FX News Today
European Fixed Income Outlook: Yields dipped in Asia. 10-year rates are down -1.0 bp in South Korea after the central bank left policy on hold. 10-year JGBs are down -0.5 bp at 0.032%, 10-year Treasury yields fell back -0.4 bp to 2.859%, after initially trying to move higher. Eurozone peripheral markets are outperforming and European stock futures are higher, after a mixed session in Asia, where markets in Hong Kong and mainland China sold off, while Topix and Nikkei closed with solid gains. U.S. futures are heading south, however, and the stock rally that was fuelled by hopes that central banks will slow the withdrawal of support, is starting to stutter ahead of Powell’s testimony that is hoped to give a clearer guidance on the outlook. Draghi continued to sit on the fence yesterday and we expect Powell’s comments to be also rather balanced. Today’s local calendar focuses on German inflation numbers and Eurozone ESI economic confidence.
FX Update: The dollar majors have posted narrow ranges so far today as many market participants sit on their hands into the Congressional testimony of the new Fed chairman, Powell. USDJPY has held a narrow range, logging a high of 107.10 before settling in the upper 106.00s, holding comfortably within yesterday’s range. EURUSD lifted to an intraday peak of 1.2342 before settling around 1.2330, leaving yesterday’s high at 1.2355 unchallenged. Regarding Powell, most Fed watchers, including ourselves, expect he will signal a gradualist approach to tightening, maintaining continuity in approach from his predecessor, Yellen. This expectation was cited in equity market summaries yesterday as justifying the strong close on Wall Street, though U.S. equity index futures have come off the boil in overnight trading, and stocks have been mixed in Asia, where Japan’s Nikkei 225 closed with a 1% gain but Chinese and some other markets have posted losses. The New Zealand dollar came under pressure after NZ trade data showed an unexpected deficit in January of NZ$ 566 mln. NZDUSD logged a two-session low of 0.7273.
Charts of the Day
Main Macro Events Today
- Eurozone ESI – rounds up the February confidence numbers and a dip to 114.3 is expected from 114.7 after preliminary consumer confidence already dipped sharply. Unlike other confidence readings the ESI already dipped in January, but overall readings remain at high levels and consistent with ongoing robust growth with PMI readings suggesting that job creation remains strong, which backs expectations for gradually rising wages going forward.
- US CB Consumer Confidence- The Consumer confidence should remain buoyant at 126.7 in February and the Richmond Fed index is sent to rise to 16.0 in February from 14.
- US Core Durable Goods – seen sinking 2.5% in January from 2.8%, while advanced indicators goods trade gap may widened to -$73.4 bln in January from -$72.3 bln. Also on tap is the FHFA home price index, seen rising 0.4% to 257.0, while Case-Shiller home prices may be flat in December.
- Fed Chair Powell Testifies
Support and Resistance Levels
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Andria Pichidi
Market Analyst
HotForex
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