is trading at 1.1367.
GBP/USD looks to extend the corrective slide towards 1.2900
Data-wise, markets will await the second-linier UK CBI industrial orders data while the speech from the BOE Deputy Governor Broadbent will be closely eyed.
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