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USD/JPY: Greenback Ticks Higher After Holidays - The greenback rose slightly against the Japanese yen in the early European session on Monday, returning to a firmer position amid the continuing low volume holiday trade.
The US dollar was up 0.14% against the Japanese yen in the late Asian session, trading at ¥120.44, after booking some losses last week after Bank of Japan (BoJ) Governor Haruhiko Kuroda's speech on December 24.
Last week, Kuroda emphasized that one of the most successful parts of the BoJ's policy making moves in 2015 was inflation, due to the fact that the central bank successfully had put the CPI in the safer harbor.
However, falling oil prices and a rather moderate economic growth rate meant that the core inflation rate in Japan slipped back to deflationary territory in November, putting further pressure on the BoJ to expand its monetary stimulus program.
Top 5 Things to Know In the Market on Tuesday 1. Oil prices recover after Monday's selloff
Oil prices recovered in subdued trading ahead of the end of the year on Tuesday, one day after plunging more than 3%.
U.S. crude futures were up 13 cents, or 0.37%, at $36.95 a barrel at 6:10AM ET, after tumbling $1.29, or 3.39%, on Monday. Internationally traded Brent futures tacked on 17 cents, or 0.46%, to $36.79. A day earlier, the global benchmark lost $1.27, or 3.35%.
Meanwhile, the WTI crude contract maintained its slim premium over Brent. U.S. crude has been firmer relative to Brent recently, on signs that the U.S. oil market is likely to grow tighter, while a global glut gets worse in 2016.
2. Global stocks rise, tracking oil higher
Global stock markets rose on Tuesday, as oil prices recovered from the prior day's selloff, boosting sentiment on the second day of the final trading week of 2015.
Major Asian equities closed mostly higher, led by strong gains in Australia.
Meanwhile, European stocks opened higher as sentiment got a boost from a mostly positive performance in Asian markets.
Elsewhere, U.S. stock futures were up between 0.4% and 0.5%, suggesting a strong open on Wall Street later in the day after stocks seesawed on Monday.
Trading volumes are expected to remain light in the final few days of the year as many traders already closed books due to the holiday period, reducing liquidity in the market which could result in exaggerated moves.
3. U.S. data ahead
At 8:30AM ET, investors are slated to take in a November report on U.S. international trade in goods. Data on October home prices from S&P/Case-Shiller is due at 9:00AM.
At 10:00AM, the Conference Board will publish data on December consumer confidence, with market players expecting the index to inch up to 93.6 from 90.4 a month earlier, which was the lowest reading since November 2014.
4. U.S. dollar holds steady
The dollar held steady against the other major currencies on Tuesday as trading volumes remained thin ahead of the New Year holiday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.07% at 98.06.
With the first U.S. rate hike since 2006 out of the way, the focus is now on the pace of future rate increases. The Federal Reserve, from its forecasts, is anticipating four rate hikes next year. However, the Fed funds futures currently suggests there will be just two rate increases, one in June and one in December.
5. Deutsche Bank (DE:DBKGn) to sell stake in China lender for up to $4 billion
German lender Deutsche Bank has agreed to sell its entire 20% stake in Beijing-based Hua Xia Bank to Chinese insurer PICC Property and Casualty for up to $4 billion, as it seeks to raise cash and reduce its balance sheet exposure.
Deutsche shares rose 1.7% in Germany on the news.
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European Economics Preview: U.K. Nationwide House Price Data Due House prices from the U.K. and bank lending from euro area are due on Wednesday, headlining a light day for the European economic news.
At 2.00 am ET, U.K. Nationwide house price figures are due. Economists forecast prices to increase 3.8 percent on a yearly basis in December following a 3.7 percent rise in November.
In the meantime, Switzerland's UBS consumption indicator is due. The indicator stood at 1.60 points in October.
At 3.00 am ET, Spain's INE publishes flash inflation figures for December. Consumer prices are forecast to edge up 0.1 percent year-on-year reversing a 0.3 percent drop in November.
At 4.00 am ET, the European Central Bank is slated to issue euro area money supply data. Economists expect M3 money supply to grow 5.2 percent on a yearly basis in November, slower than the 5.3 percent gain posted in October.
Also, Norway's retail sales figures are due. Sales are forecast to rise 0.2 percent in October from September, when it climbed 0.9 percent.
At 6.00 am ET, Italy's statistical office Istat releases producer prices for November. Prices had decreased 2.9 percent on year in October.
RBNZ's Backpedaling Puts NZ Economy Back on Track The Reserve Bank of New Zealand's (RBNZ) 100 basis points of policy easing in 2015 has already seen confidence levels among businesses and consumers pick up, painting a better outlook for the new year.
2015 started out of a soft note, with dairy prices some 50% lower than where they peaked in early 2014, drastically reducing export income and domestic demand, hitting hardest on the regions where farmers were struggling - and still are - to break even.
There was a glimmer of hope when dairy prices started to pick up between late August and early October, with the Global Dairy Trade (GDT) index recovering about 30%, before easing again between late October and throughout November.
According to the RBNZ's December Monetary Policy Statement (MPS) dairy prices are expected to recover at a "gradual" pace over the next few years, but several risks are seen, including the possibility of drought conditions during the summer period, and of course the huge wildcard - China.
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GBP/USD About To Trigger A Bullish Quant Signal - BNPP GBP/USD’s aggressive fall fall today has caused the pair to approach the lower end of its +/-1.5 standard-deviation corridoraround BNP Paribas quant model's STEER given that the fair value for GBP/USD has remained relatively stable at around 1.5050 with the lower bound of the corridor at 1.47.
"The underlying components indicate that the STEER for GBPUSD has been supported by the relative UK-US yield curves, but this has been offset by less favourable 2y swap rate differentials due to a slight rise in US 2y yields.
All in all, STEER signals that GBPUSD is susceptible to a move higher, although this signal is not strongly significant, as the pair has remained in its +/- 1.5 z-score corridor," BNPP notes.
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EURUSD toying with stops around 1.0775 EURUSD continues to fall as the euro generally comes under renewed pressure Stop losses I reported earlier at 1.0775 have so far failed to accelerate the down-move but rallies limited still and this points to further declines. Currently 1.0780 after 1.0774 1-month lows
Just hearing of more stops if 1.0750 breached so it's possible some orders could be have been lowered
EURGBP clinging onto support between 0.7330-35 but EURJPY lower again at 128.30. Barrier option defence expected into 128.00
Nervous FX Traders Are Buying Dollars And Yen During the North American trading session, the U.S. dollar and Japanese yen held onto their gains, reflecting the continued anxiety felt by many forex traders. Although Chinese stocks stabilized overnight and the Dow Jones Industrial Average ended the day unchanged after falling over 100 points, forex traders are worried that the losses at the start of the year foreshadow a deeper correction in the days, weeks and maybe even months to come. China is in trouble, U.S. data has been disappointing, Japan refuses to increase stimulus and oil prices continue to fall but everyone’s greatest fear is that stocks have finally peaked for all of the reasons mentioned above. While some traders are buying dollars for legitimate reasons -- they believe that the U.S. will outperform Europe and Asia, others are simply covering their short yen bets.
This week’s U.S. economic reports will help investors determine if it is smart to be long dollars for the first few weeks of the year. We know that the Federal Reserve plans to raise interest rates by another 25 to 75bp in 2016 and as long as they are not one-and-done, the dollar will rise. However the more important question is whether it will do so from current or lower levels. Nonfarm payrolls is the most important piece of U.S. data scheduled for release this week but beforehand we have ADP and non-manufacturing ISM, two reports that will give us early insight into how the labor market performed in December. Unfortunately given the recent track record of U.S. data and market expectations, the odds are skewed toward softer numbers and if that is true, the dollar could extend its losses versus the yen and give up its gains against other major currencies. The minutes from the meeting at which the Federal Reserve raised interest rates for the first time in 9 years are also scheduled for release and it will be interesting to see if it reveals any fresh opposition to the last rate hike or the projected path for tightening.
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Opinion: Merkel has run out of bazookas For several years, a semi-permanent U.S. criticism against Germany in the monetary and economic sphere has been that Europe’s largest economy is not living up to its potential.
At the beginning of what promises to be a bruising year for Chancellor Angela Merkel, the reality may be starting to sink in: At least in its efforts to bring about a solution to the festering problems within the eurozone, Germany has reached the limits of that potential.
From now on, particularly with regard to the difficulties with Europe’s debt-strapped Mediterranean countries, the road for the German chancellor, and for Europe as a whole, will be getting steeper and thornier.
Protesters Gather in Cologne After Sex Assault Claims(1:32)
Cologne tightened security on Wednesday after at least 100 women reported being assaulted, many sexually, during New Year celebrations. Protesters held a peaceful demonstration against violence toward women on Tuesday night. Mark Kelly reports. Image: AFP
Greece has been off investors’ radar screens in the past few months following last summer’s agreement on a €86 billion bailout package. But indications from Athens over the Christmas period are that the Greek imbroglio will soon return as a force for drama, doubt and perturbation.
Alexis Tsipras, the Greek prime minister, has thrown down the gauntlet to creditors by saying he would rather not have the International Monetary fund participating in the loan plan. This diametrically opposes the wishes of Germany, which wants to keep the IMF on board to prevent European governmental creditors from being overly influenced by the European Commission’s desire to keep Greece afloat — precisely the reason why Tsipras would rather the Fund deserted the field.
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Dollar regains ground vs. yen, euro on PBOC move The dollar regained ground against the yen and the euro on Friday, after the People's Bank of China set a higher yuan guidance rate for the first time in nine days.
USD/JPY gained 0.68% to 118.47, off the previous session’s four-month low of 116.45.
The PBOC strengthened the yuan's midpoint rate for the first time in nine days on Friday, fixing it at 6.5636 per dollar, compared with the previous fix of 6.5646.
However, China was expected to continue allowing the yuan to weaken in the longer term in a bid to help its exporters and remain competitive against its regional rivals.
The greenback had weakened broadly against safe-haven currencies after Wednesday’s largest daily drop in the yuan midpoint rate since last August, when an unexpected almost 2% devaluation of the currency sparked a broad based selloff in markets.
EUR/USD declined 0.69% to trade at 1.0856.
Investors were now eyeing the release of key U.S. employment data due later in the day for further indications on the strength of the country’s job market.
On Thursday, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 1 decreased by 10,000 to 277,000 from the previous week’s total of 287,000, which was the highest since mid-July.
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The stock market is having a nightmare start to 2016 and it's all the Fed's fault 2016 has been a nightmare for stocks.
In the first five trading days of the year the benchmark S&P 500 fell about 6%, its worst-ever 5-day start to a year.
This was also the index's worst since 2011.
And while we're now more than three weeks removed from the Federal Reserve's decision to raise interest rates for the first time since 2006, it's this decision that is at the heart of this stock market decline.
The rate hike itself— that is, the mechanics of actually raising interest rates via increased repo and deposit rates — is not what's bothering markets.
The stock market, we need to keep in mind, is a forward-looking place. Investors buying stocks are buying pieces of businesses at a certain price in exchange for a future claim on that company's profit. And any uncertainty about that future is likely to make investors pause before putting more money at risk. Since the Fed raised rates on December 16 the S&P 500 is down 7.3%.
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