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IFR Markets ForexWatch Asia Regional Daily Briefing
March 1, 2017 / 11:26 PM / 9 months ago

IFR Markets ForexWatch Asia Regional Daily Briefing

    SYDNEY, March 2 (IFR) - 

USD, bond yields & stocks surge, JPY purged 
Market Briefs
    * US consumer spending 0.2% v 0.3% Rtrs f/c 0.5% pvs

    * US Jan PCE price IDX y/y 1.9% v 1.6% pvs, m/m 0.4% v 0.2%
pvs

    * US Feb ISM Mfg PMI surges to 2.5-yrr high in Feb; 57.7 v
56 Rtrs f/c, 56 pvs; Employment dips, prices pd steady

    * Fed’s Kaplan: We should begin process of gradual rate
hikes, econ solid not spectacular - DJ

    * Atlanta Fed’s GDPNow: US econ growing at 1.8% in Q1 vs
2.5% on Feb 27

    * Wall St hits new highs as Trump speech reignites rally

    * Weaker euro helps propel EZ factory growth to six-year
high, Growth in new export orders highest since April 2011

    * Welcome or not, ECB buying crushes German 2-yr bond
yields, ECB seen buying more bonds sub -0.40% for QE

    * U.S. crude oil stocks rise, production up again; early
NorAm oil gains reversed -EIA

    * US 2-yr yield hits highest since 2009 on rate hike bets,
fed funds futures show 65% chance of hike in March

    * Mexico’s Carstens: Bank has never thought to request swap
line w/Fed, lifts MXN of session high

 
 
Looking Ahead - Economic Data (GMT)
    * 23:50  JP   Foreign Bond Investment                 
w/e    48.2b-prev

    * 23:50  JP   Foreign Invest JP Stock                  
w/e    -127.9b-prev

    * 00:30  AU  Building Approvals*                         
Jan    f/c 0%, -1.20%-prev

    * 00:30  AU  Private House Approvals*                 Jan   
-1.60%-prev

    * 00:30  AU  Trade Balance G&S (A$)*                  Jan   
f/c 3800m, 3511m-prev

    * 00:30  AU  Goods/Services Imports*                  Jan   
1.00%-prev

    * 00:30  AU  Goods/Services Exports*                  Jan   
5.00%-prev

 
Looking Ahead - Events, Other Releases (GMT)
    * No Significant Events

 
Macro Themes in Play
    * USD gives back big chunk of early gains, near term Fed
rate hike expectations raised by Dudley/Trump but long term Fed
Funds (end-2019) still unable to break 2%, situation will
continue to hold back long USD trade

    * US rate market pricing 2 ½  hikes for 2017 now that March
meeting firmly in play, new high for cycle, March trades 7-in-10
chance

    * Markets sharply higher, S&P and bank sector gaps up,
bullish on appearance that Trump/GOP coalition united, to
leverage majority status to advance legislation

    * EURUSD ends down only small, bears losing grip, between
European events last week and US rate move this week currency
pair should be much lower; USDJPY up but underwhelming given
spike in stocks/rates; Cable down on Mfg PMI miss, foreign
investors turn net sellers of Gilts for first time in six months

    * BOC holds, US-Canada rate diff at new highs, last time
here (1 year ago) USDCAD had 1.40 handle; AUD up behind copper
on US infrastructure play; MXN better, Banxico sees inflation
above target for most of year

Gold climbs back above 200 hma, not dead yet, no clear message
on FX; crude down small, stuck in tight range, lacks catalyst,
huge long oil trade risks getting trapped
 
Currency Summaries
EUR/USD  
    * Heavy in Europe's morning, NY opens near 1.0545, bear
pressure persists

    * USD & UST yields rally on above f/c core PCE, EUR/USD
slides to 1.0514

    * ISM beat is no help to USD, gains erode as UST yields
slip, EUR/USD lifts

    * Nears the 200-Hour SMA, rally stalls as USD bounces after
Fed's Beige Book

    * EUR/USD slips towards 1.0550 late in the day

    * Techs are bearish, RSIs biased down & pair holds below 10
& 55-DSMAs

    * EZ Feb inflation & US weekly claims data are risks
tomorrow

 
USD/JPY 
    * USD/JPY's Dudley-inspired rally got to 114.05 by midday NY

    * Move o/b on hourlies & yld spreads had stopped rising in
Asian trading

    * Weak 114.00 break brought a pullback toward Kijun at
113.49

    * US data were mixed, but ltd post-ISM beat gains triggered
some P/T 

    * Beige Book eyes labor tightening, but no econ moderating

    * Lots of rsst in 114.80-115 range fm 55-DMA, Cloud top &
Feb peak

    * EUR/JPY probed 38.2%, 61.8% & daily Kijun at 120.16-18

    * 50% Fibo & daily Kijun look pivotal at 120.78

    * BoJ Sato: BoJ may raise yield targets before (if)
inflation hits 2 pct - Rtrs

    * GBP/JPY rebound rejected near daily Cloud base

    * AUD/JPY near Feb 22 swing high @87.38 after Oz data &
55-DMA prop

    * JP Jobs, CPI next key local releases on Friday

 
USD/CHF
    * Franc firm today after Swiss PMI data outshined EZ results

    * Mfg PMI highest since April 2011             

    * Swiss consumption indicator rose to 1.43 pts in Jan
            

    * Good news may spur Swiss franc rally             , less
SNB rsst

    * EUR/CHF back to hovering above Feb & Brexit lows at
1.0632/23

    * USD/CHF shed its hawkish Dudley gains in late Ldn trading

    * US PMI beat not enough to maintain big USD/CHF gains

    * Beige Book eyes labor tightening, but no big econ rush

    * CHF/JPY on the rise, as JPY bore brunt of risk-on flows

    * Swiss GDP & Retail Sales are out Thurs

 
GBP/USD   
    * Cable tripped stops below daily cloud top (1.2379) during
Ldn am, moved to 6-wk low

    * Below 1.2350 selling exacerbated, ultimately finding
support in NY AM at 1.2282

    * Pair moved higher finding resistance by 1.2330, A50
overhang continues to weigh

    * Lower UK mortgage lending & lower Markit Mfg
PMI              hit GBP as well

    * EUR/GBP remains bid, ends NY 0.42% to 0.8580, Brexit fears
take toll on UK econ

    * EZ Feb flash inflation Thurs Rtrs f/c 2% v 1.8% pvs; may
hint at UK-EZ econ divergence

 
USD/CAD
    * O/N range 1.3285/3340 O/N, Noram range 1.3298/3357, last
1.3343 (NY +24 pips)

    * CAD under pressure O/N as UST/GoC spreads widened (2-Yr
opened 54.2, +8.4bp)

    * Spread closed 53.1, strong demand for CAD FI y'day & Fed
hike focus             

    * Trump's speech was more balanced than expected, stocks
rallied             

    * Risk on continued in NY after data              S & P
+1.53% Dow +1.67%

    * BoC was as predicted unch              Thur - Cda GDP Dec
& Q4 [page:2417]

 
AUD/USD     
    * Choppy in Europe's morning, NY opens near 0.7660, USD goes
broadly bid

    * AUD/USD  slides toward 0.7640, USD bid fades after ISM
data, gains erode

    * UST yields slip as well, AUD/USD lifts towards the 10-Day
SMA

    * USD bounces and AUD/USD slips towards the 21-DSMA late in
the day

    * Techs mixed, daily lean bearish but monthly suggest higher

    * Oz Jan building approvals and trade balance are data risks
in Asia

 
NZD/USD
    * Choppy in Europe's morning but with a bear tint, AUD/NZD
rally weighs

    * NY opens near 0.7135, USD bought across the board early,
NZD/USD slides

    * Nears 0.7105 but slide stalls as USD bid reverses, NZD/USD
steadily climbs

    * Pair nears 0.7160 but can't extend as USD bounces late,
near 0.7145 late

    * Techs are bearish, new s-t low set and RSIs biased down
with room to run

    * No NZ data due, pair might be impacted on OZ data via
AUD/NZD

 
LATAM
    * USD/MXN reverses o/n high by 20.1670, pre-Trump address
Asia high

    * Pair falls to 5-day low by 19.7220, ends NorAm nearby

    * Peso shrugs off higher US rate outlook & weak oil, eyes
better US-Mex relationship

    * USD/BRL -0.42% to 3.0966, Brazil holiday avoids recent
risk-off yaw

    * BCB survey sees inflation falling further, GDP steady in
2017             

    * USD/CLP  -0.17% ends NY 649.25, copper higher, BCCH holds
maintains easier bias

 
Fed rate expectations may accelerate despite Trump
While U.S. payrolls data will be important ahead of the Fed
meeting, the backdrop of looser financial conditions and lack of
market volatility helps to strengthen the case for a March rate
hike. The latest Fed speakers' comments seem to invalidate the
view that the Fed will wait until policymakers have greater
insight into President Trump's fiscal policies. While questions
remain over implementation of Trump's fiscal plans, the Fed
seems to feel risks are now asymmetric and if policymakers don't
move in March then the alternatives of May (French election) and
June (six months between hikes) look less appealing. A March
hike  also gives the Fed the flexibility not only to hike rates
by a total of 100bps this year (once a quarter) but also not be
rushed into two further rate hikes embedded in the dot plots.
Full comment              
 
CHART OF THE DAY (AUD/JPY)
The final days of Feb proved trying for AUD/JPY longs, but a
sizeable rebound has followed this week's tests of the 55-DMA
line (85.86) that is just above the daily Cloud top (85.71),
staving off a broader retreat. For today's bullish engulfing
candle to gain greater purchase, the Feb 22 swing high at 87.38
must be closed above. More important for longer horizon bulls is
whether a weekly close above 88.01, the 50% Fibo of the Nov
'14-Jun'16 drop, can be mustered. The explosive rally since Nov
has created a pending overbought bearish divergence top risk
from weekly RSI, while opening a huge gap between the weekly
Tenkan and flat Kijun (82.06) by the weekly Cloud top (81.96),
often a warning that a correction is overdue. Weekly ADX is also
the highest it's been since an Oct '15 peak

 (Reporting by IFR and NY buzz team)
  

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