December 17, 2015 / 11:24 PM / 2 years ago

IFR Markets ForexWatch Asia Regional Daily Briefing

SYDNEY, Dec 18 (IFR) - 
OVERNIGHT NDF RANGES AND CLOSING NY NDF PRICES UNAVAILABLE
Big USD gains hit risk, flatten curve
 
Market Briefs  
    * Equities fall on energy drag; dollar strengthens
    * U.S. jobless claims fall from five-month high ( 271k vs 275k Rtrs f/c,
282k pvs)
    * US Q3 current account gap widens to $124.1 bln, largest since 2008
    * Philly Fed falls to -5.9 in Dec, new orders drop to -9.5
    * Nearly half of Britons leaning towards voting to quit EU -poll
    * Mexico cenbank hikes rate 25bps, follows Fed hike in lock-step to support
peso 
    * Brazil's Congress approves cut in budget surplus target to 0.5% from 0.7%
    * Argentina's closed at 13.38/USD, -26.55% after the government announced it
was lifting currency controls and allowing the currency to weaken

 
Macro Themes in Play
Dollar extends gains, commodities hammered; CRB at new 13 year lows; presses on
HY credit and in familiar feedback loop weighs on stocks
Commodity currencies hard hit; AUD falls nearly 2% but holds trendline support;
CAD crushed to new lows; EM down; resource/energy sectors lead lower
Fed Funds trade at 34/35 bps; next macro trade comes as investors reconcile
market view (2 rate hikes in 2016) and Fed view (4 rate hikes); focus back on
data
Street loves USDJPY, think big catch-up trade to wider rate diffs possible; EUR
lowest close since ECB day; Cable worst in 8 months on softer short rates
Gold at 6 year lows; Fed calls USD effect on inflation transitory but could be
as wrong on dollar as they were on energy
 
Looking Ahead - Economic Data (GMT)
    * 00:00  NZ NBNZ Business Outlook         Dec  14.6%-prev
    * 00:00  NZ NBNZ Own Activity             Dec  32%-prev
    * 01:30  CN China House Prices YY*        Nov  0.1%-prev

    
Looking Ahead - Events, Other Releases (GMT)
    * 02:00 JP  Bank of Japan monetary policy meeting, Interest rate
announcement

 
Currency Summaries
 
EUR/USD 
    * Tight 1.0840/80 range in Europe's morning, NY opens near bottom of the
range
    * Lifts early as JPY weakness takes EUR/JPY above 133.20, EUR/USD lifts
above 1.0870
    * Gains fade though as broad based USD bid takes hold, overnight low breaks
    * Slides extends toward 1.0800, large bids in that area halts the drop
    * Little bounce seen, near 1.0815 late, break lower looks due
    * Daily techs bearish, below 10-DMA & RSI biased down

 
USD/JPY
    * Post-Fed rally has erased most of last wk's USD/JPY slide
    * 2-yr yield spreads had already priced in most of the Fed hike before Wed
    * It wasn't until the N225 shook off it's Dec blues that prices surged
    * Even a swoon in S&Ps today failed to drag N225 & USD/JPY lower
    * Fed doubts linger: 2-yr Tsy ylds are only at 1% v 2.38% '17 DOT plot
    * Some USD/JPY offers by 123, but retest of the 123.77 trend high is eyed
    * BOJ to leave policy on hold tonight; JPY firm on crosses amid Fed fallout

 
GBP/USD
    * GBP/USD continues to ride lwr 21-h Bolli lower, capped by falling 21-HMA
at 1.4930
    * Fed rate hike lifting USD, Brexit fears now move to fore, add to GBP
weakness
    * Cable remains weak near 8-mos lows, despite sound retail sales beat
, 
    * Despite RS recent weak UK data applying little pressure on BOE to hike
    * EUR/GBP closing NorAm in middle of day's range at 0.7265 near flat
    * Converging UK-EZ rate outlook weighs on GBP

 
USD/CHF
    * Post-Fed rally nearly got USD/CHF to 38.2% of the Nov-Dec drop & parity
    * The 38.2% is at 0.9994 vs the 0.9991 session high ahead of the Ldn close
    * A midday NY swoon in equity prices and other risky asset didn't help CHF
    * Next topside targets are the Kijun & 50% retracement at 1.0057
    * Talk of big bids defended 1.08 in EUR/USD playing into USD/CHF stall
    * SECO lowered growth f/cast for this year to 0.8%, kept 2016 at 1.5%
    * Infl f/cast for 2015 -1.1%, 2016 to -0.1% fm 0.1% in Sept. 2017 @ 0.2%
    * EUR/CHF remains in a tight range either side of 1.08 (SNB bid rumored)

 
USD/CAD  
    * O/N range 1.3778/83, Noram range 1.3811/3986, Close 1.3949, NY +116 pips
    * Brent crude -1.1%, WTI -1.75%, alum. -0.4%, copper -1.3%, gold -2.5%
    * AUD/CAD -0.34%, 0.9929, CAD/JPY -0.74, 88.04, EUR/CAD +0.25%, 1.5066
    * DXY +1.39% (+0.33% in NY) US stocks -0.95/-0.80% (S&P -1.1% in NY)
    * Claims better than f/c, Philly Fed soft except for jobs index [page:2417]
    * US 2s-10 curve flattened as long end dropped; Cda w'sale trade & CPI due

 
AUD/USD  
    * Early Europe sees lift to 0.7215, gains erode & pair below 0.7200 into NY
    * Below f/c jobless claims keeps bear pressure on, 0.7159/60 & daily cloud
top tested
    * Broad based USD bid and slide in commodities see support break & stops run
    * Slide accelerates, breaks daily cloud base & 0.7097 low set, near 0.7115
late
    * T-L off 2015 low & daily lows near 0.0760/70 are next bear hurdles
    * Techs favor bears, RSIs biased down & pair below slew of moving averages

 
NZD/USD  
Bull pressure in Europe's morning sees 0.6801 high, slips near 0.6750 into NY
Bear pressure persists in NY, slide accelerates after below f/c jobless claims
10-DMA pierced & slide extends to a 0.6688 low, little bounce seen, near 0.6705
late
Daily techs favor bears, sub-10 DMA, RSI biased down, cloud top to fall soon
Nov NBNZ Own activity & bus. outlook a NZD risk in Asian session
 
LATAM
    * USD/MXN below 17.00 after Banxico hikes rate 25bps as expected
    * C.bank cites Fed hike and further peso weakness as catalyst for Hike
    * USD/BRL near flat (3.89) into NorAm close, Bovespa higher w/BTG founder
released
    * Congress passes '16 budget, keeps Bolsa Familia pgm, sees +10b from
proposed fin'l trans tax
    * USD/CLP ends NY near flat at 707.50, despite copper/oil weakness
    * USD/ARS opens near 14.00 ends NY  13.3140 +35%, after govt opens FX market

 
Fed's gradualism still too aggressive for market
Now that lift-off is done and dusted, the focus shifts to the nature of the rate
path to which there are two aspects 1) the market is priced for a less
aggressive tightening cycle and 2) the Fed has little desire to foster
expectations that gradual equates to a pre-set cycle. Despite all the focus on a
dovish hike from the Fed, the actual outcome was mildly hawkish. The Fed's
updated dot plots still point to 100bps of rate hikes next year, unchanged from
its Sept forecasts. The other aspect of the rate path is that "gradual" is
assumed to mean a 25 bp hike at every other meeting, especially those with
updated projections and a press conference. However, Yellen was keen to note
that "gradual" did not equate to rate hikes being "equally sized" or "equally
timed". The Fed clearly wants to avoid a repeat of the 2004 "measured"
tightening cycle and will avoid letting this one become too predictable. Full
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