The Asian traders cheered optimism on the US-China trade deal front, lifting the risk sentiment across financial markets, as the 2-day trade talks between both the sides begin later on Wednesday. Amongst the fx space, the Chinese Yuan was the biggest gainer that led the advances in the Antipodeans. However, the upside remained capped in both the Aussie and the Kiwi amid mixed oil prices, a 3% drop in the Chinese iron-ore futures and dismal Australian wage price data.
The Yen extended Tuesday’s sell-off, pushing the USD/JPY pair back for a test of the 111 handle, but the bulls lacked follow-through after the BoJ Chief Kuroda said in parliament today that the central policy is not weakening the domestic currency. Meanwhile, the US dollar remained broadly subdued ahead of the key FOMC minutes, leaving both the common currency and the pound modestly flat, as all eyes remain on the Brexit developments.
Among the related markets, the Asian equity markets rose to fresh 4-1/2 month highs but pared back gains towards the closing. Meanwhile, both crude benchmarks also failed to sustain at higher levels and traded modestly flat. Gold prices on Comex corrected sharply from YTD tops of 1349.75 reached in mid-Asia.
Main Topics in Asia
WTI: Lack of inventory data and doubts over future demand restrict price gains near $56
Aussie wages disappoint ahead of key jobs data tomorrow
USD/CNH Technical Analysis: Potential inverse head-and-shoulders
Gold Technical Analysis: Jumps to fresh YTD highs, RSI reporting overbought conditions on all major time frames
US Govt offices (DC area) will be closed on February 20th due to severe weather
Ex-Fed Chair Yellen: Need to be careful not to define domestic policy tools as currency manipulation
UK’s Hammond: Most urgent task is to secure Brexit deal that will protect trading relationship with EU
China’s Foreign Ministry: China urges US to respect its right to develop, prosper – Reuters
FOMC meeting minutes press lock up cancelled, minutes to be published at 1900 GMT
Key Focus Ahead
In the sessions ahead, the key focus is likely to be on the meeting between the UK PM May and the European Commission President Juncker, as PM May makes another attempt to renegotiate with the EU in a bid to end the Irish border stalemate and avoid a no-deal Brexit scenario. The details/developments from the meeting are likely to drive the next moves in both the Euro and the GBP in the coming days.
On the data front, the German PPI release is due at 0700 GMT, followed by the Swiss industrial figures at 0815 GMT and UK CBI industrial trends survey at 1100 GMT. Meanwhile, the Eurozone consumer confidence numbers will be showed up at 1500 GMT.
From the US docket, we have a couple of minority reports ahead of the highly influential FOMC January meeting minutes release (at 1900 GMT) that will offer fresh insights into the Fed’s next policy moves.
Attention will also remain on the outcome of the US-China trade talks and the API weekly crude stocks data, due at 2130 GMT, for near-term trading directives.
EUR/USD: Focus on Fed minutes and yield differential
Dollar selling may gather pace, bolstering the already bullish setup in EUR/USD if the Fed minutes reveal a strong consensus on the need to change the pace or halt balance sheet normalization if required.
GBP/USD struggles around 1.3060 as investors await May-Juncker meet
The pair struggles to the extend previous moves as investors await details of the meeting between the UK Prime Minister Theresa May and the EU Commission chief Jean-Claude Juncker.
FOMC Minutes Preview January 29-30 Meeting: The pause that refreshes
How will a positive outcome to Brexit and US-China affect the Fed’s economic estimates and policy projections? Will the US economic growth ebb if global growth levels off or improves? Whether the FOMC minutes will provide answers is questionable and historically unlikely but they will be scoured nonetheless.
Dollar – Past its Prime?
Investors are selling US dollars ahead of Wednesday’s FOMC minutes. This move should not be a surprise to our readers as we talked about how the dollar is past its prime.
Australia: +15k seen on employment, jobless rate to steady at 5.0% – Westpac
The Westpac Analysts offer a sneak peek at what to expect from the Australian January labor market report due on Thursday at 0030 GMT.
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